The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2016
and JUNE 30, 2015
NOTE 1 – NATURE OF OPERATIONS
AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Nature of Operations
Propanc PTY LTD was
incorporated in Melbourne, Victoria Australia on October 15, 2007, and is based in Richmond, Victoria Australia. Since inception,
substantially all of the efforts of the Company have been the development of new cancer treatments targeting high risk patients
who need a follow up, nontoxic, long term therapy which prevents the cancer from returning and spreading. The Company anticipates
establishing global markets for its technologies.
On November 23, 2010,
Propanc Health Group Corporation (the “Company", "we", "us", "our") was incorporated
in the state of Delaware. In January 2011, to reorganize the Company, Propanc Health Group Corporation acquired all of the outstanding
shares of Propanc PTY LTD on a one-for-one basis making it a wholly-owned subsidiary.
Principals
of Consolidation
The consolidated
financial statements include the accounts of Propanc Health Group Corporation and its wholly-owned subsidiary, Propanc PTY LTD.
All inter-company balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of
financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from these estimates. Significant estimates in the accompanying consolidated financial statements include the estimates
of useful lives for depreciation, valuation of derivatives, valuation of beneficial conversion features on convertible debt, 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 Comprehensive Income (Loss)
The Company’s
functional currency is the Australian dollar (AUD). For financial reporting purposes, the Australian dollar has been translated
into United States dollars ($) and/or (USD) as the reporting currency. 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 statement of operations and comprehensive loss as other income (expense). 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.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
As of June 30, 2016 and 2015, the exchange rates used to translate
amounts in Australian dollars into USD for the purposes of preparing the financial statements were as follows:
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
Exchange rate on balance sheet dates
|
|
|
|
|
|
|
|
|
USD : AUD exchange rate
|
|
|
0.7401
|
|
|
|
0.7655
|
|
|
|
|
|
|
|
|
|
|
Average exchange rate for the period
|
|
|
|
|
|
|
|
|
USD : AUD exchange rate
|
|
|
0.7282
|
|
|
|
0.8369
|
|
Changes in Accumulated
Other Comprehensive Income (Loss) by component during the years ended June 30, 2015 and 2016 were as follows:
|
|
Foreign
Currency
Items:
|
|
Beginning balance, June 30, 2014
|
|
$
|
(302,863
|
)
|
Foreign currency translation gain
|
|
|
403,831
|
|
Balance, June 30, 2015
|
|
|
100,968
|
|
Foreign currency translation gain
|
|
|
30,296
|
|
Ending balance, June 30, 2016
|
|
$
|
131,264
|
|
Fair Value of
Financial Instruments and Fair Value Measurements
The Company measures
their financial assets and liabilities in accordance with US GAAP. For certain of the Company’s financial instruments, including
cash and cash equivalents, accounts and other receivables, accounts payable and accrued expenses and other liabilities, the carrying
amounts approximate fair value due to their short maturities. Amounts recorded for loans payable, also approximate fair value
because current interest rates available to us for debt with similar terms and maturities are substantially the same.
The Company adopted
accounting guidance for fair value measurements of financial assets and liabilities. The adoption did not have a material impact
on the Company’s results of operations, financial position or liquidity. 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). 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.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
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 June 30, 2016 or 2015.
Receivables
As amounts become
uncollectible, they will be charged to an allowance and operations in the period when a determination of uncollectability is made.
Any estimates of potentially uncollectible customer accounts receivable will be made based on an analysis of individual customer
and historical write-off experience. The Company’s analysis includes the age of the receivable account, creditworthiness
of the customer and general economic conditions.
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:
Machinery and equipment
|
- 5 years
|
Furniture
|
- 7 years
|
Patents
Patent costs are
stated at cost and reclassified to intangible assets 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 costs as long as the Company
is in the startup stage. Accordingly, as the Company's product was and is not currently approved for market, thus any patent costs
incurred from 2013 through 2016 were expensed immediately. Currently, the Company has five international patents pending which
were jointly applied for by the Company and another entity.
For its lead patent,
the Company received grant status, or has been accepted in South Africa, Australia, Japan and New Zealand. In addition,
the United States Patent and Trademark office (the “USPTO”) and the European Patent Office (the “EPO”)
have made preliminary indications that key features of the Company’s technology are patentable. The Company is presently
working towards securing a patent in each region, covering as many aspects of its technology as possible, while also actively
seeking protection throughout Eastern Europe, Asia and South America.
Individual countries and regions where the
Company is actively seeking protection for its lead patent include United States, Canada, Japan, Brazil, China, Mexico, Hong Kong,
Singapore, Israel, Chile, Peru, Malaysia, Vietnam, Indonesia, Europe, Russia, India, and South Korea. The patent has been granted,
or accepted in South Africa, Australia, and New Zealand.
Of the four patents, the Company has either
filed an application, or is presently under examination in the country of origin. Two patent applications have been filed in the
United States, one in Spain and another in Australia.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
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, annual leave, accumulated sick leave and any other employee benefits expected to be settled
within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected
to be paid when the liability is settled. 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 and therefore, recorded at nominal value.
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 June 30, 2016
and June 30, 2015 the Company was owed $29,355 and $11,647 from the Australian Taxation Office. These amounts were fully collected
subsequent to the balance sheet reporting dates.
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 or recorded in other comprehensive income (loss)
depending on the purpose of the derivatives and whether they qualify and have been designated for hedge accounting treatment.
The Company does not have any derivative instruments for which it has applied hedge accounting 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 the time of conversion.
The Company treats these convertible notes as stock settled debt under ASC 480 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 accretion
to interest expense to the date of first conversion.
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 FASB ASC 740 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.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
The Company adopted
provisions of 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 costs are expensed when incurred. Total research and development costs for
the years ended June 30, 2016 and 2015 were $1,446,948 and $134,319 respectively.
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 an income tax benefit, in operations, upon receipt.
During the years
ended June 30, 2016 and 2015, the Company applied for and received from the Australian Taxation Office a research and development
tax credit in the amount of $72,538 and $77,470 respectively, which is reflected as an income tax benefit in the accompanying
consolidated statements of operations and comprehensive income (loss).
Stock Based
Compensation
The Company records
stock based compensation in accordance with ASC section 718, “Stock Compensation” and Staff Accounting Bulletin (SAB)
No. 107 (SAB 107) issued by the SEC in March 2005 regarding its interpretation of ASC 718. ASC 718 requires the fair
value of all stock-based employee compensation awarded to employees to be recorded as an expense over the related requisite service
period. The Company values employee and non-employee stock based compensation at fair value using the Black-Scholes Option Pricing
Model.
The Company accounts for non-employee share-based awards in accordance
with the measurement and recognition criteria of ASC 505-50 “Equity-Based Payments to Non-Employees.”
Start-up Costs
In accordance with
ASC 720-15-15, start-up costs are expensed as incurred.
Revenue Recognition
In accordance with
SEC Staff Accounting Bulletin (SAB) No. 104,
Revenue Recognition
, (codified in ASC 605) the Company recognizes revenue
when (i) persuasive evidence of a customer or distributor arrangement exists or acceptance occurs, (ii) a retailer, distributor
or wholesaler receives the goods, (iii) the price is fixed or determinable, and (iv) collectability of the sales revenues is reasonably
assured. Subject to these criteria, the Company recognizes revenue relating to royalties on product sales in the period in which
the sale occurs and the royalty term has begun.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
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. For the years ended June 30 2016 and
2015, there were 37,569,634 and 7,379,158 warrants outstanding, 143,000,000 and no stock options, and six and fourteen convertible
notes payable that are convertible into 449,876,877 and 335,716,597 common shares, respectively, which are considered dilutive
securities which were excluded from the computation since the effect is anti-dilutive.
Recently Adopted Accounting Pronouncements
Financial Accounting
Standards Board, Accounting Standard Updates which are not effective until after June 30, 2016 are not expected to have a significant
effect on the Company’s consolidated financial position or results of operations. The Company implemented the following
at June 30, 2016:
In March 2016, the FASB issued ASU 2016-09,
“Improvements to Employee Share-Based Payment Accounting,” which amends several aspects of the accounting for share-based
payment transaction, including income tax consequences, classification of awards as either equity or liabilities, and classification
on the statement of cash flows. These changes become effective for the Company’s fiscal year beginning July 1, 2017. The
Company has not determined the effects of this update on the Company’s consolidated financial statements at this time.
In February 2016, the FASB issued ASU 2016-02,
“Leases,” which will require lessees to recognize assets and liabilities for the rights and obligations created by
most leases on the balance sheet. The changes become effective for the Company’s fiscal year beginning July 1, 2019. Modified
retrospective adoption for all leases existing at, or entered into after, the date of initial application, is required with an
option to use certain transition relief. The Company has not determined the effects of this update on the Company’s consolidated
financial statements at this time.
On May 8, 2015, the FASB issued ASU 2015-08,
“Business Combinations (Topic 805) Pushdown Accounting
” which conforms the FASB’s guidance on pushdown
accounting with the SEC’s guidance. ASU 2015-08 is effective for annual periods beginning after December 15, 2015. As of
June 30, 2016, this ASU has not had a material impact on the consolidated financial statements.
In April 2015, the Financial Accounting Standards
Board issued Accounting Standards Update No. 2015-03,
"Simplifying the Presentation of Debt Issuance Costs,"
which
changes the presentation of debt issuance costs in financial statements. Under this guidance such costs would be presented as
a direct deduction from the related debt liability rather than as an asset. This guidance is effective for interim and annual
reporting periods beginning after December 15, 2015. As of June 30, 2016, this ASU has not had a material impact on the consolidated
balances current presentation.
In November 2015, the FASB issued ASU No.
2015-17, Balance Sheet Classification of Deferred Taxes, which requires that an entity classify deferred tax assets and liabilities
as noncurrent on the balance sheet. Prior to the issuance of the standard, deferred tax assets and liabilities were required to
be separated into current and noncurrent amounts on the basis of the classification of the related asset or liability. This ASU
is effective for the Company on April 1, 2017, with early adoption permitted. The adoption of ASU No. 2015-17 is not expected
to have a material impact on the Company's consolidated financial statements or related disclosures.
In August 2014, the FASB issued ASU 2014-15,
“Presentation of Financial Statements – Going Concern (Topic 205-40)”, which requires management to evaluate
whether there is substantial doubt about an entity’s ability to continue as a going concern for each annual and interim
reporting period. If substantial doubt exists, additional disclosure is required. This new standard will be effective for the
Company for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. The Company expects to
adopt this new standard as of December 31, 2016. The Company does not expect this ASU to have a material impact on its consolidated
financial statements.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
NOTE 2 – GOING CONCERN
The accompanying
consolidated financial statements have been prepared in conformity with US GAAP, which contemplates continuation of the Company
as a going concern. For the year ended June 30, 2016, the Company had no revenues and had a net loss of $9,410,352 and
net cash used in operations of $4,499,314. Additionally, as of June 30, 2016, the Company had a working capital deficit, stockholders'
deficit and accumulated deficit of $2,581,668, $2,565,293, and $30,376,023, respectively. These conditions raise substantial doubt
about the Company’s ability to continue as a going concern. The 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 International
patent applications and achieving a level of sales adequate to support the Company’s cost structure. However, there can
be no assurances that the Company will be able to secure additional equity investments or achieve an adequate sales level.
NOTE 3 –
PROPERTY AND EQUIPMENT
Property and equipment
consist of the following as of June 30,
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Office equipment at cost
|
|
$
|
25,251
|
|
|
$
|
15,732
|
|
Less: Accumulated depreciation
|
|
|
(12,724
|
)
|
|
|
(12,238
|
)
|
|
|
|
|
|
|
|
|
|
Total property, plant, and equipment
|
|
$
|
12,527
|
|
|
$
|
3,494
|
|
Depreciation expense
for the years ended June 30, 2016 and 2015 were $877 and $81, respectively.
NOTE 4 –
DUE TO DIRECTORS - RELATED PARTIES
Due to directors
- related parties 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 amount owed the former director at June 30, 2016
and June 30, 2015 is $33,943 and $35,108 respectively. As part of the settlement and stipulation agreement noted in Note 9,
the Company reduced the then outstanding liability by approximately $44,000. On January 30, 2015, as part of the Settlement and
Lock-up Agreement, the above agreement was terminated and the Company increased this liability by approximately $44,000. On February
4, 2015, the Company entered into a Debt Settlement Agreement with a current director whereby the Company issued shares of common
stock as settlement of approximately $17,000 of the balance due to this director (See Note 5).
NOTE 5 –
LOANS AND NOTES PAYABLE
Loans from Directors
and Officer - Related Parties
Loans from Directors
and an Officer at June 30, 2016 and June 30, 2015 were $54,767 and $79,416, respectively. The loans bear no interest
and are all past their due date and in default. As part of the settlement and stipulation agreement noted in Note 9, the Company
reduced this liability by approximately $127,000. On January 30, 2015, as part of the Settlement and Lock-up Agreement, the above
agreement was terminated and the Company increased this liability by approximately $109,000. On February 4, 2015, the Company entered
into a Debt Settlement Agreement with each of our current directors whereby the Company issued 33,259,350 and 17,654,470 shares
of common stock as settlement of approximately $24,000 of the balance due to one director and $17,000 of debt to the other director
as discussed in Note 4. The Company valued the common stock at a price of $0.0025 per share based on the last private placement
purchase price per share for a total value of $127,284 which resulted in the Company recording a loss of $86,455 as a result of
these settlements. During the year ended June 30, 2015, the Company made loan repayments of approximately $28,500. The Company
repaid cash of $21,660 ($29,744 AUD) on these loans during the year ended June 30, 2016.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
Other Loans from
Unrelated Parties
Loans from other
unrelated parties at June 30, 2016 consisted of one loan the bears no interest and had a balance of $2,220. As of June 30, 2015
the loan balance from other unrelated parties was $27,558 and consisted of three loans, two of which had an interest rate of 10%
and one that bore no interest. During the year ended June 30, 2016, the Company repaid cash of $24,031 for these loans ($33,000
AUD) and a foreign currency transaction gain of $392.
Debt Settlement
to be Paid in Stock, Net of Premium
In July 2014, the
Company consolidated outstanding debt and other liabilities as part of a settlement agreement (See Note 9) and was indebted to
one unrelated party for approximately $1,033,000 which includes a $50,000 note payable issued as a fee to the lender, a $355,000
premium and $628,000 of principal. On September 11, 2014 and on November 4, 2014, the Company issued 7,426,000 and 8,161,000 shares
of common stock as a settlement of a portion of that debt for a total value of $81,396 (See Note 8). On January 30, 2015, as part
of the Settlement and Lock-up Agreement with the lender, the above agreement was terminated and the Company reclassified remaining
principal outstanding debts and other liabilities of approximately $575,000 back to the original debt holders. In addition, since
this agreement was terminated the Company wrote off the remaining premium of approximately $310,000 to gain on debt settlement
and the $50,000 note payable issued as a fee and $17,000 premium as a gain on debt settlement.
Notes Payable
On July 18, 2014, the Company paid a $50,000
fee to the investor (See Note 9) in the form of a $50,000 promissory note, non-interest bearing and due January 31, 2015. On January
30, 2015, the Company entered into a Settlement and Lock-up Agreement with a lender whereby the Company issued 10,000,000 shares
of common stock as settlement of the $50,000 promissory note issued on July 18, 2014 in connection with an Equity Purchase Agreement
of the same date and a $25,000 convertible promissory note issued in connection with a Settlement and Stipulation Agreement dated
May 2014 and accrued interest of $1,466. The Company valued the common stock at a price of $0.0025 per share based on the last
private placement purchase price per share for a total value of $25,000 which resulted in the Company recording a gain of $51,466
as a result of this settlement.
NOTE 6 –
CONVERTIBLE NOTES
Convertible notes at June 30, 2016 and 2015 were as follows:
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
Convertible notes and debenture
|
|
$
|
1,721,694
|
|
|
$
|
1,455,000
|
|
Unamortized discounts
|
|
|
(768,931
|
)
|
|
|
(415,467
|
)
|
Accrued interest
|
|
|
116,805
|
|
|
|
26,989
|
|
Premium, net
|
|
|
132,955
|
|
|
|
727,853
|
|
Convertible notes, net
|
|
$
|
1,202,523
|
|
|
$
|
1,794,375
|
|
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On September 30,
2013 the Company’s subsidiary issued a Debenture for $139,680 (AUD $150,000) plus warrants for 3,000,000 common shares of
the Company. The Company agreed to pay 12% interest on the principal amount and the maturity date is December 31, 2015. This
debenture rolls into it $27,963 of loans outstanding at June 30, 2013, an August 2013 note of $63,196 along with September advances
of $46,446 and accrued interest. The debenture is convertible only at the Company’s option into common stock
at $0.075 AUD per share and is convertible at that same rate by the lender only upon default by the Company, as defined in the
debenture. The warrants were determined to be derivative instruments due to the variable exercise price of the warrants
which is initially $0.0698 and subject to adjustment if the Company issues shares at a price below the initial exercise price. Accordingly,
the fair value of the warrants was determined using a Black-Scholes option pricing model with a stock price of $0.20, exercise
price of $0.075 AUD, volatility of 53% based on the comparative company’s method since the Company’s stock is very
thinly traded, an expected term of 27 months based on the debenture term and a risk free rate of 0.4%. The approximate
initial $400,000 value of the warrants was recorded as a derivative liability in the accompanying consolidated balance sheet,
along with a debt discount of approximately $140,000 and change in warrant derivative liability of approximately $260,000
as an expense for the three months ended September 30, 2013. (See Note 12 for current period re-measurement) On July 2, 2014,
this $139,680 convertible debenture and accrued interest of $15,118 was converted, using the contractual conversion rate of $0.0709
or $0.075 AUD, into 2,183,333 shares of the Company’s common stock (See Note 8).
On May 8, 2014, the Company issued a 10% convertible
promissory note for $25,000 as a prepaid fee for services to be provided under a settlement and stipulation agreement as discussed
in Note 9. The note and all accrued interest was due on November 8, 2014 and was in default. The note is convertible immediately
at 50% of the lowest closing bid price in the 30 trading days prior to conversion. The convertible note is treated as stock settled
debt under ASC 480 and accordingly the Company is accreting a $25,000 put premium which was fully expensed during the year ended
June 30, 2015. On January 30, 2015, this note principal of $25,000 and accrued interest of $1,466 was settled as part of a Settlement
and Lock-Up Agreement (See Note 9).
On May 29, 2014,
the Company issued a convertible note payable for $75,000. The Company agreed to pay 8% interest per annum on the principal amount
and the maturity date is May 29, 2015. The note is convertible at the option of the holder at any time after 180 days at a rate
of 55% of the lowest trading bid price of the Company’s common stock for the ten prior trading days including the date upon
which the conversion notice was received. The convertible note is treated as stock settled debt under ASC 480 and accordingly
the Company is accreting a $61,364 put premium over 180 days from the execution of the convertible note. During the year ended
June 30, 2015, the Company has accreted the remaining $51,089 of the put premium as $10,275 had been accreted in a prior period,
resulting in the put premium being fully expensed. During the year ended June 30, 2015, the Company converted $14,547 of principal
and accrued interest of $218 into shares of the Company’s common stock (See Note 8). Additionally, $61,364 of the put premium
was expensed as interest expense and the remaining $60,453 of principal and $4,352 of accrued interest was assigned to a third
party. As of June 30, 2015, this note was fully converted.
On May 29, 2014,
the Company issued a second convertible note payable for $75,000. The Company agreed to pay 8% interest per annum on the principal
amount and the maturity date is May 29, 2015. The note is convertible at the option of the holder at any time after 180 days at
a rate of 55% of the lowest trading bid price of the Company’s common stock for the ten prior trading days including the
date upon which the conversion notice was received. The convertible note is treated as stock settled debt under ASC 480 and accordingly
the Company is accreting a $61,364 put premium over 180 days from the execution of the convertible note. During the year ended
June 30, 2015, the Company has accreted the remaining $51,089 of the put premium as $10,275 had been accreted in a prior period,
resulting in the put premium being fully expensed. During the year ended June 30, 2015, the Company converted $11,755 of principal
and accrued interest of $553 into shares of the Company’s common stock (See Note 8). Additionally, $61,364 of the put premium
was expensed as interest expense and the remaining $63,245 of principal and $3,313 of accrued interest was assigned to a third
party. As of June 30, 2015, this note was fully converted.
On May 30, 2014, the Company issued a third
convertible note payable for $50,000. The Company agreed to pay 8% interest per annum on the principal amount and the maturity
date is May 30, 2015. The note is convertible at the option of the holder at any time after 180 days at a rate of 55% of the lowest
trading bid price of the Company’s common stock for the ten prior trading days including the date upon which the conversion
notice was received. The convertible note is treated as stock settled debt under ASC 480 and accordingly the Company is accreting
a $40,909 put premium over 180 days from the execution of the convertible note. During the year ended June 30, 2015, the Company
has accreted the remaining $34,273 of the put premium as $6,636 had been accreted in a prior period, resulting in the put premium
being fully expensed. During the year ended June 30, 2015, the Company converted $50,000 of principal and accrued interest of
$3,346 into shares of the Company’s common stock (See Note 8). Additionally, this conversion resulted in a $40,909 reduction
of the put premium. As of June 30, 2015, this note was fully converted.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
In addition to each of the above initial convertible
promissory notes (“initial convertible notes”), the Company issued to each lender another convertible promissory note
for the same amounts of $75,000, $75,000 and $50,000 termed "Back-End Notes". These notes have the same terms as the
initial convertible notes. Each Back-End Note shall initially be paid for by an offsetting promissory note issued to the Company
by the lender ("Note Receivable") provided that prior to the conversion of the Back-End Notes, the holders must have
paid off the Notes Receivable in cash. The Notes Receivable were due on January 30, 2015, unless the Company did not meet the
“current public information” requirement pursuant to Rule 144, in which case both the Back-End Notes and the Notes
Receivable could both be cancelled. The Notes Receivable are initially secured by the pledge of the Back-End Notes, but may be
exchanged for other collateral with an appraised value of at least $50,000, upon Company’s approval following a three (3)
day written notice to the Company. The term of the Notes Receivable and the Back-End Notes are one year, upon which the outstanding
principal and interest is payable. The amounts funded plus accrued interest under Back-End Notes are convertible into common stock
at any time after the requisite Rule 144 holding period (subject to the condition above for the Back-End Notes), at a conversion
price equal to 55% of the lowest trading bid price in the ten (10) trading days prior to the conversion. The $50,000 Back-End
Note was issued as noted below.
In the event the Company redeems the initial
convertible notes in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by
i) 130% if prepaid within 60 days of the issuance date; ii) 140% if prepaid 60 but less than 121 days after the issuance date;
and (iii) 150% if prepaid 120 but less than 180 days after the issuance date. There shall be no redemption after the 180th day.
The Back-End Notes may not be prepaid, except that if the initial convertible notes are redeemed by the Company within six months
of their issuance, all obligations of the Company and holders under the Back-End Notes and the Notes Receivable will be deemed
satisfied and such notes shall automatically be deemed cancelled and of no further force or effect.
In the event of two specific defaults, which
include the maintenance of a minimum trading price and an aggregate dollar trading volume of the Company's common shares, the
holders may cancel the Back-End Notes and the related Notes Receivable and otherwise in the event of other defaults as defined
in the securities purchase agreement, the amount of principal and accrued interest will become immediately due and payable and
may be offset by amounts due to the Company by the holders. Additionally, the Back-End Notes will bear default interest at a rate
of 16% per annum, or the highest rate of interest permitted by law.
Since the Back-End Notes are not convertible
until the Notes Receivable are paid and also not for 180 days from the note dates, and the Notes Receivable and Back-End Notes
have a right of setoff, the Notes Receivable and Back-End Notes and related accrued interest receivable and payable have been
netted for presentation purposes on the accompanying consolidated balance sheet.
On August 6, 2014
(execution date), the Company executed a convertible promissory note in the principal sum of $250,000, with an original issue
discount (“OID”) of $25,000. The consideration to be paid to the Lender shall be equal to the consideration actually
paid by the Lender plus prorated interest and any other fees that the Company shall be required to pay. The original issue discount
shall also be prorated based on the actual consideration received to equal approximately 10% of the consideration received. If
the Company repays a consideration payment on or before the first 90 days from the effective date of that payment, the interest
rate on that payment of consideration will be 0%. If the Company does not repay a payment on or before the 90 days, the Company
will incur a one-time interest charge of 12% on the principal amount of the loan. Upon execution of the note, the note holder
made an initial payment of $25,000 (net of a $2,500 OID) to the Company of the total consideration. The maturity date is two years
from the date of each payment to the Company, and is the date upon which the principal sum, as well as any unpaid interest and
other fees, shall be due and payable. The note is convertible, at the option of the investor, to common stock of the Company at
any time after the effective date at the lesser of $0.09 or 60% of the lowest trade price in the 25 trading days prior to the
conversion. The Company didn’t repay the consideration payment on or before the first 90 days from the effective date of
that payment and therefore incurred a 12% interest charge. No further funding other than the above mentioned $25,000 has been
received under the $250,000 note. On December 10, 2015, the Company repaid cash of $90,000 as payment in full of $27,500 of principal
and accrued interest of $3,607 resulting in $58,893 of a penalty which was expensed as loss on debt settlement. As of June 30,
2016, this note was paid in full.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On November 17, 2014,
the Company issued a convertible promissory note for $43,000. The Company agreed to pay 8% interest per annum on the principal
amount and the maturity date is August 20, 2015. The note is convertible at the option of the holder at any time after 180 days
at a rate of 58% of the average lowest three trading closing bid prices of the Company’s common stock for the ten prior
trading days including the date upon which the conversion notice was received. The convertible note is treated as stock settled
debt under ASC 480 and accordingly the Company is accreting a $31,138 put premium over 180 days from the execution of the convertible
note. During the year ended June 30, 2015, the Company has accreted $27,851 of the put premium. During the year ended June 30,
2015, the Company repaid cash of $61,632 as payment in full of $43,000 of principal and accrued interest of $1,527 resulting in
$17,105 of a prepayment penalty which was expensed as interest expense. Additionally, this repayment resulted in a $3,287 reduction
of the remaining put premium. As of June 30, 2015, this note was paid in full.
On December 10, 2014,
the Company issued a convertible promissory note for $28,000. The Company agreed to pay 8% interest per annum on the principal
amount and the maturity date is September 12, 2015. The note is convertible at the option of the holder at any time after 180
days at a rate of 58% of the average lowest three trading closing bid prices of the Company’s common stock for the ten prior
trading days including the date upon which the conversion notice was received. The convertible note is treated as stock settled
debt under ASC 480 and accordingly the Company is accreting a $20,276 put premium over 180 days from the execution of the convertible
note. During the year ended June 30, 2015, the Company has accreted $15,657 of the put premium. During the year ended June 30,
2015, the Company repaid cash of $38,654 as payment in full of $28,000 of principal and accrued interest of $853 resulting in
$9,801 of a prepayment penalty which was expensed as interest expense. Additionally, this repayment resulted in a $4,619 reduction
of the remaining put premium. As of June 30, 2015, this note was paid in full.
On January 26, 2015,
the Company issued a convertible promissory note for $28,000. The Company agreed to pay 8% interest per annum on the principal
amount and the maturity date is October 28, 2015. The note is convertible at the option of the holder at any time after 180 days
at a rate of 58% of the average lowest three trading closing bid prices of the Company’s common stock for the ten prior
trading days including the date upon which the conversion notice was received. The convertible note is treated as stock settled
debt under ASC 480 and accordingly the Company is accreting a $20,276 put premium over 180 days from the execution of the convertible
note. During the year ended June 30, 2015, the Company has accreted $15,432 of the put premium. During the year ended June 30,
2015, the Company repaid cash of $37,137 as payment in full of $28,000 of principal and accrued interest of $835 resulting in
$8,302 of a prepayment penalty which was expensed as interest expense. Additionally, this repayment resulted in a $4,844 reduction
of the remaining put premium. As of June 30, 2015, this note was paid in full.
On January 27, 2015,
the Company received payment of the Note Receivable of $50,000 that offsets the Back-End Note that was issued on May 30, 2014.
Proceeds from the Note Receivable of $7,779, $2,500 and $5,000 were paid directly to the stock transfer agent, legal fees and
capital raising fees respectively resulting in net cash proceeds of $34,721 received by the Company. This Back-End Note is related
to the initial convertible note that was issued on May 30, 2014 and has the same terms as previously discussed. As a result, the
Back-End Note is now eligible for conversion at a rate of 55% of the lowest trading bid price of the Company’s common stock
for the ten prior trading days including the date upon which the conversion notice was received. The convertible note is treated
as stock settled debt under ASC 480 and accordingly the Company is accreting a $40,909 put premium over 180 days from the execution
of the convertible note. During the year ended June 30, 2015, the Company has accreted $40,909 of the put premium resulting in
the put premium being fully expensed. During the year ended June 30, 2015, the Company converted $50,000 of principal and accrued
interest of $609 into shares of the Company’s common stock (See Note 8). Additionally, this conversion resulted in a $40,909
reduction of the put premium. As of June 30, 2015, this note was fully converted.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On February 10,
2015, the Company issued a convertible note payable for $45,000 (“initial convertible note”) with an OID of $7,500.
The Company agreed to pay 8% interest per annum on the principal amount and the maturity date is February 10, 2016. The note is
convertible at the option of the holder at any time after 180 days at a rate of 55% of the lowest trading bid price of the Company’s
common stock for the ten prior trading days prior to the date upon which the conversion notice was received. The convertible note
is treated as stock settled debt under ASC 480 and accordingly the Company is accreting a $36,818 put premium over 180 days from
the execution of the convertible note. During the year ended June 30, 2016, the Company has accreted the remaining $9,409 of the
put premium as $27,409 had been accreted at June 30, 2015, resulting in the put premium being fully expensed. During the year ended
June 30, 2016, the Company converted $45,000 of principal and accrued interest of $1,568 into shares of the Company’s common
stock (See Note 8). Additionally, this conversion resulted in a $36,818 reduction of the put premium. As of June 30, 2016, this
note was fully converted.
On February 15, 2015, in connection with
a six-month consulting agreement, the Company issued a convertible promissory note for $90,000 as compensation for services to
be rendered. The Company agreed to pay 5% interest per annum on the principal amount and the maturity date is August 15, 2015.
The note is convertible at the option of the holder at any time after issuance of note at a rate of 60% of the lowest trading price
of the Company’s common stock for the ten prior trading days including the date upon which the conversion notice was received.
The convertible note is treated as stock settled debt under ASC 480 and accordingly the Company fully expensed a $60,000 put premium.
During the year ended June 30, 2016, the Company converted $90,000 of principal and accrued interest of $3.274 into shares of the
Company’s common stock (See Note 8). Additionally, this conversion resulted in a $60,000 reduction of the put premium. As
of June 30, 2016, this note was fully converted.
On February 17, 2015, the Company issued
a second convertible note payable for $45,000 (“initial convertible note”) with an OID of $7,500. The Company agreed
to pay 8% interest per annum on the principal amount and the maturity date is February 17, 2016. The note is convertible at the
option of the holder at any time after 180 days at a rate of 55% of the lowest trading bid price of the Company’s common
stock for the ten prior trading days prior to the date upon which the conversion notice was received. The convertible note is treated
as stock settled debt under ASC 480 and accordingly the Company is accreting a $36,818 put premium over 180 days from the execution
of the convertible note. During the year ended June 30, 2016, the Company has accreted the remaining $9,409 of the put premium
as $27,409 had been accreted at June 30, 2015, resulting in the put premium being fully expensed. During the year ended June 30,
2016, the Company converted $45,000 of principal and accrued interest of $2,028 into shares of the Company’s common stock
(See Note 8). Additionally, this conversion resulted in a $36,818 reduction of the put premium. As of June 30, 2016, this note
was fully converted.
On February 20, 2015, the Company issued a
convertible promissory note for $58,000. The Company agreed to pay 12% interest per annum on the principal amount and the maturity
date is July 27, 2015. The note is convertible at the option of the holder at any time after 180 days at a rate of 50% of the
average lowest three trading closing bid prices of the Company’s common stock for the ten prior trading days including the
date upon which the conversion notice was received. The convertible note is treated as stock settled debt under ASC 480 and accordingly
the Company is accreting a $58,000 put premium over 180 days from the execution of the convertible note. During the year ended
June 30, 2015, the Company has accreted $36,411 of the put premium. During the year ended June 30, 2015, the Company repaid cash
of $83,512 as payment in full of $58,000 of principal and accrued interest of $2,212 resulting in $23,300 of a prepayment penalty
which was expensed as interest expense. Additionally, this repayment resulted in a $21,589 reduction of the remaining put premium.
As of June 30, 2015, this note was paid in full.
On March 12, 2015, the Company issued a convertible
promissory note for $104,000. The Company agreed to pay 8% interest per annum on the principal amount and the maturity date is
December 16, 2015. The note is convertible at the option of the holder at any time after 180 days at a rate of 58% of the average
lowest three trading closing bid prices of the Company’s common stock for the ten prior trading days including the date
upon which the conversion notice was received. The convertible note is treated as stock settled debt under ASC 480 and accordingly
the Company is accreting a $75,310 put premium over 180 days from the execution of the convertible note. On July 15, 2015, the
Company repaid cash of $137,915 as payment in full of $104,000 of principal and accrued interest of $2,872 resulting in $31,043
of a prepayment penalty which was expensed as interest expense. During the year ended June 30, 2016, the Company has accreted
$6,276 of the put premium as $46,441 had been accreted at June 30, 2015 and this repayment resulted in a $22,593 reduction of
the remaining put premium. As of June 30, 2016, this note was paid in full.
On March 12, 2015, in connection with a
two-year consulting agreement, the Company issued a convertible promissory note for $60,000 as compensation for services to be
rendered. The Company agreed to pay 10% interest per annum on the principal amount and the maturity date is March 11, 2017. The
note is convertible, at the option of the holder, at any time after the effective date at the lesser of $0.0175 or 75% of the volume
weighted average of the lowest three trading closing bid prices of the Company’s common stock for the ten prior trading days
including the date upon which the conversion notice was received. This note was bifurcated with the embedded conversion option
recorded as a derivative liability at fair value (See Note 12). During the year ended June 30, 2016, the Company converted $60,000
of principal and accrued interest of $5,159 into shares of the Company’s common stock (See Note 8). As of June 30, 2016,
this note was fully converted.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On March 12, 2015, the Company issued a
third convertible note payable for $170,500 (“initial convertible note”) with an OID of $13,000. The Company agreed
to pay 8% interest per annum on the principal amount and the maturity date is March 12, 2016. The note is convertible at the option
of the holder at any time at a rate of 55% of the Company’s common stock for the average of the lowest three trading prices
in the ten prior trading days including the date upon which the conversion notice was received. The convertible note is treated
as stock settled debt under ASC 480 and accordingly the Company recognized a $139,500 put premium. During the year ended June 30,
2016, the Company converted $170,500 of principal and accrued interest of $7,859 into shares of the Company’s common stock
(See Note 8). Additionally, this conversion resulted in a $139,500 reduction of the put premium. As of June 30, 2016, this note
was fully converted.
On March 20, 2015, the Company issued a
fourth convertible note payable for $150,000 (“initial convertible note”). The Company agreed to pay 8% interest per
annum on the principal amount and the maturity date is March 20, 2016. The note is convertible at the option of the holder at any
time at a rate of 55% of the lowest trading bid price of the Company’s common stock for the average of the lowest three trading
priced in the ten prior trading days including the date upon which the conversion notice was received. The convertible note is
treated as stock settled debt under ASC 480 and accordingly the Company recognized a $122,727 put premium. During the year ended
June 30, 2016, the Company converted $150,000 of principal and accrued interest of $8,779 into shares of the Company’s common
stock (See Note 8). Additionally, this conversion resulted in a $122,727 reduction of the put premium. As of June 30, 2016, this
note was fully converted.
On April 20, 2015,
the Company issued a convertible note payable for $17,500. The Company agreed to pay 8% interest per annum on the principal amount
and the maturity date is April 20, 2016. The note is convertible at the option of the holder at any time at a rate of 55% of the
lowest trading bid price of the Company’s common stock for the ten prior trading days including the date upon which the conversion
notice was received. The convertible note is treated as stock settled debt under ASC 480 and accordingly the Company recognized
a $14,318 put premium. During the year ended June 30, 2016, the Company converted $17,500 of principal and accrued interest of
$849 into shares of the Company’s common stock (See Note 8). Additionally, this conversion resulted in a $14,318 reduction
of the put premium. As of June 30, 2016, this note was fully converted.
On June 4, 2015
(execution date), the Company executed a convertible promissory note in the principal sum of $1,215,000, with an OID of $110,000.
The consideration to be paid to the lender shall be equal to the consideration actually paid by the lender plus prorated interest
and any other fees that the Company shall be required to pay. The original issue discount shall also be prorated based on the actual
consideration received to equal approximately 10% of the consideration received. The Company agreed to pay 10% interest per annum
on the principal amount and the maturity date is ten months from the date of each payment to the Company, and is the date upon
which the principal sum, as well as any unpaid interest and other fees, shall be due and payable. The note is comprised of an initial
cash purchase of $335,000 (includes $30,000 of OID and $5,000 for legal fees) (“Initial Note”), a Secured Investor
Note of $220,000 (includes $20,000 of OID) (“Secured Investor Note”) and three Investor Notes of $220,000 each (include
$20,000 of OID each) (“Investor Notes”). The Secured Investor Note is secured by the lender’s 40% membership
interest in a certain LLC. The Company will accrue 10% interest per annum on the unpaid principal amount of the Secured Investor
Note and the three Investor Notes as defined in the agreements. Upon execution of the note, the note holder made an initial cash
payment of $300,000 (net of a $30,000 OID and $5,000 for legal fees) to the Company of the total consideration and issued the Secured
Investor Note and three Investor Notes to the Company. On July 13, 2015, the Company received payment of the Secured Investor Note
of $220,000 less OID of $20,000 that was issued on June 4, 2015. The Company received interest proceeds of $1,997 from the Secured
Investor Note resulting in net cash proceeds of $201,997 received by the Company. The Initial Note and the Secured Investor Note
are convertible, at the option of the lender, to common stock of the Company at any time after the effective date at a price of
$0.07 per share, which represents fair value at execution date. These notes were determined to be derivative instruments due to
the variable conversion price of the notes which is initially $0.07 and subject to adjustment if the Company’s market capitalization
falls below $3,000,000 at any time. These notes were bifurcated with the embedded conversion option recorded as a derivative liability
at fair value (See Note 12). On December 9, 2015, the Company repaid cash of $269,976 as partial payment for this note. During
the year ended June 30, 2016, the Company converted $285,024 of principal and accrued interest of $29,091 into shares of the Company’s
common stock (See Note 8). As of June 30, 2016, this note was fully converted.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
In addition to each
of the above initial convertible promissory notes (“initial convertible notes”), the Company issued to each lender
another convertible promissory note for the same amounts of $45,000, $45,000, $170,500 and $150,000 termed "Back-End Notes".
These notes have the same terms as the initial convertible notes. Each Back-End Note shall initially be paid for by an offsetting
promissory note issued to the Company by the lender ("Note Receivable") provided that prior to the conversion of the
Back-End Notes, the holders must have paid off the Notes Receivable in cash. Each Note Receivable is due eight months from issuance
of each initial convertible note, unless the Company does not meet the “current public information” requirement pursuant
to Rule 144, in which case both the Back-End Notes and the Notes Receivable may both be cancelled. Each Note Receivable is initially
secured by the pledge of the Back-End Notes, but may be exchanged for other collateral with an appraised value of at least the
principal amount of the note less the OID, upon Company’s approval following a three (3) day written notice to the Company.
The term of the Notes Receivable and the Back-End Notes are one year, upon which the outstanding principal and interest is payable.
The amounts funded plus accrued interest under Back-End Notes are convertible into common stock at any time after the requisite
Rule 144 holding period (subject to the condition above for the Back-End Notes), at a conversion price equal to 55% of the lowest
trading bid price in the ten (10) trading days prior to the conversion. The $45,000, $45,000, $170,500 and $150,000 Back-End Notes
were issued as noted below.
In the event the
Company redeems the initial convertible notes in full, the Company is required to pay off all principal, interest and any other
amounts owing multiplied by i) 130% if prepaid within 60 days of the issuance date; ii) 140% if prepaid 60 but less than 121 days
after the issuance date; and (iii) 150% if prepaid 120 but less than 180 days after the issuance date. There shall be no redemption
after the 180th day. The Back-End Notes may not be prepaid, except that if the initial convertible notes are redeemed by the Company
within six months of their issuance, all obligations of the Company and holders under the Back-End Notes and the Notes Receivable
will be deemed satisfied and such notes shall automatically be deemed cancelled and of no further force or effect.
In the event of two specific defaults, which
include the maintenance of a minimum trading price and an aggregate dollar trading volume of the Company's common shares, the
holders may cancel the Back-End Notes and the related Notes Receivable and otherwise in the event of other defaults as defined
in the securities purchase agreement, the amount of principal and accrued interest will become immediately due and payable and
may be offset by amounts due to the Company by the holders. Additionally, the Back-End Notes will bear default interest at a rate
of 24% per annum, or the highest rate of interest permitted by law.
Since the Back-End Notes are not convertible
until the Notes Receivable are paid, and the Notes Receivable and Back-End Notes have a right of setoff, the Notes Receivable
and Back-End Notes and related accrued interest receivable and payable have been netted for presentation purposes on the accompanying
consolidated balance sheet.
On April 24, 2015,
the Company received payment of the Note Receivable of $45,000, less the OID of $7,500, that offsets the Back-End Note that was
issued on February 10, 2015. Proceeds from the Note Receivable of $2,250 were paid directly to legal fees resulting in net cash
proceeds of $35,250 received by the Company. This Back-End Note is related to the initial convertible note that was issued on February
10, 2015 and has the same terms as previously discussed. As a result, the Back-End Note is now eligible for conversion at a rate
of 55% of the lowest trading bid price of the Company’s common stock for the ten prior trading days including the date upon
which the conversion notice was received. The convertible note is treated as stock settled debt under ASC 480 and accordingly the
Company is accreting a $36,818 put premium over 180 days from the execution of the convertible note. During the year ended June
30, 2016, the Company has accreted the remaining $22,909 of the put premium as $13,909 had been accreted at June 30, 2015, resulting
in the put premium being fully expensed. During the year ended June 30, 2016, the Company converted $45,000 of principal and accrued
interest of $1,525 into shares of the Company’s common stock (See Note 8). Additionally, this conversion resulted in a $36,818
reduction of the put premium. As of June 30, 2016, this note was fully converted.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On April 24, 2015,
the Company received payment of the Note Receivable of $45,000, less the OID of $7,500, that offsets the Back-End Note that was
issued on February 17, 2015. Proceeds from the Note Receivable of $2,250 were paid directly to legal fees resulting in net cash
proceeds of $35,250 received by the Company. This Back-End Note is related to the initial convertible note that was issued on February
17, 2015 and has the same terms as previously discussed. As a result, the Back-End Note is now eligible for conversion at a rate
of 55% of the lowest trading bid price of the Company’s common stock for the ten prior trading days including the date upon
which the conversion notice was received. The convertible note is treated as stock settled debt under ASC 480 and accordingly the
Company is accreting a $36,818 put premium over 180 days from the execution of the convertible note. During the year ended June
30, 2016, the Company has accreted the remaining $22,909 of the put premium as $13,909 had been accreted at June 30, 2015, resulting
in the put premium being fully expensed. During the year ended June 30, 2016, the Company converted $45,000 of principal and accrued
interest of $3,610 into shares of the Company’s common stock (See Note 8). Additionally, this conversion resulted in a $36,818
reduction of the put premium. As of June 30, 2016, this note was fully converted.
On April 27, 2015, the Company received
payment of the Note Receivable of $170,500, less the OID of $13,000, that offsets the Back-End Note that was issued on March 12,
2015. Proceeds from the Note Receivable of $7,500 were paid directly to legal fees resulting in net cash proceeds of $150,000 received
by the Company. This Back-End Note is related to the initial convertible note that was issued on March 12, 2015 and has the same
terms as previously discussed. As a result, the Back-End Note is now eligible for conversion at a rate of 55% of the lowest trading
bid price of the Company’s common stock for the ten prior trading days including the date upon which the conversion notice
was received. The convertible note is treated as stock settled debt under ASC 480 and accordingly the Company recognized a $139,500
put premium. During the year ended June 30, 2016, the Company converted $170,500 of principal and accrued interest of $7,142 into
shares of the Company’s common stock (See Note 8). Additionally, this conversion resulted in a $139,500 reduction of the
put premium. As of June 30, 2016, this note was fully converted.
On June 2, 2015,
the Company received payment of the Note Receivable of $150,000 that offsets the Back-End Note that was issued on March 20, 2015.
Proceeds from the Note Receivable of $7,500 were paid directly to legal fees resulting in net cash proceeds of $142,500 received
by the Company. This Back-End Note is related to the initial convertible note that was issued on March 20, 2015 and has the same
terms as previously discussed. As a result, the Back-End Note is now eligible for conversion at a rate of 55% of the lowest trading
bid price of the Company’s common stock for the ten prior trading days including the date upon which the conversion notice
was received. The convertible note is treated as stock settled debt under ASC 480 and accordingly the Company recognized a $122,727
put premium. During the year ended June 30, 2016, the Company converted $150,000 of principal and accrued interest of $8,059 into
shares of the Company’s common stock (See Note 8). Additionally, this conversion resulted in a $122,727 reduction of the
put premium. As of June 30, 2016, this note was fully converted.
May 2015 Securities Purchase Agreement
On May 19, 2015, the Company entered into
a Securities Purchase Agreement (“SPA”), to issue a series of nine back end convertible notes in the principal sum
of $782,500, pursuant to the SPA, the Company issued to the lender nine convertible promissory notes termed "Back-End Notes",
in the amounts of $37,500 ("Back-End Note 1"), $37,500 ("Back-End Note 2"), $157,500 ("Back-End Note
3"), $150,000 ("Back-End Note 4"), $17,500 ("Back-End Note 5"), $37,500 ("Back-End Note 6"),
$37,500 ("Back-End Note 7"), $157,500 ("Back-End Note 8") and $150,000 ("Back-End Note 9"). These
notes have the same terms as the initial convertible notes. Each Back-End Note shall initially be paid for by an offsetting promissory
note issued to the Company by the lender ("Note Receivable") provided that prior to the conversion of the Back-End Notes,
the holders must have paid off the Notes Receivable in cash. Each Note Receivable is due on May 19, 2016, unless the Company does
not meet the “current public information” requirement pursuant to Rule 144, in which case both the Back-End Notes
and the Notes Receivable may both be cancelled. Each Note Receivable is initially secured by the pledge of the Back-End Notes,
but may be exchanged for other collateral with an appraised value of at least the principal amount of the note less the OID, upon
Company’s approval following a three (3) day written notice to the Company. The term of the Notes Receivable and the Back-End
Notes are one year, upon which the outstanding principal and interest is payable. The amounts funded plus accrued interest under
Back-End Notes are convertible into common stock at any time after the requisite Rule 144 holding period (subject to the condition
above for the Back-End Notes), at a conversion price equal to 55% of the lowest trading bid price in the ten (10) trading days
prior to the conversion. During the year ended June 30, 2016, all of the Back-End Notes (an aggregate total principal of $782,500)
were issued as noted below.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
The Back-End Notes may not be prepaid,
except that if the initial convertible notes are redeemed by the Company within six months of their issuance, all obligations of
the Company and holders under the Back-End Notes and the Notes Receivable will be deemed satisfied and such notes shall automatically
be deemed cancelled and of no further force or effect.
In the event of two specific defaults,
which include the maintenance of a minimum trading price and an aggregate dollar trading volume of the Company's common shares,
the holders may cancel the Back-End Notes and the related Notes Receivable and otherwise in the event of other defaults as defined
in the securities purchase agreement, the amount of principal and accrued interest will become immediately due and payable and
may be offset by amounts due to the Company by the holders. Additionally, the Back-End Notes will bear default interest at a rate
of 24% per annum, or the highest rate of interest permitted by law.
Since the Back-End Notes are not convertible
until the Notes Receivable are paid, and the Notes Receivable and Back-End Notes have a right of setoff, the Notes Receivable and
Back-End Notes and related accrued interest receivable and payable have been netted for presentation purposes on the accompanying
consolidated balance sheet.
On July 14, 2015, the Company received
payment of three Note Receivables of $352,500 that offset three of the Back-End Notes that were issued on May 19, 2015. Proceeds
from the Note Receivables of $17,690 were paid directly to legal fees resulting in net cash proceeds of $334,810 received by the
Company. These Back-End Note are related to the initial convertible notes that was issued on May 19, 2015 and have the same terms
as previously discussed. As a result, these Back-End Notes are now eligible for conversion at a rate of 55% of the lowest trading
bid price of the Company’s common stock for the ten prior trading days including the date upon which the conversion notice
was received. These convertible notes are treated as stock settled debt under ASC 480 and accordingly the Company is accreting
a $288,409 put premium over 180 days from the execution of the convertible notes. During the year ended June 30, 2016, the Company
converted $320,000 of principal and accrued interest of $15,864 into shares of the Company’s common stock (See Note 8). Additionally,
this conversion resulted in a $261,818 reduction of the put premium. Accrued interest as of June 30, 2016 was $2,154.
On October 14, 2015 and October 15, 2015,
the Company received payment of six Note Receivables of $430,000 that offset the remaining six of the Back-End Notes that were
issued on May 19, 2015. Proceeds from the Note Receivables of $22,265 were paid directly to legal fees resulting in net cash proceeds
of $407,735 received by the Company. These Back-End Note are related to the initial convertible notes that was issued on May 19,
2015 and have the same terms as previously discussed. As a result, these Back-End Notes are now eligible for conversion at a rate
of 55% of the lowest trading bid price of the Company’s common stock for the ten prior trading days including the date upon
which the conversion notice was received. These convertible notes are treated as stock settled debt under ASC 480 and accordingly
the Company is accreting a $351,818 put premium over 180 days from the execution of the convertible notes. During the year ended
June 30, 2016, the Company has accreted $351,818 of the put premium resulting in the put premium being fully expensed. During the
year ended June 30, 2016, the Company converted $300,000 of principal and accrued interest of $11,356 into shares of the Company’s
common stock (See Note 8). Additionally, this conversion resulted in a $245,455 reduction of the put premium. Accrued interest
as of June 30, 2016 was $5,900.
On October 1, 2015, the Company received cash
of $1,150,000 ($1,200,000 less $50,000 of legal fees) for the Promissory Note issued on September 24, 2015. On September 24, 2015,
(the “Issuance Date”), the Company entered into a Promissory Note with a Lender whereby the Lender loaned the Company
$1,200,000 in exchange for the issuance of a Promissory Note (the “Promissory Note”). The Company issued the Promissory
Note with a principal amount of $1,200,000 to the Lender. The Promissory Note has a maturity date of the earlier of: (i) the date
on which the Company closes a subsequent equity offering in an amount greater than the principal amount of the Promissory Note;
or (ii) June 24, 2016. On its face, the Promissory Note does not accrue any interest. In the event that the Lender does not proceed
with a subsequent financing, beginning on the 46
th
day following the Issuance Date, the Note will have a one-time interest
adjustment of $180,000 on the outstanding principal of the Promissory Note. Additionally, if the Lender does not wish to proceed
with a subsequent financing, the Promissory Note will also be convertible into common stock at the lower of (i) $0.0346; or (ii)
a twenty percent (20%) discount to the average of the two lowest closing prices of the common stock in the five trading days prior
to the date of conversion. In connection with the Promissory Note, the Company entered into a Security Agreement dated September
24, 2015 with the Lender whereby the Company agreed to grant to Lender an unconditional and continuing, first priority security
interest in all of the assets and property of the Company to secure the prompt payment, performance and discharge in full of all
of Company’s obligations under the Promissory Note, provided, however that in the event the Lender does not proceed with
a subsequent financing, any and all security interests shall be removed. On October 28, 2015, the Lender proceeded with a subsequent
financing. See below as this note was cancelled on October 28, 2015.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
October 2015 Securities
Purchase Agreement and Debenture
On October 28, 2015
(the “Closing Date”), the Company entered into a securities purchase agreement dated as of the Closing Date (the “Purchase
Agreement”) with a third party purchaser (the “Purchaser”). The Purchase Agreement provides that, upon the terms
and subject to the conditions set forth therein, the Purchaser will invest $4,000,000 (“Investment Amount”) in exchange
for a Convertible Debenture (the “Debenture”) in the principal amount of $4,400,000 (the “Principal Amount”)
and warrants to purchase an aggregate of 26,190,476 shares of the Company’s common stock, par value $0.001 per share, for
an exercise price of $0.60 per share for a period of four (4) years from the Closing Date (the “Warrants”). Pursuant
to the Purchase Agreement, on the Closing Date, the Company issued the Debenture and Warrant to the Purchaser.
Under the terms of
the Purchase Agreement, the Purchaser agreed to deliver the Promissory Note entered into by the Company and Purchaser on September
24, 2015 with a principal amount of $1,200,000 (the “Prior Note”) (as noted above). The parties further agreed that
the Prior Note was deemed cancelled upon the delivery by the Purchaser to the Company and the amount of the Prior Note is included
in the Investment Amount under the Purchase Agreement.
Under the terms
of the Purchase Agreement and Debenture, $2,800,000 of the Investment Amount will be deposited into a deposit control account and
such amount will remain in the deposit control account pending the achievement of certain milestones by the Company and the satisfaction
of certain equity conditions set forth in the Debenture. Additionally, under the Debenture, the Principal Amount will be reduced
by $25,000 if the Company files a registration statement with the SEC within 30 days following the Closing Date. The Principal
Amount will be reduced by an additional $25,000 if the registration statement is deemed effective within 100 days after the Closing
Date. On November 23, 2015, the Company filed a registration statement with the SEC and on December 10, 2015, the registration
statement was deemed effective. Both of these conditions were met resulting in a $50,000 reduction of the Principal Amount, which
was credited to interest expense, such that the aggregate principal amount was $4,350,000.
The Purchase Agreement
contains customary representations, warranties and covenants by, among and for the benefit of the parties. The Company also agreed
to pay up to $50,000 of reasonable attorneys’ fees and expenses incurred by the Purchaser in connection with the transaction.
The Purchase Agreement also provides for indemnification of the Purchaser and its affiliates in the event that the Purchaser incurs
losses, liabilities, obligations, claims, contingencies, damages, costs and expenses related to a breach by the Company of any
of its representations, warranties or covenants under the Purchase Agreement.
The Debenture
has a 10% original issue discount and matures on October 28, 2016. The Principal Amount of the Debenture accrues interest at the
rate of 5% per annum based on the $4,350,000 note agreement with a one year value guarantee of $217,500, payable quarterly in cash
(or if certain conditions are met, in stock at the Company’s option) on January 1, April 1, July 1 and October 1. The Debenture
was, prior to Addendum, convertible at any time, in whole or in part, at the Purchaser’s option into shares of the Company’s
Common Stock at a conversion price equal to $0.042, which is the volume weighted average price of the Company’s Common Stock
five days prior to the execution of the Debenture (subject to adjustment) (the “Conversion Price”). At any time after
the effective date of the registration statement, the Purchaser has the opportunity to convert up to an aggregate of $2,090,000
of the Debenture, at one or more conversion dates, into shares of Common Stock at a conversion price equal to the VWAP of the Common
Stock over the five (5) trading days prior to such Effective Date. The Purchaser option to convert at such a conversion price expires
when the Purchaser converts an aggregate of $2,090,000 of the Debenture using such conversion price. If the volume weighted average
price of the Company Common Stock on any trading day is less than the Conversion Price, the Purchaser may convert at a price per
share equal to a twenty percent (20%) discount to the average of the two lowest closing prices during the five trading days prior
to the date of conversion. At no time will the Purchaser be entitled to convert any portion of the Debenture to the extent that
after such conversion, the Purchaser (together with its affiliates) would beneficially own more than 4.99% of the outstanding shares
of Common Stock as of such date. During the year ended June 30, 2016, the Company withdrew a principal amount of $2,800,000 from
the deposit control account, of which $269,976 was paid directly as partial payment of a note dated June 4, 2015 and $33,437 were
paid directly to legal fees resulting in net cash proceeds of $2,496,587 received by the Company. An aggregate total of $1,955,300
of these notes were bifurcated with the embedded conversion option recorded as a derivative liability at fair value (See Note 12).
During the year ended June 30, 2016, the Company converted $2,790,806 of principal and $108,750 of accrued interest into shares
of the Company’s common stock (See Note 8). Accrued interest as of June 30, 2016 was $108,750.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
The Debenture includes
customary event of default provisions, and provides for a default interest rate of 18%. Upon the occurrence of an event of default,
the Purchaser may convert the Debenture into shares of Common Stock at a price per share equal to a thirty percent (30%) discount
to the average volume weighted average price of the shares for the three trading days prior to conversion.
Subject to the conditions
set forth in the Debenture, the Company has the right at any time to redeem some or all of the total outstanding amount then remaining
under the Debenture in cash at a price equal to 125% of the total amount of the Debenture outstanding on the twentieth (20th)
trading date following the date the Company delivers notice of such redemption to the Purchaser.
The Warrants are
exercisable in whole or in part, at an initial exercise price per share of $0.60, subject to adjustment. The exercise price and
number of shares of the Company’s common stock issuable under the Warrants (the “Warrant Shares”) are subject
to adjustments for stock dividends, splits, combinations, subsequent rights offerings and pro rata distributions. Any adjustment
to the exercise price shall similarly cause the number of warrant shares to be adjusted so that the total value of the Warrants
may increase. In the event that the Warrant Shares are not included in an effective registration statement, the Warrants may be
exercised on a cashless basis. The Company calculated the 26,190,476 warrants at relative fair value, which was $712,110 and amortized
to interest expense during the year ended June 30, 2016 (See Note 13).
In connection with
the execution of the Purchase Agreement, on the Closing Date, the Company and the Purchaser also entered into a registration rights
agreement dated as of the Closing Date (the “Registration Rights Agreement”). Pursuant to the Registration Rights
Agreement, the Company has agreed to file an initial registration statement (“Registration Statement”) with the SEC
to register the resale of the Common Stock into which the Debenture may be converted or the Warrant may be exercised, within 30
days following the Closing Date. The Registration Statement must also be declared effective by the 100th calendar day after the
Closing Date, subject to a 20-day extension as requested by the Company and consented to by the Purchaser. On November 23, 2015,
the Company filed a registration statement with the SEC and on December 10, 2015, the registration statement was deemed effective.
If at any time all
of the shares of Common Stock underlying the Debenture or the Warrant are not covered by the initial Registration Statement, the
Company has agreed to file with the SEC one or more additional Registration Statements so as to cover all of the shares of Common
Stock underlying the Debenture or the Warrant not covered by such initial Registration Statement, in each case, as soon as practicable,
but in no event later than the applicable filing deadline for such additional Registration Statements as provided in the Registration
Rights Agreement.
In connection with
the Purchase Agreement, the Company entered into a Security Agreement dated as of even date therewith with the Purchaser whereby
the Company agreed to grant to Purchaser an unconditional and continuing, first priority security interest in all of the assets
and property of the Company to secure the prompt payment, performance and discharge in full of all of Company’s obligations
under the Debentures, Warrants and the other transaction documents until ten days following the such time as the Registration
Statement is declared effective by the SEC and the equity conditions set forth in the Debenture are met.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On March 11, 2016,
the Company entered into an Addendum (the “Addendum”) as discussed below with the Purchaser pursuant to which the
Company and the Purchaser agreed to new terms with respect to that certain securities purchase agreement entered into by and between
the Company and the Purchaser dated as October 28, 2015.
Addendum
Under the Addendum,
the Company and the Purchaser agreed that the balance of the deposit control account, after giving effect to the amounts released
from such account as of the date of the Addendum, will be released to the Company in two installments as follows: (1) up to $1,200,000
will be released to the Company upon full execution of the Addendum, and (2) up to $375,000 within 60 days of the full execution
of the Addendum as long as certain conditions have been met.
The Company and the
Purchaser agreed that the new conversion price will be $0.03; provided that in the event that the volume weighted average price
per share on any trading day is less than such conversion price, the conversion price will be adjusted to a price per share that
is equal to a 22.5% discount to the lowest trading price of the common stock in the 10 trading days prior to the date of conversion.
The Company evaluated this note modification under ASC 470-50-40-10 and concluded that it doesn’t apply since the conversion
option is bifurcated and the 10% cash flow test was not met under ASC 470-50.
Under the Addendum,
the Purchaser agreed to limit the number of shares of common stock it sells on any trading day to an amount of shares that is
less than 25% of the trading volume of the common stock on that same trading day. The Purchaser and the Company may agree otherwise
with respect to this trading limitation.
The Company also
agreed to reserve an additional 300,000,000 shares for issuance and to file a registration statement on Form S-1 to register shares
covering the resale of all of the additional shares of common stock that are issuable upon conversion of the Debenture, as modified
by this Addendum. On March 25, 2016, the Company filed a registration statement with the SEC and on April 19, 2016, the registration
statement was deemed effective.
The Company and the
Purchaser agreed that the October Financing Documents, as applicable, will continue in effect and remain in place, except to the
extent modified by the Addendum.
The Company recorded $3,888,280 and $529,500
of debt discounts related to the above note issuances during the year ended June 30, 2016 and 2015 respectively. The debt discounts
are being amortized over the term of the debt. Amortization of all debt discounts for the years ended June 30, 2016 and 2015 was
$3,534,817 and $114,033 respectively.
NOTE 7 –
INCOME TAXES
The Company follows
ASC 740-10-10, under which an entity recognizes deferred tax assets and liabilities for future tax consequences or for events that
were previously recognized in the Company’s financial statements or tax returns. The measurement of deferred tax assets
and liabilities is based on enacted tax law provisions. The effects of future changes in tax laws or rates are not anticipated. Through
June 30, 2010, the Company operated exclusively in Australia. The Company was wholly subject to Australian income tax laws
and regulations, which are administered by the Australian Taxation Office for the years ended June 30, 2010 and all prior years.
On November 23,
2010, Propanc Health Group Corporation was incorporated in the state of Delaware. In January 2011, Propanc Health Group Corporation
acquired all of the outstanding shares of Propanc PTY LTD on a one-for-one basis making it a wholly-owned subsidiary. As a
result of these transactions, the Company is subject to the income tax laws of both the United States and Australia for the years
ended June 30, 2011 through June 30, 2016.
For the years
ended June 30, 2016 and 2015, the Company’s losses before income taxes resulted from both its Australian and US activities
and its taxable losses are subject to both Australian and U.S. tax law. At June 30, 2016, the Company has net operating loss carryforwards
(NOL) for Australian tax purposes only that approximates $13,630,000. At June 30, 2016, the Company has NOL carryforwards
for US tax purposes only that approximates $4,003,000. Consequently, the Company may have NOL carryforwards available for income
tax purposes that will continue to be available until they are recovered through earning taxable income. Deferred tax
assets would arise from the recognition of anticipated utilization of these net operating losses to offset future taxable income. The
NOL for Australian tax purposes is subject to a reduction of $2,453,786 for research and development credits granted
by the Australian Taxation Office through June 30, 2016.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
The components for
the provision for income taxes are as follows:
|
|
Year Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Current Taxes
|
|
$
|
(72,538
|
)
|
|
$
|
(77,470
|
)
|
Deferred Taxes
|
|
|
-
|
|
|
|
-
|
|
Income Taxes Expense (Benefit)
|
|
$
|
(72,538
|
)
|
|
$
|
(77,470
|
)
|
The items accounting
for the difference between income taxes at the Australia statutory rate and the provision for income taxes are as follows:
|
|
Year Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Amount
|
|
|
Impact on
Rate
|
|
|
Amount
|
|
|
Impact on
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense (Benefit) at Australia Statutory Rate
|
|
$
|
(2,190,750
|
)
|
|
|
(23.10
|
)%
|
|
$
|
(672,087
|
)
|
|
|
(19.26
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses Paid by Parent on Behalf of Foreign Subsidiary
|
|
|
1,113,419
|
|
|
|
11.74
|
%
|
|
|
156,410
|
|
|
|
4.48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R&D Refundable Tax Credit
|
|
|
(72,538
|
)
|
|
|
(0.76
|
)%
|
|
|
(77,470
|
)
|
|
|
(2.22
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction of NOL Carryforward Due to R&D Tax Credit
|
|
|
72,538
|
|
|
|
0.76
|
%
|
|
|
77,470
|
|
|
|
2.22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Deferred Tax Valuation Allowance
|
|
|
900,761
|
|
|
|
9.50
|
%
|
|
|
(355,636
|
)
|
|
|
(10.19
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Exchange Rate Changes
|
|
|
104,032
|
|
|
|
1.10
|
%
|
|
|
793,843
|
|
|
|
22.74
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income Tax Expense (Benefit)
|
|
$
|
(72,538
|
)
|
|
|
(0.76
|
)%
|
|
$
|
(77,470
|
)
|
|
|
(2.22
|
)%
|
Deferred income taxes
reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. Significant components of the Company's net deferred income taxes are as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Current Deferred Tax Assets
|
|
|
|
|
|
|
|
|
Warrant Derivative Liability
|
|
$
|
23,818
|
|
|
$
|
88,204
|
|
Provision for Annual Leave
|
|
|
27,966
|
|
|
|
21,426
|
|
Superannuation
|
|
|
-
|
|
|
|
-
|
|
Total Current Deferred Tax Assets
|
|
$
|
51,784
|
|
|
$
|
109,630
|
|
|
|
|
|
|
|
|
|
|
Current Deferred Tax Liabilities
|
|
|
|
|
|
|
|
|
Prepaid Investor Services
|
|
$
|
-
|
|
|
$
|
-
|
|
Prepaid Expenses
|
|
|
6,198
|
|
|
|
-
|
|
Prepaid Insurance
|
|
|
-
|
|
|
|
-
|
|
Accounts Payable/Trade Creditors
|
|
|
-
|
|
|
|
-
|
|
Patent Costs
|
|
|
-
|
|
|
|
-
|
|
Total Current Deferred Tax Liabilities
|
|
$
|
6,198
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-Current Deferred Tax Assets
|
|
|
|
|
|
|
|
|
Prepaid Investor Services
|
|
$
|
378,409
|
|
|
$
|
185,025
|
|
Capital Raising Costs
|
|
|
22,489
|
|
|
|
23,261
|
|
Legal Costs
|
|
|
22,801
|
|
|
|
23,583
|
|
Intellectual Property
|
|
|
11,226
|
|
|
|
11,612
|
|
Patent Costs
|
|
|
91,408
|
|
|
|
59,995
|
|
Formation Expense
|
|
|
6,881
|
|
|
|
7,117
|
|
Net Operating Loss Carryover
|
|
|
4,155,936
|
|
|
|
3,426,149
|
|
Foreign Exchange Loss (OCI)
|
|
|
(39,379
|
)
|
|
|
(30,290
|
)
|
Total Non-Current Deferred Tax Assets
|
|
|
4,649,771
|
|
|
|
3,706,452
|
|
Deferred Tax Valuation Allowance
|
|
|
(4,707,753
|
)
|
|
|
(3,816,082
|
)
|
Total Non-Current Deferred Tax Assets
|
|
|
(57,982
|
)
|
|
|
(109,630
|
)
|
|
|
|
|
|
|
|
|
|
Total Deferred Tax Assets (Net)
|
|
$
|
-
|
|
|
$
|
-
|
|
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
Management has determined
that the realization of the net deferred tax asset is not assured and has created a valuation allowance for the entire amount
of such benefits.
The Company follows
ASC 740-10, which provides guidance for the recognition and measurement of certain tax positions in an enterprise’s financial
statements. Recognition involves a determination whether it is more likely than not that a tax position will be sustained
upon examination with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge
of all relevant information.
The Company’s
policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement
of operations. As of June 30, 2016 the Company had no unrecognized tax benefits. There were no changes in the Company’s
unrecognized tax benefits during the years ended June 30, 2016 and 2015. The Company did not recognize any interest or penalties
during fiscal 2016 or 2015 related to unrecognized tax benefits.
The income tax
returns filed for the tax years from inception will be subject to examination by the relevant taxing authorities.
NOTE 8 – STOCKHOLDERS’ DEFICIT
Preferred Stock:
The total number
of preferred shares authorized and that may be issued by the Company is 10,000,000 preferred shares with a par value of $0.01.
These preferred shares have no rights to dividends, profit sharing or liquidation preferences.
Of the total preferred
shares authorized, pursuant to the Certificate of Designation filed on December 9, 2014, 500,000 have been designated as Series
A preferred stock, with a par value of $0.01 (“Series A Preferred Stock”). On December 9, 2014, the Company issued
500,000 shares of Series A Preferred Stock to its chief executive officer in consideration for services rendered to the Company,
including for and as an incentive to continue to assist and provide services to the Company. The shares were valued at $0.00213
per share for a total value of $1,067 based on the average sale price per share of the 8,161,000 shares of common stock sold during
the three months ended December 31, 2014.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
Of the total preferred
shares authorized, pursuant to the Certificate of Designation filed on June 16, 2015, up to five (5) shares have been designated
as Series B preferred stock, with a par value of $0.01 (“Series B Preferred Stock”). Each holder of outstanding shares
of Series B Preferred Stock shall be 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. On June 16, 2015, the Company issued 1 share of Series B Preferred Stock to its CEO in consideration for services
rendered to the Company, including for and as an incentive to continue to assist and provide services to the Company. The share
was valued at $0.1165 per share for a total value of $0.12 based on the closing price of the stock on that date. This value represents
the economic rights of the share as the value of voting rights, which represent control rights, are not objectively measurable.
Common Stock:
On November 12, 2014,
the Company filed an amendment to the Company’s Certificate of Incorporation with the Secretary of State of the State of
Delaware, to increase the Company’s authorized common stock from one hundred million (100,000,000) shares of common stock,
par value $0.001 per share, to ten billion (10,000,000,000) shares of common stock, par value $0.001 per share. On July 10, 2015,
the Company filed an amendment to the Company’s Certificate of Incorporation with the Secretary of State of the State of
Delaware, to decrease the Company’s authorized common stock from ten billion (10,000,000,000) shares of common stock, par
value $0.001 per share, to two billion (2,000,000,000) shares of common stock, par value $0.001 per share.
Shares issued
for services
On May 9, 2014, the
Company entered into an agreement with a consultant to provide services over a twelve month period in exchange for 1,000,000 shares
of common stock. The Company valued the 1,000,000 shares based on the market price on the agreement date of $0.10 and will recognize
$100,000 of consulting expense through the term of the agreement. On August 7, 2014 the Company issued the first 500,000 shares
of this agreement. On April 28, 2015 the Company issued the remaining 500,000 shares of this agreement. The Company has recorded
$100,000 of consulting expense as of June 30, 2015 related to this agreement.
On October 17, 2014,
the Company entered into an agreement with a consultant to provide services over a six month period. The Company agreed to issue
the consultant 4,000,000, 3,000,000 and 3,000,000 shares of common stock in the first, third and fifth months respectively. The
Company valued the 10,000,000 shares based on the market price on the agreement date of $0.008 and is recognizing $80,000 of consulting
expense through the term of the agreement. On December 4, 2014, the Company issued the first 4,000,000 shares of this agreement.
On April 15, 2015 the Company issued the remaining 6,000,000 shares of this agreement. The Company has recorded $80,000 of consulting
expense as of June 30, 2015 related to this agreement.
On May 7, 2015, the
Company entered into an agreement with a consultant to provide services over a six month period in exchange for 6,758,316 shares
of common stock. The Company valued the 6,758,316 shares based on the market price on the agreement date of $0.043 and will recognize
$290,608 of consulting expense through the term of the agreement. On June 5, 2015 the Company issued the 6,758,316 shares of this
agreement. The Company has recorded $88,446 of consulting expense as of June 30, 2015 related to this agreement, and the remaining
$202,162 was recorded during the year ending June 30, 2016.
On May 21, 2015,
the Company entered into an agreement with a consultant to provide services over an eight month period in exchange for 1,000,000
shares of common stock. The Company valued the 1,000,000 shares based on the market price on the agreement date of $0.0445 and
will recognize $44,500 of consulting expense through the term of the agreement. On June 3, 2015 the Company issued the 1,000,000
shares of this agreement. The Company has recorded $7,265 of consulting expense as of June 30, 2015 related to this agreement,
and the remaining $37,235 was recorded during the year ending June 30, 2016.
On June 4, 2015,
the Company entered into an agreement with a consultant to provide services over a six month period in exchange for 500,000 shares
of common stock. The Company valued the 500,000 shares based on the market price on the agreement date of $0.0706 and will recognize
$35,300 of consulting expense through the term of the agreement. On July 2, 2015 the Company issued the 500,000 shares of this
agreement. The Company has recorded $5,015 of consulting expense as of June 30, 2015 related to this agreement, and the remaining
$30,285 was recorded during the year ending June 30, 2016.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On July 24, 2015,
the Company entered into an agreement with a consultant to provide services over a six month period. The Company agreed to issue
the consultant 8,000,000 shares of common stock. The Company valued the 8,000,000 shares based on the market price on the agreement
date of $0.0435 and is recognizing $348,000 of consulting expense through the term of the agreement. On October 8, 2015, the Company
issued the 8,000,000 shares related to this agreement. The Company has recorded $348,000 of consulting expense as of June 30,
2016 related to this agreement.
On August 26, 2015,
the Company issued 560,000 shares of common stock to a consultant as compensation for a six month period consulting service. The
Company valued the 560,000 shares based on the market price on the issuance date of $0.04 and has recorded $22,400 of consulting
expense as of June 30, 2016 related to this agreement.
On September 8, 2015,
the Company issued 600,000 shares of common stock to a member of the Company’s Scientific Advisory Board. The Company valued
the 600,000 shares based on the market price on the issuance date of $0.0369. The Company has recorded $22,140 of consulting expense
as of June 30, 2016 related to this agreement.
On October 1, 2015,
the Company entered into an agreement with a consultant to provide services over a one year period. The Company agreed to issue
the consultant 1,500,000 shares of common stock and an additional 1,500,000 shares of common stock on April 1, 2016 unless the
Company terminates the agreement. The Company valued the 1,500,000 shares based on the market price on the agreement date of $0.031
and is recognizing $46,500 of consulting expense over the one year term of the agreement. The Company has recorded $34,907 of
consulting expense for the year ended June 30, 2016 related to this agreement. On October 1, 2015, the Company issued 1,100,000
and 400,000 shares of common stock to consultants related to this agreement. In February 2016, the Company terminated this agreement.
On October 16, 2015,
the Company issued 4,000,000 shares of common stock to a consultant. The Company valued the 4,000,000 shares based on the market
price on the issuance date of $0.0415 and is recognizing $166,000 of consulting expense over the six month term of the agreement.
The Company has recorded $166,000 of consulting expense as of June 30, 2016 related to this agreement.
On November 1, 2015,
the Company entered into an agreement with a consultant to provide services over a nine month period. The Company agreed to issue
the consultant 2,120,000 shares of common stock. The Company has recorded $28,305 of consulting expense for the year ended June
30, 2016 related to this agreement. On August 8, 2016, the Board of Directors authorized the issuance of 2,120,000 shares of common
stock valued at $0.015 per share to the consultant (See Note 13).
On November 11, 2015,
the Company entered into an agreement with a consultant to provide services over a six month period. The Company agreed to issue
the consultant 2,000,000 shares of common stock. The Company valued the 2,000,000 shares based on the market price on the effective
date of the agreement of $0.0157 and is recognizing $31,400 of consulting expense over the term of the agreement. On February
17, 2016, the Company issued the 2,000,000 shares of this agreement. The Company has recorded $31,400 of consulting expense as
of June 30, 2016 related to this agreement.
On November 12, 2015,
the Company amended an agreement with a consultant for $10,000 shares worth of common stock to be issued in lieu of a cash payment.
On June 16, 2016 the Company issued 500,000 shares of common stock. The Company valued the 500,000 shares based on the market
price on the date of issuance of $0.0201. The Company has recorded $10,050 of consulting expense as of June 30, 2016 related to
this agreement.
On December 30, 2015,
the Company entered into an agreement with a consultant to provide services over a nine month period. The Company agreed to issue
the consultant 1,000,000 shares of common stock. The Company valued the 1,000,000 shares based on the market price on the agreement
date of $0.0260 and is recognizing $26,000 of consulting expense over the term of the agreement. On January 4, 2016, the Company
issued the 1,000,000 shares of this agreement. The Company has recorded $17,271 of consulting expense for the year ended June
30, 2016 related to this agreement.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On December 30,
2015, the Company entered into an agreement, effective on January 1, 2016, with a consultant to provide services over a six month
period. The Company agreed to issue the consultant 2,250,000 shares of common stock. The Company valued the 2,250,000 shares based
on the market price on the effective date of the agreement of $0.0279 and will amortize the $62,775 over the six month term of
the agreement. On January 4, 2016 and on February 18, 2016, the Company issued 375,000 shares of common stock (or 750,000 in aggregate)
related to this agreement. The Company has recorded $20,925 of consulting expense for the year ended June 30, 2016 related to this
agreement. In February 2016, the Company terminated this agreement.
On December 31, 2015,
the Company entered into an agreement, effective on January 1, 2016, with a law firm to provide legal services. The Company agreed
to issue the law firm 1,600,000 shares of common stock. The Company valued the 1,600,000 shares based on the market price on the
effective date of the agreement of $0.0279 and immediately expensed $44,640. On January 4, 2016, the Company issued the 1,600,000
shares of common stock related to this agreement.
On January 31, 2016,
the Company entered into an agreement with a consultant to provide services over a five month period. The Company agreed to issue
the consultant 9,000,000 shares of common stock. The Company has recorded $93,600 of consulting expense for the year ended June
30, 2016 related to this agreement. On August 23, 2016, the Board of Directors authorized the issuance of 9,000,000 shares of
common stock valued at $0.0104 per share to the consultant (See Note 13).
On April 22, 2016,
the Company entered into an agreement with a consultant to provide services over a twelve month period. The Company agreed to
issue the consultant 6,250,000 shares of common stock. The Company valued the 6,250,000 shares based on the market price of the
effective date of the agreement of $0.03336 and is recognizing $208,500 of consulting expense over the term of the agreement.
On June 16, 2016 the Company issued 6,250,000 shares of common stock related to this agreement. The Company has recorded $39,523
of consulting expense for the year ended June 30, 2016 related to this portion of the agreement. Additionally, the agreement allowed
for 2,500,000 shares of common stock to be issued for certain reports and another 1,250,000 shares of common stock to be issued
for specified consulting services. These reports were issued during the year and the specified consulting services were performed.
On June 16, 2016 the Company issued 3,750,000 shares of common stock related to this agreement. These additional shares are valued
based on the market price of the effective date of the agreement of $0.03336 and the Company recognized $125,100 of consulting
expense for the year ended June 30, 2016.
On June 16, 2016,
the Company agreed to issue a consultant 2,000,000 shares of common stock for a discretionary bonus agreed to on June 2, 2015.
The Company valued the 2,000,000 shares based on the market price of the effective date of the issuance of the shares, the date
the discretionary bonus was deemed earned. The value of the shares was $0.0201 and the Company recognized $40,200 of consulting
expense for the year ended June 30, 2016 related to this agreement.
Shares issued
for conversion of convertible debt
On July 2, 2014, a $139,680 convertible note
was converted into shares of common stock pursuant to a conversion notice. $154,798 of principal and interest was converted at
$0.0709 into 2,183,333 shares (See Note 6).
On September 11, 2014, the Company issued
7,426,000 shares of common stock as the first tranche of a settlement agreement. (See Note 9).
On November 4, 2014,
the Company issued 8,161,000 shares of common stock as the second tranche of a settlement agreement. (See Note 9).
On November 5, 2014,
the Company entered into a private placement securities purchase agreement with an accredited investor pursuant to which the Company
agreed to issue up to 3,000,000 shares of its common stock at a price of $0.001 per share for an aggregate purchase price of $3,000
in gross proceeds. On December 4, 2014, the Company issued 3,000,000 shares of common stock. There are no registration rights
with regards to these securities.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On December 9, 2014,
pursuant to a conversion notice, $5,357 of principal and interest was converted at $0.0011 into 4,870,391 shares of common stock
(See Note 6).
On December 10, 2014,
pursuant to a conversion notice, $7,368 of principal and interest was converted at $0.0011 into 6,698,331 shares of common stock
(See Note 6).
On December 11, 2014,
the Company entered into a private placement securities purchase agreement with an accredited investor pursuant to which the Company
agreed to issue up to 1,000,000 shares of its common stock at a price of $0.0025 per share for an aggregate purchase price of
$2,500 in gross proceeds.
On December 16, 2014,
the Company entered into a private placement securities purchase agreements with accredited investors pursuant to which the Company
agreed to issue up to 9,400,000 shares of its common stock at a price of $0.0025 per share for an aggregate purchase price of
$23,500 in gross proceeds.
On December 16, 2014,
pursuant to a conversion notice, $6,000 of principal was converted at $0.0012 into 5,194,805 shares of common stock (See Note
6).
On December 24, 2014,
pursuant to a conversion notice, $3,762 of principal was converted at $0.0007 into 5,700,000 shares of common stock (See Note
6).
On December 26, 2014,
pursuant to a conversion notice, $4,044 of principal and interest was converted at $0.0007 into 5,655,958 shares of common stock
(See Note 6).
On February 2, 2015,
pursuant to a conversion notice, $3,446 of principal and interest was converted at $0.0006 into 6,265,964 shares of common stock
(See Note 6).
On February 4, 2015,
pursuant to debt settlement agreements with two directors (Note 4), the Company issued 17,654,470 and 33,259,350 shares of common
stock valued at $0.0025 per share or $44,136 and $83,148, respectively.
On February 9, 2015,
pursuant to a conversion notice, $21,100 of principal and interest was converted at $0.0035 into 6,089,544 shares of common stock
(See Note 6).
On February 17, 2015,
pursuant to a conversion notice, $3,266 of principal and interest was converted at $0.0006 into 5,937,563 shares of common stock
(See Note 6).
On February 17, 2015,
pursuant to a conversion notice, $15,323 of principal and interest was converted at $0.0035 into 4,422,257 shares of common stock
(See Note 6).
On March 6, 2015,
pursuant to a conversion notice, $3,410 of principal was converted at $0.0006 into 6,200,000 shares of common stock (See Note
6).
On March 6, 2015,
pursuant to a conversion notice, $6,443 of principal and interest was converted at $0.0015 into shares 4,338,384 of common stock
(See Note 6).
On March 6, 2015,
pursuant to a conversion notice, $1,011 of principal and interest was converted at $0.0015 into 680,485 shares of common stock
(See Note 6).
On March 11, 2015,
pursuant to a conversion notice, $14,675 of principal and interest was converted at $0.0015 into 9,882,013 shares of common stock
(See Note 6).
On March 11, 2015,
pursuant to a conversion notice, $10,121 of principal and interest was converted at $0.0015 into 6,815,185 shares of common stock
(See Note 6).
On March 12, 2015,
pursuant to a conversion notice, $1,001 of principal and interest was converted at $0.0015 into 674,141 shares of common stock
(See Note 6).
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On March 12, 2015,
pursuant to a conversion notice, $14,678 of principal and interest was converted at $0.0015 into 9,884,155 shares of common stock
(See Note 6).
On March 12, 2015,
pursuant to a conversion notice, $10,125 of principal and interest was converted at $0.0016 into 6,347,918 shares of common stock
(See Note 6).
On March 16, 2015,
pursuant to a conversion notice, $15,534 of principal and interest was converted at $0.0017 into 9,110,833 shares of common stock
(See Note 6).
On March 17, 2015,
pursuant to a conversion notice, $1,061 of principal and interest was converted at $0.0017 into 622,504 shares of common stock
(See Note 6).
On March 17, 2015,
pursuant to a conversion notice, $20,048 of principal and interest was converted at $0.0019 into 10,414,660 shares of common stock
(See Note 6).
On March 18, 2015,
pursuant to a conversion notice, $20,053 of principal and interest was converted at $0.0020 into 10,127,576 shares of common stock
(See Note 6).
On March 19, 2015,
pursuant to a conversion notice, $8,260 of principal and interest was converted at $0.0020 into 4,171,808 shares of common stock
(See Note 6).
On March 20, 2015,
pursuant to a conversion notice, $23,762 of principal and interest was converted at $0.0020 into 12,001,242 shares of common stock
(See Note 6).
On April 14, 2015,
pursuant to a conversion notice, $4,271 of principal and interest was converted at $0.0020 into 2,135,450 shares of common stock
(See Note 6).
On April 15, 2015,
pursuant to a conversion notice, $10,145 of principal and interest was converted at $0.0020 into 5,072,740 shares of common stock
(See Note 6).
On April 21, 2015,
pursuant to a conversion notice, $28,202 of principal and interest was converted at $0.0020 into 14,100,870 shares of common stock
(See Note 6).
On August 14, 2015,
pursuant to a conversion notice, $20,500 of principal and interest was converted at $0.02365 into 866,796 shares of common stock
(See Note 6).
On August 14, 2015,
pursuant to a conversion notice, $20,802 of principal and interest was converted at $0.02365 into 879,585 shares of common stock
(See Note 6).
On August 26, 2015,
pursuant to a conversion notice, $26,068 of principal and interest was converted at $0.018425 into 1,414,843 shares of common
stock (See Note 6).
On September 1, 2015,
pursuant to a conversion notice, $25,723 of principal and interest was converted at $0.018425 into 1,396,108 shares of common
stock (See Note 6).
On September 4, 2015,
pursuant to a conversion notice, $15,648 of principal and interest was converted at $0.018425 into 849,263 shares of common stock
(See Note 6).
On September 16,
2015, pursuant to a conversion notice, $15,687 of principal and interest was converted at $0.018975 into 826,726 shares of common
stock (See Note 6).
On September 18,
2015, pursuant to a conversion notice, $15,694 of principal and interest was converted at $0.017875 into 877,969 shares of common
stock (See Note 6).
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On September 22,
2015, pursuant to a conversion notice, $15,638 of principal and interest was converted at $0.01716 into 911,294 shares of common
stock (See Note 6).
On October 1, 2015,
pursuant to a conversion notice, $26,635 of principal and interest was converted at $0.012375 into 2,152,289 shares of common
stock (See Note 6).
On October 7, 2015,
pursuant to a conversion notice, $31,374 of principal and interest was converted at $0.012375 into 2,535,293 shares of common
stock (See Note 6).
On October 13, 2015,
pursuant to a conversion notice, $109,004 of principal and interest was converted at $0.012375 into 8,808,435 shares of common
stock (See Note 6).
On October 13, 2015,
pursuant to a conversion notice, $104,712 of principal and interest was converted at $0.012375 into 8,461,602 shares of common
stock (See Note 6).
On October 15, 2015,
pursuant to a conversion notice, $50,000 of principal and interest was converted at $0.01 into 5,000,000 shares of common stock
(See Note 6).
On November 17, 2015,
pursuant to a conversion notice, $2,099 of principal and interest was converted at $0.01986 into 105,709 shares of common stock
(See Note 6).
On November 17, 2015,
pursuant to a conversion notice, $35,000 of principal and interest was converted at $0.01 into 3,500,000 shares of common stock
(See Note 6).
On November 23, 2015,
pursuant to a conversion notice, $15,707 of principal and interest was converted at $0.0154 into 1,019,925 shares of common stock
(See Note 6).
On November 24, 2015,
pursuant to a conversion notice, $20,947 of principal and interest was converted at $0.0154 into 1,360,185 shares of common stock
(See Note 6).
On November 30, 2015,
pursuant to a conversion notice, $49,287 of principal and interest was converted at $0.0154 into 3,200,448 shares of common stock
(See Note 6).
On December 4, 2015,
pursuant to a conversion notice, $31,703 of principal and interest was converted at $0.0154 into 2,058,637 shares of common stock
(See Note 6).
On December 8, 2015,
pursuant to a conversion notice, $63,213 of principal and interest was converted at $0.01595 into 3,963,207 shares of common stock
(See Note 6).
On December 11, 2015,
pursuant to a conversion notice, $50,000 of principal was converted at $0.02608 into 1,917,178 shares of common stock (See Note
6).
On December 15, 2015,
pursuant to a conversion notice, $50,000 of principal was converted at $0.02712 into 1,843,658 shares of common stock (See Note
6).
On December 16, 2015,
pursuant to a conversion notice, $31,782 of principal and interest was converted at $0.01650 into 1,926,177 shares of common stock
(See Note 6).
On December 17, 2015,
pursuant to a conversion notice, $40,000 of principal was converted at $0.02500 into 1,600,000 shares of common stock (See Note
6).
On December 21, 2015,
pursuant to a conversion notice, $40,000 of principal was converted at $0.02360 into 1,694,916 shares of common stock (See Note
6).
On December 21, 2015,
pursuant to a conversion notice, $51,719 of principal and interest was converted at $0.01584 into 3,265,069 shares of common stock
(See Note 6).
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On December 23, 2015,
pursuant to a conversion notice, $40,000 of principal was converted at $0.02320 into 1,724,138 shares of common stock (See Note
6).
On December 23, 2015,
pursuant to a conversion notice, $31,414 of principal and interest was converted at $0.01584 into 1,983,188 shares of common stock
(See Note 6).
On December 28, 2015,
pursuant to a conversion notice, $40,000 of principal was converted at $0.02320 into 1,724,138 shares of common stock (See Note
6).
On December 29, 2015,
pursuant to a conversion notice, $15,727 of principal and interest was converted at $0.01573 into 999,783 shares of common stock
(See Note 6).
On December 30, 2015,
pursuant to a conversion notice, $40,000 of principal was converted at $0.02284 into 1,751,314 shares of common stock (See Note
6).
On January 4, 2016,
pursuant to a conversion notice, $20,995 of principal and interest was converted at $0.0143 into 1,468,187 shares of common stock
(See Note 6).
On January 4, 2016,
pursuant to a conversion notice, $54,375 of interest was converted at $0.02156 into 2,522,032 shares of common stock (See Note
6).
On January 6, 2016,
pursuant to a conversion notice, $40,000 of principal was converted at $0.02068 into 1,934,236 shares of common stock (See Note
6).
On January 6, 2016,
pursuant to a conversion notice, $21,004 of principal and interest was converted at $0.014135 into 1,485,946 shares of common
stock (See Note 6).
On January 8, 2016,
pursuant to a conversion notice, $40,000 of principal was converted at $0.02008 into 1,992,032 shares of common stock (See Note
6).
On January 8, 2016,
pursuant to a conversion notice, $10,506 of principal and interest was converted at $0.0113805 into 761,050 shares of common stock
(See Note 6).
On January 11, 2016,
pursuant to a conversion notice, $10,513 of principal and interest was converted at $0.01375 into 764,573 shares of common stock
(See Note 6).
On January 12, 2016,
pursuant to a conversion notice, $10,515 of principal and interest was converted at $0.012705 into 827,632 shares of common stock
(See Note 6).
On January 13, 2016,
pursuant to a conversion notice, $17,650 of principal was converted at $0.01864 into 946,889 shares of common stock (See Note
6).
On January 13, 2016,
pursuant to a conversion notice, $10,517 of principal and interest was converted at $0.011825 into 889,409 shares of common stock
(See Note 6).
On January 13, 2016,
pursuant to a conversion notice, $20,820 of principal and interest was converted at $0.01056 into 1,971,565 shares of common stock
(See Note 6).
On January 14, 2016,
pursuant to a conversion notice, $82,350 of principal was converted at $0.0168 into 4,901,786 shares of common stock (See Note
6).
On January 19, 2016,
pursuant to a conversion notice, $10,423 of principal and interest was converted at $0.009955 into 1,047,013 shares of common
stock (See Note 6).
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On January 20, 2016,
pursuant to a conversion notice, $5,108 of principal and interest was converted at $0.009955 into 513,158 shares of common stock
(See Note 6).
On January 21, 2016,
pursuant to a conversion notice, $25,000 of principal was converted at $0.01488 into 1,680,108 shares of common stock (See Note
6).
On January 21, 2016,
pursuant to a conversion notice, $12,513 of principal and interest was converted at $0.009955 into 1,256,944 shares of common
stock (See Note 6).
On January 25, 2016,
pursuant to a conversion notice, $25,000 of principal was converted at $0.01492 into 1,675,604 shares of common stock (See Note
6).
On January 25, 2016,
pursuant to a conversion notice, $13,567 of principal and interest was converted at $0.009955 into 1,362,834 shares of common
stock (See Note 6).
On January 25, 2016,
pursuant to a conversion notice, $65,159 of principal and interest was converted at $0.0150 into 4,343,934 shares of common stock
(See Note 6).
On January 27, 2016,
pursuant to a conversion notice, $15,661 of principal and interest was converted at $0.009955 into 1,573,161 shares of common
stock (See Note 6).
On January 29, 2016,
pursuant to a conversion notice, $25,000 of principal was converted at $0.015080 into 1,657,825 shares of common stock (See Note
6).
On February 1, 2016,
pursuant to a conversion notice, $16,722 of principal and interest was converted at $0.009955 into 1,679,800 shares of common
stock (See Note 6).
On February 3, 2016,
pursuant to a conversion notice, $20,000 of principal was converted at $0.0148 into 1,351,352 shares of common stock (See Note
6).
On February 3, 2016,
pursuant to a conversion notice, $10,456 of principal and interest was converted at $0.009405 into 1,111,737 shares of common
stock (See Note 6).
On February 4, 2016,
pursuant to a conversion notice, $25,000 of principal was converted at $0.0142 into 1,760,564 shares of common stock (See Note
6).
On February 4, 2016,
pursuant to a conversion notice, $26,145 of principal and interest was converted at $0.009405 into 2,779,927 shares of common
stock (See Note 6).
On February 8, 2016,
pursuant to a conversion notice, $15,700 of principal and interest was converted at $0.009405 into 1,669,354 shares of common
stock (See Note 6).
On February 9, 2016,
pursuant to a conversion notice, $198,140 of principal was converted at $0.0100 into 19,814,000 shares of common stock (See Note
6).
On February 9, 2016,
pursuant to a conversion notice, $25,000 of principal was converted at $0.0138 into 1,811,595 shares of common stock (See Note
6).
On February 10, 2016,
pursuant to a conversion notice, $12,042 of principal and interest was converted at $0.00864 into 1,394,548 shares of common stock
(See Note 6).
On February 12, 2016,
pursuant to a conversion notice, $40,000 of principal was converted at $0.01268 into 3,154,575 shares of common stock (See Note
6).
On February 16, 2016,
pursuant to a conversion notice, $10,276 of principal and interest was converted at $0.00864 into 1,221,172 shares of common stock
(See Note 6).
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On February 17, 2016,
pursuant to a conversion notice, $10,278 of principal and interest was converted at $0.00787 into 1,306,848 shares of common stock
(See Note 6).
On February 22, 2016,
pursuant to a conversion notice, $20,579 of principal and interest was converted at $0.00787 into 2,616,482 shares of common stock
(See Note 6).
On February 23, 2016,
pursuant to a conversion notice, $30,000 of principal was converted at $0.01184 into 2,533,784 shares of common stock (See Note
6).
On February 25, 2016,
pursuant to a conversion notice, $115,975 of principal and interest was converted at $0.0100 into 11,597,463 shares of common
stock (See Note 6).
On February 25, 2016,
pursuant to a conversion notice, $30,000 of principal was converted at $0.0100 into 3,000,000 shares of common stock (See Note
6).
On February 26, 2016,
pursuant to a conversion notice, $30,000 of principal was converted at $0.0096 into 3,275,110 shares of common stock (See Note
6).
On March 2, 2016,
pursuant to a conversion notice, $25,773 of principal and interest was converted at $0.00567 into 4,549,444 shares of common stock
(See Note 6).
On March 4, 2016,
pursuant to a conversion notice, $50,000 of principal was converted at $0.00832 into 6,009,616 shares of common stock (See Note
6).
On March 8, 2016,
pursuant to a conversion notice, $143,000 of principal was converted at $0.00868 into 16,474,655 shares of common stock (See Note
6).
On March 13, 2016,
pursuant to a conversion notice, $8,274 of principal and interest was converted at $0.00201 into 4,107,483 shares of common stock
(See Note 6).
On March 15, 2016,
pursuant to a conversion notice, $126,549 of principal and interest was converted at $0.00572 into 22,123,958 shares of common
stock (See Note 6).
On March 18, 2016,
pursuant to a conversion notice, $67,237 of principal and interest was converted at $0.00660 into 10,187,380 shares of common
stock (See Note 6).
On March 29, 2016,
pursuant to a conversion notice, $62,926 of principal was converted at $0.01920 into 3,277,403 shares of common stock (See Note
6).
On April 1, 2016,
pursuant to a conversion notice, $54,375 of interest was converted at $0.01705 into 3,189,150 shares of common stock (See Note
6).
On April 4, 2016,
pursuant to a conversion notice, $75,000 of principal was converted at $0.01705 into 4,398,827 shares of common stock (See Note
6).
On April 5, 2016,
pursuant to a conversion notice, $70,000 of principal was converted at $0.01705 into 4,105,572 shares of common stock (See Note
6).
On April 7, 2016,
pursuant to a conversion notice, $75,000 of principal was converted at $0.01705 into 4,398,827 shares of common stock (See Note
6).
On April 12, 2016,
pursuant to a conversion notice, $75,000 of principal was converted at $0.01938 into 3,870,968 shares of common stock (See Note
6).
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
On April 18, 2016,
pursuant to a conversion notice, $75,000 of principal was converted at $0.01945 into 3,855,546 shares of common stock (See Note
6).
On April 19, 2016,
pursuant to a conversion notice, $75,000 of principal was converted at $0.01945 into 3,855,546 shares of common stock (See Note
6).
On April 20, 2016,
pursuant to a conversion notice, $29,218 of principal and interest was converted at $0.01419 into 2,059,042 shares of common stock
(See Note 6).
On April 21, 2016,
pursuant to a conversion notice, $75,000 of principal was converted at $0.01984 into 3,780,242 shares of common stock (See Note
6).
On April 21, 2016,
pursuant to a conversion notice, $15,628 of principal and interest was converted at $0.01419 into 1,101,335 shares of common stock
(See Note 6).
On April 22, 2016,
pursuant to a conversion notice, $150,000 of principal was converted at $0.01984 into 7,560,484 shares of common stock (See Note
6).
On April 22, 2016,
pursuant to a conversion notice, $48,610 of principal and interest was converted at $0.01419 into 3,425,642 shares of common stock
(See Note 6).
On April 26, 2016,
pursuant to a conversion notice, $150,000 of principal was converted at $0.01984 into 7,560,484 shares of common stock (See Note
6).
On April 27, 2016,
pursuant to a conversion notice, $634,880 of principal was converted at $0.01984 into 32,000,000 shares of common stock (See Note
6).
On April 27, 2016,
pursuant to a conversion notice, $156,477 of principal and interest was converted at $0.01463 into 10,695,606 shares of common
stock (See Note 6).
On April 27, 2016,
pursuant to a conversion notice, $26,868 of principal and interest was converted at $0.01463 into 1,836,534 shares of common stock
(See Note 6).
On May 2, 2016, pursuant
to a conversion notice, $325,000 of principal was converted at $0.02093 into 15,531,661 shares of common stock (See Note 6).
On May 31, 2016,
pursuant to a conversion notice, $5,357 of principal and interest was converted at $0.01227 into 436,792 shares of common stock
(See Note 6).
2015 Settlement
Lock Up Agreement:
During the year ended
June 30, 2015, pursuant to the January 30, 2015 Settlement and Lock-up Agreement (Note 9), the Company issued 10,000,000 shares
of common stock at a rate of $0.0025 per share or $25,000.
Options:
On April 14, 2016
(“Grant Date”), the Board of Directors of the Company, through unanimous written consent, granted 71,500,000 and 71,500,000
stock options at an exercise price of $0.03 (market value of the Company’s stock on Grant Date), to its CEO and to a director,
respectively. 23,833,333 of such stock options vested on April 14, 2016 and expire on April 14, 2021, 23,833,333 of such stock
options shall vest on April 14, 2017 (first anniversary of Grant Date) and expire on April 14, 2021 and 23,833,334 of such stock
options shall vest on April 14, 2018 (second anniversary of Grant Date) and expire on April 14, 2021. The fair value of each of
the 71,500,000 options at Grant Date is $1,962,440 (aggregate total of $3,924,880).
The Company expensed
$1,722,288 for these stock options during fiscal June 30, 2016.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
A summary of the
Company’s option activity during the year ended June 30, 2016 is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Options
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Balance Outstanding, June 30, 2015
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
143,000,000
|
|
|
|
0.03
|
|
|
|
5
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance Outstanding, June 30, 2016
|
|
|
143,000,000
|
|
|
$
|
0.03
|
|
|
|
4.79
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, June 30, 2016
|
|
|
47,666,666
|
|
|
$
|
0.03
|
|
|
|
4.79
|
|
|
$
|
-
|
|
Warrants:
In September 2013, pursuant to convertible
debenture, the Company issued 3,000,000 warrants to purchase common stock. These warrants have an initial exercise price of $0.0698
per share which is subject to adjustment and expire 5 years from the date of issuance (See Note 6).
In connection with
above agreement dated May 7, 2015, the Company issued to the consultant, warrants for 3,379,158 common shares of the Company.
The fair value of the warrants was determined using a Black-Scholes option pricing model with a stock price of $0.043, exercise
price of $0.03, volatility of 397% based on the Company’s stock price, an expected term of 60 months based on the warrant
and a risk free rate of 1.54%. The value of the warrants of $145,303 was recorded as additional paid in capital in the accompanying
consolidated balance sheet, along with a prepaid expense of approximately $101,080 and stock based expense of approximately $44,223
for the year ended June 30, 2015. The remaining $101,080 was expensed for the year ended June 30, 2016.
In connection with
above agreement dated May 21, 2015, the Company issued to the consultant warrants for 1,000,000 common shares of the Company.
The fair value of the warrants was determined using a Black-Scholes option pricing model with a stock price of $0.0445, exercise
price of $0.07, volatility of 397% based on the Company’s stock price, an expected term of 60 months based on the warrant
and a risk free rate of 1.54%. The value of the warrants of $44,500 was recorded as additional paid in capital in the accompanying
consolidated balance sheet, along with a prepaid expense of approximately $37,235 and stock based expense of approximately $7,265
for the year ended June 30, 2015. The remaining $37,235 was expensed for the year ended June 30, 2016.
On October 28, 2015, pursuant to a convertible
debenture, the Company issued 26,190,476 warrants to purchase common stock. These warrants have an exercise price of $0.60 per
share and expire 4 years from the date of issuance (See Note 6).
In connection with above agreement dated November
11, 2015, on February 22, 2016, the Company issued to the consultant, 4,000,000 warrants to purchase common stock of the Company.
The fair value of the warrants was determined using a Black-Scholes option pricing model with a stock price of $0.0119, exercise
price of $0.045, volatility of 314% based on the Company’s stock price, an expected term of 60 months based on the warrant
and a risk free rate of 1.54%. The value of the warrants of $47,560 was recorded as additional paid in capital and fully
expensed in the accompanying condensed consolidated balance sheet, at June 30, 2016.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
As of June 30, 2016, there were 37,569,634
warrants outstanding and exercisable with expiration dates commencing September 2018 – November 2020.
The following table
summarizes warrant activity for the years ended June 30, 2016 and 2015:
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average
|
|
|
|
Shares
|
|
|
Price Per Share
|
|
Outstanding at June 30, 2014
|
|
|
3,000,000
|
|
|
$
|
0.07
|
|
Issued
|
|
|
4,379,158
|
|
|
|
0.04
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at June 30, 2015
|
|
|
7,379,158
|
|
|
|
0.05
|
|
Issued
|
|
|
30,190,476
|
|
|
|
0.53
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at June 30, 2016
|
|
|
37,569,634
|
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2016
|
|
|
37,569,634
|
|
|
$
|
0.43
|
|
Outstanding and Exercisable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining contractual term
|
|
|
3.42
|
|
|
|
|
|
Aggregate intrinsic value
|
|
$
|
-
|
|
|
|
|
|
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, the Company may be involved
in litigation relating to claims arising out of the Company’s operations in the normal course of business. We
were previously involved in litigation with JMJ Financial Inc., a Florida corporation (“JMJ”), in the Circuit Court
of Dade County, Florida. JMJ claimed funds due under a convertible promissory note of $25,000 and we filed a counterclaim. We negotiated
a settlement with JMJ and on December 10, 2015, we repaid cash of $90,000 as payment in full of the promissory note and recorded
a loss on settlement of $58,893.
On May 20, 2016, the Company negotiated
a settlement with Typenex Co-Investment, LLC, a Utah limited liability company (“Typenex”) pursuant to which we paid
Typenex $612,000 as payment in full of a certain secured convertible promissory note dated June 4, 2015 held by Typenex. The settlement
resolves all pending actions including a private arbitration with Typenex in the State of Utah and a lawsuit in the Third Judicial
District Court of Salt Lake County, Utah pursuant to which Typenex claimed funds were due under the convertible promissory note.
We had filed a counter claim against Typenex in the arbitration that is also resolved by the settlement. The Company recorded a
loss on settlement of $612,000.
Operating Agreements
In November 2009,
the Company entered into a commercialization agreement whereby the Company agreed to pay royalties of 2% of net revenues. 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.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
Operating Leases
From July 2013 through
April 30, 2015, the Company utilized office space at a certain location. There was no formal lease agreement and no amounts were
paid, but the Company had accrued a liability as of April 30, 2015 of approximately $21,000 in anticipation of a month to month
agreement retroactive to July 1, 2013 at approximately $1,000 per month. On May 1, 2015, the Company moved to new premises. The
prior landlord verbally agreed that he would not be pursuing payment of any outstanding rent due, therefore the Company recorded
a gain on settlement related to the accrued rent liability. On May 1, 2015, the Company entered into a month to month lease agreement
with new landlord with a monthly rental fee of approximately $2,200 AUD and requiring a three month notice, by either party, to
terminate agreement, which occurred prior to year-end.
On May 4, 2016
the Company entered into a new five-year operating lease agreement with a related party with monthly rent of $3,300 AUD, inclusive
of GST (See Note 10). As of June 30, 2016, the Company recorded $2,220 in prepaid rent.
Future minimum operating
lease commitments consisted of the following at June 30, 2016:
Year Ended June 30,
|
|
Amount
|
|
2017
|
|
$
|
29,308
|
|
2018
|
|
$
|
29,308
|
|
2019
|
|
$
|
29,308
|
|
2020
|
|
$
|
29,308
|
|
2021
|
|
$
|
24,423
|
|
Rent expense for
the years ended June 30, 2016 and 2015 were $24,550 and $3,719 respectively.
Settlement and Stipulation Agreement
In July 2014, the Company signed a term sheet
and a Settlement and Stipulation Agreement (the "Settlement Agreement") with a third party purchaser (the "purchaser")
to have that purchaser acquire certain portions of the Company’s liabilities to creditors (“Creditors”) in exchange
for an obligation of the Company to issue shares of common stock to the purchaser, which shares of common stock would then be
sold by the purchaser and 65% of the net proceeds, as defined in the agreement, distributed to the Creditors. The shares are to
be freely traded shares issued pursuant to section 3(a)(10) of the Securities Act of 1933.
Under the terms of the Settlement Agreement,
the variable quantity of common stock will be issued in tranches such that the purchaser would not own more than 9.99% of the
outstanding shares of common stock at any time.
Under the above agreements, in May 2014 the
Company also paid an expense fee of $25,000 in the form of a convertible promissory note. (See Note 6).
The purchaser entered into agreements through
July 2014 with the Creditors to acquire $627,998 in liabilities of the Company and filed a complaint with the Second Judicial
Circuit Court in Leon County, Florida seeking a judgment against the Company for such amount. A court order based on this complaint
was issued on September 9, 2014, (the "court order date") resulting in the transfer of $627,998 in liabilities of the
Company to the purchaser. In addition, upon entry of the order, the Company became obligated to issue the purchaser a fee of $50,000
worth of common stock priced at 75% of the average closing bid prices for the 10 days immediately preceding the date of the order.
As a result of the purchased liabilities and purchaser fee, the Company became obligated to issue to the purchaser approximately
$1,033,000 worth of common stock. These liabilities meet the criteria of stock settled debt under ASC 480 resulting in the recording
of a liability premium of approximately $405,000 with a charge to interest expense on the court order date.
During the year ended June 30, 2015, the Company
issued a total of 15,587,000 shares of common stock to the purchaser. As of June 30, 2015, the purchaser has sold all 15,587,000
shares of common stock which after fees, reduced the liability owed to the purchaser by $52,907. On January 30, 2015, as part
of the Settlement and Lock-up agreement with the purchaser, this agreement was terminated and the Company reclassified the remaining
principal outstanding debts and other liabilities of approximately $575,000. In addition, since this agreement was terminated,
the Company wrote off the remaining premium of $310,000 and the fee of approximately $67,000 as a gain on debt settlement.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
Equity Purchase Agreement
On July 18, 2014 the Company executed an Equity
Purchase Agreement (the "agreement") with an investor (the "investor") affiliated with the above purchaser.
The Company may sell (put shares) from time to time, during the commitment period discussed below, up to $5,000,000 of the Company's
common stock at a sale price equal to 90% of the market price. The market price is determined during a valuation period which
is the 10 trading days immediately following the clearing date (the date when the put shares are deposited into the investor's
brokerage account) associated with the applicable put notice. The valuation period may change based on any valuation events occurring,
as defined in the agreement. The Company's right to sell to the investor and the investor's obligation to purchase shares is subject
to certain restrictions, including a floor price, as defined in the agreement. Furthermore, on each closing date the number of
shares then to be purchased shall not exceed that amount that when aggregated with all other shares beneficially owned by the
investor would result in the investor owning more than 9.99% of the outstanding shares of common stock.
The commitment period is the earlier of the
sale of $5,000,000 worth of shares or 24 months.
On July 18, 2014, Company entered into a Registration
Rights Agreement with the investor. Pursuant to the terms of the Registration Rights Agreement, the Company is obligated to file
a registration statement (the “Registration Statement”) with the SEC to cover the Registrable Securities within one
hundred twenty (120) days of closing of an equity purchase. The Company must use its commercially reasonable efforts to cause
the Registration Statement relating to the Registered Securities to become effective within five (5) business days after notice
from the SEC that such Registration Statement may be declared effective, and keep the Registration Statement effective at all
time prior to the termination of the Equity Purchase Agreement until the earliest of (i) date that is three months after the completion
of the last Closing date (as defined in the Equity Purchase Agreement), (ii) the date when the investor may sell all Registered
Securities under Rule 144 without volume limitations, or (iii) the date the investor no longer owns any of the Registered Securities
(collectively, the “Registration Period”).
On July 18, 2014 the Company paid a $50,000
fee to the investor in the form of a $50,000 promissory note, non-interest bearing and due January 31, 2015. On January 30, 2015,
the Company entered into a Settlement and Lock-up Agreement with the investor whereby the Company issued 10,000,000 shares of
common stock as settlement of the $50,000 promissory note and a $25,000 convertible promissory note issued in connection with
a Settlement and Stipulation Agreement dated May 2014 and accrued interest of $1,466. The Company valued the common stock at a
price of $0.0025 per share based on the last private placement purchase price per share for a total value of $25,000 which resulted
in the Company recording a gain of $51,466 as a result of this settlement. (See Notes 6 and 8).
NOTE 10 –
RELATED PARTY TRANSACTIONS
Since inception,
Propanc Health Group Corporation has conducted transactions with directors and director related entities. These transactions included
the following:
As of June 30,
2016 and June 30, 2015, the Company owed a current and former director a total of $54,767 and $79,416 respectively, for money loaned
to the Company throughout the years. The loan balance owed at June 30, 2016 was not interest bearing (See Note 5).
As of June 30, 2016
and June 30 2015, the Company owed its two current directors a total of $33,943 and $35,108, respectively, related to expenses
paid on behalf of the Company related to corporate startup costs and intellectual property (See Note 5).
On February 4, 2015,
the Company entered into a Debt Settlement Agreement with each of our directors whereby the Company issued 33,259,350 and 17,654,470
shares of common stock as settlement of approximately $41,000 of the balance due to these directors. The Company valued the common
stock at a price of $0.0025 per share based on the last private placement purchase price per share for a total value of $127,284
that resulted in the Company recording a loss of $86,455 as a result of these settlements.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
Effective May
5, 2016, we entered into an agreement for the lease of our principal executive offices with North Horizon Pty Ltd., of which Mr.
Nathanielsz and his wife are owners and directors. The lease has a five year term and provides for annual rental payments of $39,600
AUD, which includes $3,600 of goods and service tax for total payments of $198,000 AUD during the term of the lease.
Mr. Nathanielsz’s
wife, Sylvia Nathanielsz, is and has been an employee of ours since October 2015. Mrs. Nathanielsz receives an annual salary of
$54,615 and is entitled to customary benefits. From July 2015 until October 2015, Mrs. Nathanielsz was an independent contractor
serving us and was paid approximately $13,632 for her services.
According to a February
25, 2016 board resolution, James Nathanielsz shall be paid an amount to be determined by the board, on a monthly basis for the
purpose of acquiring and maintaining an automobile. The payments did not begin until subsequent to year end.
As per unanimous
written consent of the Board of Directors, on April 14, 2016, James Nathanielsz was granted a $200,000 bonus for accomplishments
obtained while operating as the chief executive officer.
During fiscal
year ending June 30, 2016 the Company paid $859,767 and $14,093 to two vendors who are associated with two of the Companies scientific
advisors.
During the fiscal
year ending June 30, 2016 the Company paid $82,182 to a vendor who is associated with the Company’s chief medical officer.
NOTE 11 –
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 June 30, 2016.
Receivable Concentration
As of June 30, 2016
and 2015, the Company’s receivables were 100% related to reimbursements on GST taxes paid.
Product and Patent
Concentration
As of June 30, 2016
the Company was undertaking preclinical activities for their lead product. The Company was also undertaking research to uncover
the mechanism of action of their lead product in order to screen new compounds for development.
The Company previously
expanded by the filing of an international PCT patent application (No. PCT/AU2010/001403) directed to enhanced pro-enzyme formulations
and combination therapies. The international PCT application has been based on previous provisional patent applications capturing
the Company’s ongoing research and development in this area.
The Company received grant status in South
Africa and more recently in Australia and New Zealand. In addition, the United States Patent and Trademark Office or USPTO
and European Patent Office or EPO have made preliminary indications that key features of our technology are patentable.
The Company is presently working towards securing a patent in each region, covering as many aspects of its technology as possible,
while also actively seeking protection throughout Eastern Europe, Asia and South America. Individual countries and regions, include
United States, Canada, Japan, Brazil, China, Mexico, Hong Kong, Singapore, Israel, Chile, Peru, Malaysia, Vietnam, Indonesia,
Europe, Russia, India, and South Korea. The patent is granted in South Africa, Australia, and New Zealand.
In addition to the Company’s lead patent,
another four applications have been filed, and presently under examination. Two patents applications have been filed in the United
States, one in Spain and another in Australia.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
Further provisional
patent filings are also expected to be filed to document and protect additional patentable subject matter that is identified,
namely further enhanced formulations, combination treatments, use of recombinant products, modes of action and molecular targets.
Foreign Operations
As of June 30, 2016
and 2015, the Company's operations are based in Australia.
NOTE 12 - DERIVATIVE
FINANCIAL INSTRUMENTS and FAIR VALUE MEASUREMENTS
Derivative
Financial Instruments:
The Company applies
the provisions of ASC Topic 815-40,
Contracts in Entity’s Own Equity
(“ASC Topic 815-40”), 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
has 3,000,000 warrants and $335,000 of convertible debt with repricing options and $87,500 of convertible debt with variable conversion
pricing outstanding at June 30, 2015. The Company has 3,000,000 warrants and $1,554,819 of convertible debt with repricing options
outstanding at June 30, 2016.
The Company calculates
the estimated fair values of the liabilities for derivative instruments using the Black Scholes (“BSM”) option pricing
model. Along with the below BSM value, the Company also computed the fair value using the Monte-Carlo model noting no material
difference between the valuations. The closing price of the Company’s common stock at June 30, 2016 and 2015 was $0.0187
and $0.0899, respectively. Volatility, expected remaining term and risk free interest rates used to estimate the fair value of
derivative liabilities at June 30, 2016 and 2015, are indicated in the table that follows. The volatility for the September 30,
2013 initial valuation was based on comparative companies’ methods since the Company’s stock was very thinly traded
and historical volatility for subsequent revaluations. The expected term is equal to the remaining term of the warrants and the
risk free rate is based upon rates for treasury securities with the same term.
Warrants
|
|
Initial
Valuation
|
|
|
|
|
|
|
|
|
|
September 30,
2013
|
|
|
June 30, 2015
|
|
|
June 30, 2016
|
|
Volatility
|
|
|
53
|
%
|
|
|
408
|
%
|
|
|
399
|
%
|
Expected remaining term
|
|
|
5
|
|
|
|
3.25
|
|
|
|
2.25
|
|
Risk-free interest rate
|
|
|
0.4
|
%
|
|
|
1.63
|
%
|
|
|
1.01
|
%
|
Expected dividend yield
|
|
|
None
|
|
|
|
None
|
|
|
|
None
|
|
Convertible Debt
|
|
Initial
Valuations
|
|
|
June 30, 2015
|
|
|
June 30, 2016
|
|
Volatility
|
|
216 - 408
|
%
|
|
|
408
|
%
|
|
|
175
|
%
|
Expected remaining term
|
|
0.83 – 2.00
|
|
|
|
0.82 – 1.70
|
|
|
|
0.33
|
|
Risk-free interest rate
|
|
0.5 – 0.7
|
%
|
|
|
0.64
|
%
|
|
|
0.45
|
%
|
Expected dividend yield
|
|
None
|
|
|
|
None
|
|
|
|
None
|
|
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
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 BSM option pricing model. The following tables summarize
the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2016:
|
|
Balance at
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
|
|
|
|
June
|
|
|
in Active
|
|
|
Other
|
|
|
Significant
|
|
|
|
30,
|
|
|
Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
2016
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Embedded conversion option liabilities
|
|
$
|
994,343
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
994,343
|
|
Fair value of liability for warrant derivative instruments
|
|
$
|
55,839
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
55,839
|
|
Total
|
|
$
|
1,050,182
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,050,182
|
|
The following tables
summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2015:
|
|
Balance at
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
|
|
|
|
June
|
|
|
in Active
|
|
|
Other
|
|
|
Significant
|
|
|
|
30,
|
|
|
Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
2015
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Embedded conversion option liabilities
|
|
$
|
780,281
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
780,281
|
|
Fair value of liability for warrant derivative instruments
|
|
$
|
269,648
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
269,648
|
|
Total
|
|
$
|
1,049,929
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,049,929
|
|
The following is
a roll forward for the years ended June 30, 2016 and 2015 of the fair value liability of price adjustable derivative instruments:
|
|
Fair Value of
|
|
|
|
Liability for
|
|
|
|
Derivative
|
|
|
|
Instruments
|
|
|
|
|
|
Balance at June 30, 2014
|
|
$
|
158,244
|
|
Effects of foreign currency exchange rate changes
|
|
|
(42,796
|
)
|
Initial fair value of embedded conversion option derivative liability recorded as debt discount
|
|
|
392,500
|
|
Initial fair value of embedded conversion option derivative liability recorded as change in fair value of ECO
|
|
|
1,082,567
|
|
Change in fair value included in statements of operations
|
|
|
(540,586
|
)
|
Balance at June 30, 2015
|
|
|
1,049,929
|
|
Effects of foreign currency exchange rate changes
|
|
|
(281,068
|
)
|
Initial fair value of embedded conversion option derivative liability recorded as debt discount
|
|
|
(2,462,355
|
)
|
Initial fair value of embedded conversion option derivative liability recorded as change in fair value of ECO
|
|
|
3,410,653
|
|
Change in fair value included in statements of operations
|
|
|
(666,977
|
)
|
Balance at June 30, 2016
|
|
$
|
1,050,182
|
|
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
NOTE 13 –
SUBSEQUENT EVENTS
Delafield Financing
On July 1, 2016, the Company entered into
a Letter Agreement (the “July Letter Agreement”) with Delafield Investments Limited (“Delafield”), and
the parties entered in a letter agreement dated August 3, 2016 (the “August Letter Agreement”), pursuant to which
the Company and Delafield agreed to new terms with respect to that certain securities purchase agreement entered into by and between
the Company and Delafield dated as of October 28, 2015, as amended by an addendum dated March 11, 2016 (the “Purchase Agreement”)
and the transactions contemplated thereby. Pursuant to the Purchase Agreement, Delafield agreed to invest $4,000,000
in exchange for an Original Issue Senior Discount Senior Secured Debenture (the “Debenture”) and a common stock purchase
warrant (the “2015 Warrant”) to purchase 26,190,476 shares of the Company’s common stock (the “2015 Warrant
Shares”).
The key terms of the Purchase Agreement and
related transactions were disclosed in the Company’s Current Report on Form 8-K filed on November 3, 2015 and the key terms
of the addendum, dated March 11, 2016 to the Purchase Agreement, were disclosed in the Company’s Current Report on Form
8-K filed on March 11, 2016. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase
Agreement.
Under the 2015 Letter Agreement, Delafield
agreed to exercise the 2015 Warrant with respect to all 26,190,476 shares of common stock underlying the 2015 Warrant. In consideration
for Delafield’s exercise of the 2015 Warrant, the Company agreed to adjust the exercise price from $0.60 per share to $0.012
per share. In addition, the Company and Delafield agreed to modify the July 1, 2016 “Interest Payment Date” and the
October 1, 2016 “Interest Payment Date” as such terms are defined in the Debenture. Pursuant to the July Letter Agreement,
the Company may delay the interest payment due on the July 1, 2016 Interest Payment Date by a minimum of 30 calendar days (the
“Minimum Extension Date”) and up to 60 calendar days, provided that Delafield may demand payment any time after the
Minimum Extension Date. The Company also may delay the interest payment due on the October 1, 2016 Interest Payment Date to the
October 28, 2016 maturity date (the “Maturity Date”) unless Delafield demands earlier payment; provided however, that
if Delafield has not demanded payment by October 27, 2016, the Maturity Date will be extended until December 31, 2016 (or such
earlier date as the parties mutually agree) and the interest payment that would have been due on the October 1, 2016 Interest
Payment Date will become due on December 31, 2016, unless Delafield demands earlier payment.
On July 8, 2016, the 2015 Warrant for 26,190,476
shares was fully exercised at a price of $0.012 per share for a total of $314,286. The Company revalued the warrants on the modification
date at the new exercise price and recorded an additional expense of approximately $21,000 related to the incremental increase
in value.
Pursuant to the August Letter Agreement, the
Maturity Date of the Debenture was extended until February 28, 2017 and will not accrue interest from October 28, 2016 through
the Maturity Date (provided that all accrued but unpaid interest prior to October 28, 2016 (the original maturity date) shall
be due and payable pursuant to the terms of the Debenture).
The Debenture is convertible at any time,
in whole or in part, at Delafield’s option into shares of Common Stock at a conversion price equal to $0.03 per share; provided
that in the event that the volume weighted average price per share on any trading day is less than such conversion price, the
conversion price will be adjusted to a price per share that is equal to a 22.5% discount to the lowest trading price of the Common
Stock in the 10 trading days prior to the date of conversion. At no time will Delafield be entitled to convert any portion of
the Debenture to the extent that after such conversion, Delafield (together with its affiliates) would beneficially own more than
4.99% of the outstanding shares of Common Stock as of such date.
2016 Warrants
Pursuant to the August Letter Agreement and
in consideration for extending the Maturity Date of the Debenture, we issued to Delafield warrants to purchase up to 240,000,000
shares of Common Stock (the “2016 Warrants”). The 2016 Warrants entitle the holder thereof to purchase (i) up to 200,000,000
shares of Common Stock at exercise prices ranging from $0.012 to $0.020 per share (the “Five Month Warrant”), and
(ii) up to 40,000,000 shares of Common Stock at an exercise price of $0.10 per share (the “Two Year Warrant”). We
also agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”), to register
for resale the 240,000,000 shares of Common Stock underlying the 2016 Warrants.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
The 2016 Warrants are immediately exercisable.
On August 18, 2016, Delafield notified us of its exercise of 12,500,000 shares of Common Stock under the first tranche of the
Five Month Warrant at a purchase price of $0.012 per share or $150,000 in the aggregate.
Pursuant to the Five Month Warrant, if the
Volume Weighted Average Price (as defined in the Five Month Warrant) of the Common Stock for five consecutive days equals or exceeds
the exercise price of any tranche of the Five Month Warrant (each, as applicable, a “Callable Tranche”), and provided
that the Company is in compliance with the Call Conditions as defined in the August Letter Agreement, the Company has the right
to call on Delafield to exercise any warrants under a Callable Tranche up to an aggregate exercise price of $350,000. The Five
Month Warrant generally limits the Company to one such call within a twenty trading day period. However, if the Volume Weighted
Average Price of the Common Stock for five consecutive trading days is at least 200% of the exercise price of any warrants under
a Callable Tranche, the Company may make an additional call for the exercise of additional warrants under such Callable Tranche
up to an aggregate exercise price of $600,000 prior to the passage of the twenty trading day period. If Delafield does not exercise
the 2016 Warrants under a Callable Tranche when called by the Company under the terms of the August Letter Agreement, we may,
at our option, cancel any or all outstanding warrants under the Five Month Warrant.
The exercise price and number of shares of
the Common Stock issuable under the 2016 Warrants are subject to adjustments for stock dividends, splits, combinations and pro
rata distributions. Any adjustment to the exercise price shall similarly cause the number of shares underlying the 2016 Warrants
to be adjusted so that the total value of the 2016 Warrants may increase.
Delafield is subject to a beneficial ownership
limitation under the 2016 Warrants such that the Company and Delafield will not affect any exercise of the 2016 Warrants that would
cause Delafield (together with its affiliates) to beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding
immediately after giving effect to the exercise of the warrant. Delafield, upon notice to the Company, may increase or decrease
the beneficial ownership limitation, provided that the beneficial ownership limitation may not exceed 9.99% of the number of shares
of Common Stock outstanding immediately after giving effect to the exercise of the warrant.
The Five Month Warrant requires us to file
a registration statement covering the resale of the shares underlying the warrant within 15 days after August 3, 2016, and to use
our commercially reasonable efforts to have the registration statement declared effective by the SEC promptly thereafter and to
remain effective for a period of at least twelve months from the date of effectiveness. In the event that a registration statement
registering the resale of the shares underlying the Five Month Warrant is not effective on or before October 15, 2016, or is not
maintained effective thereafter, the termination date of the Five Month Warrant will be extended until such date that the shares
have been registered for at least a period of 90 days, but in no event later than April 30, 2017.
The Two Year Warrant requires us to file a
registration statement covering the resale of the shares underlying the warrant within 15 days after August 3, 2016, and to use
our commercially reasonable efforts to have the registration statement declared effective by the SEC promptly thereafter and to
remain effective for a period of at least three years from the date of effectiveness.
On August 19, 2016, we filed a registration
statement on Form S-1 with the SEC to register for resale up to 240,000,000 additional shares of Common Stock underlying the Five
Month Warrant and the Two Year Warrant.
Additional Issuance Debenture
As of September 13, 2016, we entered into
an Additional Issuance Agreement (the “Additional Issuance Agreement”) with Delafield pursuant to the Purchase Agreement.
Pursuant to the Additional Issuance Agreement, Delafield agreed to loan an additional $150,000 in exchange for a 5% Original Issue
Discount Senior Secured Convertible Debenture of the Company in the principal amount of $165,000 (the “Additional Issuance
Debenture”).
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
The rights and obligations of Delafield and
us with respect to the Additional Issuance Debenture and the shares of Common Stock issuable under the Additional Issuance Debenture
(the “New Underlying Shares”) are identical in all respects to the rights and obligations of Delafield and of the
Company with respect to the Debenture and the shares of Common Stock issued and issuable thereunder, except that Delafield will
not receive any registration rights with respect to the New Underlying Shares and except as otherwise noted in the governing documents.
The Additional Issuance Agreement contains
customary representations, warranties and covenants by, among and for the benefit of the parties. We also agreed to pay all reasonable
out-of-pocket costs or expenses (including, without limitation, reasonable legal fees and disbursements) incurred or sustained
by Delafield, in connection with the transaction.
The Additional Issuance Debenture has a 10%
original issue discount and matures on September 13, 2017. The principal amount of the Additional Issuance Debenture accrues interest
at the rate of 5% per annum, payable quarterly in cash (or if certain conditions are met, in stock at the Company’s option)
on January 1, April 1, July 1 and October 1. The Additional Issuance Debenture is convertible at any time, in whole or in part,
at Delafield’s option into shares of Common Stock at a conversion price equal to $0.03 (subject to adjustment) (the “Conversion
Price”). If the volume weighted average price of the Common Stock on any trading day is less than the then-current Conversion
Price, Delafield may convert at a price per share equal to a twenty two and one half percent (22.5%) discount to the lowest trading
price of the Common Stock in the ten trading days prior to the date of conversion.
Delafield is subject to the same ownership
limitation in connection with the Additional Issuance Debenture as for the 2016 Warrants as described above. The Additional Issuance
Debenture includes customary event of default provisions and provides for a default interest rate of 18%. Upon the occurrence
of an event of default, Delafield may convert the Additional Issuance Debenture into shares of Common Stock at a price per share
equal to a thirty percent (30%) discount to the average volume weighted average price of the shares for the three trading days
prior to conversion.
Subject to the conditions set forth in the
Additional Issuance Debenture, we have the right at any time after the earlier of (i) the six month anniversary of the original
issuance of the Additional Issuance Debenture or (ii) the date on which the New Underlying Shares are registered pursuant to an
effective registration statement, to redeem some or all of the total outstanding amount then remaining under the Additional Issuance
Debenture in cash at a price equal to 125% of the total amount of the Additional Issuance Debenture outstanding on the twentieth
(20th) trading date following the date the Company delivers notice of such redemption to Delafield.
At the sole election of Delafield, in lieu
of receiving a cash payment for any principal amounts due on the Additional Issuance Debenture, Delafield may use all or any portion
of any principal amounts owed to it to exercise outstanding warrants of the Company held by Delafield.
The issuance of the Additional Issuance Debenture
to the Purchaser under the Additional Issuance Agreement was exempt from the registration requirements of the Securities Act pursuant
to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act.
The Company made this determination based on the representations of Delafield that it was acquiring the Additional Issuance Debenture
for its own account with no intent to distribute the Additional Issuance Debenture. No general solicitation or general advertising
was used in connection with the sale of the Additional Issuance Debenture and the Company had a pre-existing relationship with
Delafield.
Our obligations under the Additional Issuance
Debenture are secured by an unconditional and continuing, first priority security interest in all of the assets and property (as
originally stated in the October 2015 agreement) of the Company until ten days following such time as the equity conditions set
forth in the Additional Issuance Debenture are met, pursuant to the terms of the existing Security Agreement.
Q-Biologicals Agreement
We entered into a Manufacturing Services Agreement
(the “MSA”) and Quality Assurance Agreement (the “QAA”), each with an effective date of August 12, 2016,
with Q-Biologicals NV (“Q-Biologicals”), a contract manufacturing organization located in Belgium. Pursuant to the
MSA, Q-Biologicals will produce certain drug substances and product containing certain enzymes at its facility in Belgium. We
will use these substances and products for development purposes, including but not limited to clinical trials. The MSA contemplates
payment to Q-Biologicals pursuant to a pre-determined fee schedule based on the completion of certain milestones that depend on
our manufacturing requirements and final batch yield. We anticipate that our payments to Q-Biologicals under the MSA will range
between $2.5 million and $5.0 million over five years, with the majority of the expenditures occurring during the first two years
of the MSA when the finished drug product is manufactured and released for clinical trials, including a pre-payment to Q-Biologicals
of approximately $144,000. The MSA shall continue for a term of three years unless extended by mutual agreement in writing. We
can terminate the MSA early for any reason upon the required notice period, however, in such event, the pre-payment paid upon
signing the MSA is considered non-refundable. The QAA sets forth the parties respective obligations and responsibilities relating
to the manufacturing and testing of the products under the MSA. The agreements with Q-Biologicals contain certain customary representations,
warranties and limitations of liabilities, and confidentiality and indemnity obligations.
PROPANC HEALTH GROUP CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 and JUNE 30, 2015
|
Consulting Agreement
On November 1, 2015,
the Company entered into an agreement with a consultant to provide services over a nine month period. The Company agreed to issue
the consultant 2,120,000 shares of common stock. The Company has recorded $28,305 of consulting expense for the year ended June
30, 2016 related to this agreement. On August 8, 2016, the Board of Directors authorized the issuance of 2,120,000 shares of common
stock valued at $0.015 per share to the consultant (See Note 8).
Bonus Award
On August 15, 2016, the Board of Directors
approved a cash bonus to James Nathanielsz in the amount of $250,000 of which $50,000 was to be paid on August 31, 2016 and $200,000
will be paid on February 28, 2017. The bonus was issued pursuant to the terms of the employment agreement dated February 25, 2015
and amended on April 14, 2016 and is based upon the performance of the corporation. As of the date of filing, the $50,000 payment
was not made.
Regal Consulting
On January 31, 2016,
the Company entered into an agreement with a consultant to provide services over a five month period. The Company agreed to issue
the consultant 9,000,000 shares of common stock. The Company has recorded $93,600 of consulting expense for the year ended June
30, 2016 related to this agreement. On August 23, 2016, the Board of Directors authorized the issuance of 9,000,000 shares of
common stock valued at $0.0104 per share to the consultant (See Note 8).
Conversions
On August 18, 2016,
pursuant to a conversion notice, $35,385 of principal and interest was converted at $0.00825 into 4,289,082 shares of common stock.
On August 25, 2016,
pursuant to a conversion notice, $54,375 of interest was converted at $0.011625 into 4,677,420 shares of common stock.
On September 21,
2016, pursuant to a conversion notice, $25,000 of principal was converted at $0.010928 into 2,287,702 shares of common stock.
Propanc (UK) Limited
On July 22, 2016, we formed
our 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.