NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Nature
of Operations
Propanc
Biopharma, Inc. (the “Company,” “we,” “us” or “our”) was originally incorporated
in Melbourne, Victoria Australia on October 15, 2007 as Propanc PTY LTD, and continues to be based in Camberwell, Victoria Australia.
Since its inception, substantially all of the operations of the Company have been focused on the development of new cancer treatments
targeting high-risk patients, particularly cancer survivors, who need a follow-up, non-toxic, long-term therapy designed to prevent
the cancer from returning and spreading. The Company anticipates establishing global markets for its technologies. Our lead product
candidate, which we refer to as PRP, is an enhanced pro-enzyme formulation designed to enhance the anti-cancer effects of multiple
enzymes acting synergistically. It is currently in the preclinical phase of development.
On
November 23, 2010, the Company was incorporated in the state of Delaware as Propanc Health Group Corporation. In January 2011,
to reorganize the Company, we acquired all of the outstanding shares of Propanc PTY LTD on a one-for-one basis making it a wholly-owned
subsidiary of the Company.
On
July 22, 2016, the Company formed a wholly owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the
purpose of submitting an orphan drug application to the European Medicines Agency as a small and medium-sized enterprise. As of
December 31, 2019, there has been no activity within this entity.
Effective
April 20, 2017, the Company changed its name to “Propanc Biopharma, Inc.” to better reflect the Company’s stage
of operations and development.
The
Company has filed multiple patent applications relating to its lead product, PRP. The first application was filed in October 2010
in each of the countries listed in the table below. This application has been granted and remains in force in the United States,
Belgium, Czech Republic, Denmark, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein,
Turkey, United Kingdom, Australia, China, Hong Kong, Japan, Indonesia, Israel, New Zealand, Singapore, Malaysia, South Africa,
Mexico, Republic of Korea and India. In Brazil and Canada, the patent application remains under examination.
In
2016 and 2017 we filed other patent applications, as indicated below. Three applications were filed under the Patent Cooperation
Treaty (the “PCT”). The PCT assists applicants in seeking patent protection by filing one international patent application
under the PCT, which allows the applicants to seek protection for an invention in over 150 countries. Once national or regional
applications are filed, the application is placed under the control of the national or regional patent offices, as applicable,
in what is called the national or regional phase. One PCT application, filed in November 2016, entered the national phase in July
2018 in each of the countries listed in the table below. A second application filed in January 2017 entered the national phase
commencing July 2018. A third application entered the national phase in October 2018.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
No.
|
|
Title
|
|
Country
|
|
Case
Status
|
|
Date
Filed
|
1.
|
|
A
pharmaceutical composition for treating cancer comprising trypsinogen and/or chymotrypsinogen and an active agent selected
from a selenium compound, a vanilloid compound and a cytoplasmic reduction agent.
|
|
USA,
Belgium, Czech Republic, Denmark, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein,
Turkey, United Kingdom, Australia, China, Hong Kong, Japan, Indonesia, Israel, New Zealand, Malaysia, Singapore, Malaysia
South Africa, Mexico, Republic of Korea and India
|
|
Granted
|
|
Oct-22-2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil
and Canada
|
|
Under
Examination
Divisional
applications filed and under examination in Mexico and China
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA
|
|
Divisional
application granted
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
|
Proenzyme
composition
|
|
Australia,
Canada, China, Europe, Hong Kong, India, Indonesia, Israel, Japan, Malaysia, New Zealand, Singapore, South Africa and USA
|
|
Application
filed and pending
|
|
Nov-11-2016
|
|
|
|
|
|
|
|
|
|
3.
|
|
Cancer
Treatment
|
|
Australia,
Canada, China, Europe, Hong Kong, Israel, Japan, Malaysia, New Zealand, Singapore and USA
|
|
Application
filed and pending
|
|
Jan-27-2017
|
|
|
|
|
|
|
|
|
|
4.
|
|
Composition
of proenzymes for cancer treatment
|
|
Australia,
China, Europe, Japan and USA
|
|
Application
filed and pending
|
|
Apr-12-2017
|
The
Company hopes to capture and protect additional patentable subject matter based on the Company’s field of technology relating
to pharmaceutical compositions of proenzymes for treating cancer by filing additional patent applications as it advances its lead
product candidate, PRP, through various stages of development.
Decrease
in Authorized Common Stock and Reverse Split
On
June 24, 2019, the Company effected a one-for-five hundred (1:500) reverse stock split whereby the Company (i) decreased the number
of authorized shares of common stock, $0.001 par value per share, to 100,000,000 and (ii) decreased by a ratio of one-for-five
hundred (1:500) the number of retroactively issued and outstanding shares of common stock. Proportional adjustments for the reverse
stock split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share
data and amounts have been retroactively adjusted as of the earliest period presented in the consolidated financial statements
to reflect the reverse stock split.
On February 4, 2020 the Directors resolved
to increase the Common Stock of the Company from 100,000,000 authorized shares to 1,000,000,000 authorized shares and believes
that such number of authorized shares of Common Stock will be in the best interests of the Corporation and its stockholders because
the Board believes that the availability of more shares of Common Stock for issuance will allow the Corporation greater flexibility
in pursuing financing from investors, meeting business needs as they arise, taking advantage of favorable opportunities and responding
to a changing corporate environment. The Company filed the necessary documents with the U.S. Securities and Exchange Commission
on February 6, 2020 and at the date of this filing the increase in authorized shares to 1,000,000,000 has not yet been effected.
Basis
of Presentation
The
Company’s interim unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (this
“Quarterly Report”) have been prepared in accordance with accounting principles generally accepted in the United States
of America (“US GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications
and non-recurring adjustments) necessary to present fairly our results of operations for the three and six months ended December
31, 2019 and 2018 and cash flows for the six months ended December 31, 2019 and 2018 and our financial position at December 31,
2019 have been made. The Company’s results of operations for the three and six months ended December 31, 2019 are not necessarily
indicative of the operating results to be expected for the full fiscal year ending June 30, 2020.
Reference
is frequently made herein to the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification
(“ASC”). This is the source of authoritative US GAAP recognized by the FASB to be applied to non-governmental entities.
Each ASC reference in this Quarterly Report is presented with a three-digit number, which represents its Topic. As necessary for
explanation and as applicable, an ASC topic may be followed with a two-digit subtopic, a two-digit section or a two-or-three-digit
paragraph.
Certain
information and disclosures normally included in the notes to the Company’s annual audited consolidated financial statements
have been condensed or omitted from the Company’s interim unaudited condensed consolidated financial statements included
in this Quarterly Report. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction
with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2019.
The June 30, 2019 balance sheet is derived from those statements.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Principles
of Consolidation
The
condensed consolidated financial statements include the accounts of Propanc Biopharma, Inc., the parent entity, and its wholly-owned
subsidiary, Propanc PTY LTD. All inter-company balances and transactions have been eliminated in consolidation. Propanc (UK) Limited
was an inactive subsidiary at December 31, 2019.
Use
of Estimates
The
preparation of financial statements in conformity with the accounting principles generally accepted in the United States of America
(“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates
in the accompanying unaudited condensed consolidated financial statements include the estimates of useful lives for depreciation,
valuation of the operating lease liability and related right-of-use asset, valuation of derivatives, 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 Other 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 dollar ($) 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 statements of operations and comprehensive income (loss) as other comprehensive income (loss). There have
been no significant fluctuations in the exchange rate for the conversion of Australian dollars to USD after the balance sheet
date.
Other
Comprehensive Income (Loss) for all periods presented includes only foreign currency translation gains (losses).
Assets
and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing
at the consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency included in the consolidated results of operations as incurred. For
the six months ended December 31, 2019, the Company recognized an exchange loss of approximately $575,700 on intercompany loans
made by the parent to the subsidiary which have not been repaid as at December 31, 2019.
As
of December 31, 2019 and June 30, 2019, the exchange rates used to translate amounts in Australian dollars into USD for the purposes
of preparing the consolidated financial statements were as follows:
|
|
December 31, 2019
|
|
|
June
30, 2019
|
|
Exchange rate on balance sheet dates
|
|
|
|
|
|
|
|
|
USD : AUD exchange rate
|
|
|
0.7030
|
|
|
|
0.7153
|
|
|
|
|
|
|
|
|
|
|
Average exchange rate for the period
|
|
|
|
|
|
|
|
|
USD : AUD exchange rate
|
|
|
0.6847
|
|
|
|
0.7009
|
|
The
exchange rates used to translate amounts in AUD into USD for the period ended December 31, 2018 are: 0.7046 as of the balance
sheet date and 0.7248 average exchange rate for that period.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Change
in Accumulated Other Comprehensive Income (Loss) by component during the six months ended December 31, 2019 was as follows:
|
|
Foreign
Currency Items:
|
|
Beginning
balance, June 30, 2019
|
|
$
|
1,066,998
|
|
Foreign
currency translation loss
|
|
|
(65,807
|
)
|
Ending
balance, December 31, 2019
|
|
$
|
1,001,191
|
|
Fair
Value of Financial Instruments and Fair Value Measurements
The
Company measures its financial assets and liabilities in accordance with US GAAP. For certain financial instruments, including
cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, the carrying amounts approximate fair
value due to their short maturities. Amounts recorded for notes payable, net of discount, and loans payable also approximate fair
value because current interest rates available for debt with similar terms and maturities are substantially the same.
The
Company follows accounting guidance for financial assets and liabilities. This standard defines fair value, provides guidance
for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but
rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply
to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable
market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the
service capacity of an asset or replacement cost).
The
guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three
broad levels. The following is a brief description of those three levels:
Level
1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level
2: Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar
assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not
active.
Level
3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed
by us, which reflect those that a market participant would use.
Also
see Note 10 - Derivative Financial Instruments and Fair Value Measurements.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less
with financial institutions, and bank overdrafts. Bank overdrafts are reflected as a current liability on the balance sheets.
There were no cash equivalents as of December 31, 2019 or June 30, 2019.
Patents
Patents
are stated at cost and classified as 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 product costs as long as
we are in the startup stage. Accordingly, as the Company’s products were and are not currently approved for market, all
historical patent costs incurred through December 31, 2019 were expensed immediately. This practice of expensing patent costs
immediately ends when a product receives market authorization from a government regulatory agency.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
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.
Australian
Goods and Services Tax (“GST”)
Revenues,
expenses and balance sheet items are recognized net of the amount of GST, except payable and receivable balances which are shown
inclusive of GST. The GST incurred is payable on revenues to, and recoverable on purchases from, the Australian Taxation Office.
Cash
flows are presented in the statements of cash flow on a gross basis, except for the GST component of investing and financing activities,
which are disclosed as operating cash flows.
As
of December 31, 2019 and June 30, 2019, the Company was owed $2,432 and $5,439, respectively, 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. On the date of conversion
or payoff of debt, the Company records the fair value of the conversion shares, removes the fair value of the related derivative
liability, removes any discounts and records a net gain or loss on debt extinguishment. On July 1, 2019 the Company adopted ASU
2017-11 under which down-round Features in Financial Instruments will no longer cause derivative treatment. The Company applies
the modified prospective method of adoption. There were no cumulative effects on adoption.
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, “Distinguishing
Liabilities from Equity” and measures the fair value of the notes at the time of issuance, which is the result of the
share price discount at the time of conversion and records the put premium as 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 ASC 740 “Accounting for Income Taxes,”
when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements
and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws
and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in deferred tax assets and liabilities.
The
Company follows ASC 740, Sections 25 through 60, “Accounting for Uncertainty in Income Taxes.” These sections
provide detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized
in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective
date to be recognized upon the adoption of ASC 740 and in subsequent periods.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
On
December 22, 2017, the passage of legislation commonly referred to as the Tax Cuts and Jobs Act (“TCJA”) was enacted
and significantly revised the U.S. income tax law. The TCJA includes changes, which reduce the corporate income tax rate from
34% to 21% for fiscal years beginning after December 31, 2017. On December 22, 2017, the SEC Staff Accounting Bulletin No. 118
(“SAB 118”) was issued, which allows a company to recognize provisional tax amounts when it does not have the necessary
information available, prepared or analyzed, including computations, in reasonable detail to complete its accounting for the change
in tax law. SAB 118 provides for a measurement of up to one year from the date of enactment.
Research
and Development Costs and Tax Credits
In
accordance with ASC 730-10, “Research and Development-Overall,” research and development costs are expensed
when incurred. Total research and development costs for the six months ended December 31, 2019 and 2018 were $65,409 and $150,970,
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
each of the six months ended December 31, 2019 and 2018, the Company applied for, and received from the Australian Taxation Office,
a research and development tax credit in the amount of $108,751 and $116,970, respectively, which is reflected as a tax benefit
in the accompanying condensed consolidated statements of operations and comprehensive income (loss).
Stock
Based Compensation
The
Company records stock-based compensation in accordance with ASC 718, “Stock Compensation”. ASC 718 requires
the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the shorter of
the service period or the vesting period. The Company values employee and non-employee stock-based compensation at fair value
using the Black-Scholes Option Pricing Model.
The
Company adopted ASU 2018-07 and accounts for non-employee share-based awards in accordance with the measurement and recognition
criteria of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective
method of adoption. There was no cumulative effect of adoption on July 1, 2019.
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. As of December 31, 2019, there were
1,975,059 warrants outstanding, 59,644 stock options and 15 convertible notes payable, which notes are convertible into approximately
10,200,000 shares of the Company’s common stock (based on the closing price on the last trading day of the quarter ended
December 31, 2019). Each holder of the notes has agreed to a 4.99% beneficial ownership conversion limitation (subject to certain
noteholders’ ability to increase such limitation to 9.99% upon 60 days’ notice to the Company), and each note may
not be converted during the first six-month period from the date of issuance. Such securities are considered dilutive securities
which were excluded from the computation since the effect is anti-dilutive.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Leases
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). The
updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the
updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue
guidance in ASC 606. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018. The
Company adopted this guidance effective July 1, 2019.
On
July 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before
the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain
leases and; (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the
inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is
based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially
all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of
the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone
price to determine the lease payments.
Operating
lease ROU assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized
based on the present value of future minimum lease payments over the lease term at commencement date. As most leases do not provide
an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining
the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the
lease term and is included in general and administrative expenses in the condensed consolidated statements of operations.
Recent
Accounting Pronouncements
We
have reviewed the FASB issued ASU accounting pronouncements and interpretations thereof that have effectiveness dates during the
periods reported and in future periods. We have carefully considered the new pronouncements that alter previous generally accepted
accounting principles and do not believe that any new or modified principles will have a material impact on the Company’s
reported financial position or operations in the near term. The applicability of any standard is subject to the formal review
of the Company’s financial management.
NOTE
2 – GOING CONCERN
The
accompanying condensed consolidated financial statements have been prepared in conformity with US GAAP, which contemplate continuation
of the Company as a going concern. For the six months ended December 31, 2019, the Company had no revenues, had a net loss of
$3,359,049 and had net cash used in operations of $1,142,877. Additionally, as of December 31, 2019, the Company had a working
capital deficit, stockholders’ deficit and accumulated deficit of $5,693,527, $5,671,985 and $54,400,096, respectively.
It is management’s opinion that these conditions raise substantial doubt about the Company’s ability to continue as
a going concern for a period of at least twelve months from the date of this Quarterly Report.
The
condensed consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability
and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Successful
completion of the Company’s development program and, ultimately, the attainment of profitable operations are dependent upon
future events, including obtaining adequate financing to fulfill its development activities, acceptance of the Company’s
patent applications, obtaining additional sources of suitable and adequate financing and ultimately achieving a level of sales
adequate to support the Company’s cost structure and business plan. The Company’s ability to continue as a going concern
is also dependent on its ability to further develop and execute on its business plan. However, there can be no assurances that
any or all of these endeavors will be successful.
NOTE
3 – DUE TO FORMER DIRECTOR - RELATED PARTY
Due
to director - related party represents unsecured advances made primarily by a former director for operating expenses on behalf
of the Company such as intellectual property and formation expenses. The expenses were paid for on behalf of the Company and are
due upon demand. The Company is currently not being charged interest under these advances. The total amount owed the former director
at December 31, 2019 and June 30, 2019 is $31,257 and $31,164, respectively. The Company plans to repay the notes as its cash
resources allow.
NOTE
4 – LOANS AND NOTES PAYABLE
Loans
from Directors and Officer - Related Parties
Loans
from the Company’s directors and officer at December 31, 2019 and June 30, 2019 were $52,022 and $51,867, respectively.
The loans bear no interest and are all payable on demand. The Company did not repay any amount on these loans during the six months
ended December 31, 2019.
NOTE
5 – CONVERTIBLE NOTES
The
Company’s convertible notes outstanding at December 31, 2019 were as follows:
Convertible notes and
debenture
|
|
$
|
2,016,365
|
|
Unamortized discounts
|
|
|
(415,712
|
)
|
Accrued interest
|
|
|
182,581
|
|
Premiums
|
|
|
1,151,106
|
|
Convertible
notes, net
|
|
$
|
2,934,340
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Eagle
Equities Financing Agreements
December
29, 2017 Securities Purchase Agreement
The
Company entered into an executory contract on December 29, 2017, whereby the Company entered into a securities purchase agreement
with Eagle Equities, pursuant to which Eagle Equities purchased a convertible promissory note (the “December 2017 Eagle
Note”) from the Company in the aggregate principal amount of $532,435, with principal and the interest thereon convertible
into shares of the Company’s common stock at the option of Eagle Equities at any time. The transactions closed on January
2, 2018.
The
December 2017 Eagle Note contains an original issue discount of $25,354 such that the purchase price was $507,081. The maturity
date of the December 2017 Eagle Note was December 29, 2018. The Company is currently in discussions with Eagle Equities to extend
the maturity date. The December 2017 Eagle Note bears interest at a rate of 8% per annum, which interest shall be paid by the
Company to Eagle Equities in shares of the Company’s common stock upon receipt of a notice of conversion by the Company
from Eagle Equities at any time. The Company has recorded $9,630 of accrued interest for the December 2017 Eagle Note and total
principal outstanding as of December 31, 2019 under the December 2017 Eagle Note was $13,865 following conversion of $158,100
of principal and $22,478 of accrued interest during the six months to December 31, 2019.
Eagle
Equities has the option to convert all or any amount of the principal face amount of the December 2017 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s
common stock as reported on the OTCQB for the ten prior trading days, including the day upon which the Company receives a notice
of conversion from Eagle Equities. The note is treated as stock settled debt under ASC 480 and accordingly the Company recorded
a $354,956 put premium of which of which $240,313 was released to additional paid in capital following conversion of $360,470
of principal during the fiscal year to June 30, 2019, and a further $105,400 was released to additional paid in capital following
conversion of $158,100 of principal during the six months to December 31, 2019.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
July
13, 2018 Securities Purchase Agreement
Effective
July 13, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “July 2018 Note”) from the Company in the aggregate principal amount
of $75,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of Eagle Equities any time after the six month anniversary of the July 2018 Eagle Note. The transaction closed on July 16, 2018
and on July 19, 2018 the Company received proceeds of $71,250 as $3,750 was paid directly to legal fees.
The
maturity date of the July 2018 Eagle Note was July 13, 2019. The Company is currently in discussions with Eagle Equities to extend
the maturity date. The July 2018 Eagle Note bears interest at a rate of 8% per annum, which interest shall be paid by the Company
to Eagle Equities in shares of the Company’s common stock upon receipt of a notice of conversion by the Company from Eagle
Equities at any time after the six-month anniversary of the Note.
Additionally,
Eagle Equities has the option to convert all or any amount of the principal face amount of the July 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s
common stock for the ten prior trading days, including the day upon which the Company receives a notice of conversion, subject
to adjustment in certain events. Eagle Equities shall be restricted from effecting a conversion if such conversion, along with
other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the
outstanding shares of the Company’s common stock. The July 2018 Eagle Note is treated as stock settled debt under ASC 480
and accordingly, the Company recorded a $50,000 put premium. The Company has recorded $14,860 of accrued interest and the total
principal outstanding under the July 2018 Eagle Note was $75,000 as of December 31, 2019. The Company had the right to prepay
the July 2018 Eagle Note with certain penalties until January 9, 2019. No prepayment was made as of such date. As a result, the
July 2018 Eagle Note is now convertible.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
August
29, 2018 Securities Purchase Agreement
Effective
August 29, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “August 2018 Eagle Note”) from the Company in the aggregate principal
amount of $105,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the August 2018 Eagle Note. The transactions contemplated
by the agreement closed on August 30, 2018.
The
maturity date of the August 29, 2018 Eagle Note was August 2019. The Company is currently in discussions with Eagle Equities to
extend the maturity date. The August 2018 Eagle Note bears interest at a rate of 8% per annum, which interest shall be paid by
the Company to Eagle Equities in shares of the Company’s common stock upon receipt of a notice of conversion by the Company
from Eagle Equities at any time after the six-month anniversary of the August 2018 Eagle Note.
Additionally,
Eagle Equities has the option to convert all or any amount of the principal face amount of the August 2018 Eagle Note, at any
time, into shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price (the “Closing
Bid Price”) of the Company’s common stock as reported on the OTC Markets quotation system for the ten prior trading
days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the “Conversion Price”).
However, in the event that the Company’s common stock is restricted by the DTC for any reason, the Conversion Price shall
be lowered to 50% of the lowest Closing Bid Price for the duration of such restriction. If the Company fails to maintain a reserve
of shares of its common stock at least four times the number of shares issuable upon conversion of the August 2018 Eagle Note
for at least 60 days after the issuance of the August 28, 2018 Eagle Note, the conversion discount shall be increased by 10%.
Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion if such conversion, along with other
shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the outstanding
shares of the Company’s common stock. The August 2018 Eagle Note is treated as stock settled debt under ASC 480 and accordingly,
the Company recorded a $70,000 put premium. The Company has recorded $19,746 of accrued interest and the total principal outstanding
under the August 2018 Eagle Note was $105,000 as of December 31, 2019. The Company had the right to prepay the August 2018 Eagle
Note with certain penalties until February 25, 2019. No prepayment was made as of such date. As a result, the August 2018 Eagle
Note is now convertible.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Upon
an event of default, interest on the outstanding principal shall accrue at a default interest rate of 24% per annum or at the
highest rate permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
October
2, 2018 Securities Purchase Agreement
Effective
October 2, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “October 2018 Eagle Note”) from the Company in the aggregate principal
amount of $210,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the October 2018 Eagle Note. The transactions contemplated
by the purchase agreement closed on October 3, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted
$10,000 from the principal payment due under the October 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.
The
maturity date of the October 2018 Eagle Note was October 2, 2019. The October 2018 Eagle Note shall bear interest at a rate of
8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice
of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the October 2018 Eagle Note.
Additionally,
Eagle Equities has the option to convert all or any amount of the principal amount of the October 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s
common stock for the ten prior trading days, including the day upon which the Company receives a notice of conversion, subject
to adjustment in certain events. Eagle Equities shall be restricted from effecting a conversion if such conversion, along with
other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the
outstanding shares of the Company’s common stock. The October 2, 2018 Eagle Note is treated as stock settled debt under
ASC 480 and accordingly, the Company recorded a $140,000 put premium. The Company has recorded $29,227 of accrued interest and
the total principal outstanding under the October 2018 Eagle Note was $210,000 as of December 31, 2019. The Company had the right
to prepay the October 2018 Eagle Note with certain penalties until December 31, 2019. No prepayment has been made as of such date.
As a result, the October 2018 Eagle Note is now convertible.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
November
30, 2018 Securities Purchase Agreement
Effective
November 30, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “November 2018 Eagle Note”) from the Company in the aggregate principal
amount of $105,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the November 2018 Eagle Note. The transactions contemplated
by the purchase agreement closed on December 3, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted
$5,000 from the principal payment due under the November 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.
The
maturity date of the November 2018 Eagle Note was November 30, 2019. The November 2018 Eagle Note shall bear interest at a rate
of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice
of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the November 2018 Eagle Note.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Additionally,
Eagle Equities has the option to convert all or any amount of the principal amount of the November 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 61% of the lowest closing bid price (the “Closing Bid
Price”) of the Company’s common stock as reported on the OTC Markets Group, Inc. quotation system for the ten prior
trading days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the “Conversion
Price”). However, in the event that the Company’s common stock is restricted by the Depository Trust Company for any
reason, the Conversion Price shall be lowered to 51% of the lowest Closing Bid Price for the duration of such restriction. If
the Company fails to maintain a reserve of shares of its common stock at least two and a half times the number of shares issuable
upon conversion of the November 2018 Eagle Note for at least 60 days after the issuance of the November 2018 Eagle Note, the conversion
discount shall be increased by 10%. Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion
if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates,
exceeds 4.99% of the outstanding shares of the Company’s common stock. The November 2018 Eagle Note is treated as stock
settled debt under ASC 480 and accordingly, the Company recorded a $67,131 put premium. The Company has recorded $10,540 of accrued
interest and the total principal outstanding under the November 2018 Eagle Note was $105,000 as of December 31, 2019. The November
2018 Eagle Note may be prepaid with certain penalties by the Company until May 29, 2019. No prepayment has been made as of December
31, 2019.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
December
24, 2018 Securities Purchase Agreement
Effective
December 24, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “December 2018 Eagle Note”) from the Company in the aggregate principal
amount of $126,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the December 2018 Eagle Note. The transactions contemplated
by the purchase agreement closed on December 24, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted
$6,000 from the principal payment due under the December 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.
The Company used the net proceeds from the December 2018 Eagle Note to repay an outstanding convertible promissory note before
such note became convertible.
The
maturity date of the December 2018 Eagle Note was December 24, 2019. The December 2018 Eagle Note shall bear interest at a rate
of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice
of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the December 2018 Eagle Note.
Additionally,
Eagle Equities has the option to convert all or any amount of the principal amount of the December 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 61% of the lowest closing bid price (the “Closing Bid
Price”) of the Company’s common stock as reported on the OTC Markets Group, Inc. quotation system for the ten prior
trading days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the “Conversion
Price”). However, in the event that the Company’s common stock is restricted by the Depository Trust Company for any
reason, the Conversion Price shall be lowered to 51% of the lowest Closing Bid Price for the duration of such restriction. If
the Company fails to maintain a reserve of shares of its common stock at least two and a half times the number of shares issuable
upon conversion of the December 2018 Eagle Note for at least 60 days after the issuance of the December 2018 Eagle Note, the conversion
discount shall be increased by 10%. Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion
if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates,
exceeds 4.99% of the outstanding shares of the Company’s common stock. The December 2018 Eagle Note is treated as stock
settled debt under ASC 480 and accordingly, the Company recorded an $80,557 put premium. The Company has recorded $10,688 of accrued
interest and the total principal outstanding under the November 2018 Eagle Note was $126,000 as of December 31, 2019. The December
2018 Eagle Note may be prepaid with certain penalties until June 22, 2019. No prepayment has been made as of December 31, 2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amount outstanding under the above Eagle Equities financing agreements, specifically the December 29, 2017, the
July 13, 2018, the August 29, 2018, the October 2, 2018, the November 30, 2018 and the December 24, 2018 agreements was $634,865
as of December 31, 2019 and accrued interest totaled $94,691.
GS
Capital Financing Agreements
October
2, 2018 Securities Purchase Agreement
Effective
October 2, 2018, the Company entered into a securities purchase agreement with GS Capital, pursuant to which GS Capital purchased
two 8% unsecured convertible redeemable notes (the “October 2, 2018 GS Notes”) from the Company in the aggregate principal
amount of $212,000, such principal and the interest thereon convertible into shares of the Company’s common stock. The purchase
price of $106,000 of the first note (the “October 2018 GS Note”) was paid in cash by GS Capital on October 3, 2018.
After payment of certain legal fees and expenses, net proceeds to the Company from the October 2018 GS Note totaled $100,700.
The purchase price of $106,000 of the second note (the “October 2, 2018 GS Back End Note”) was initially paid for
by GS Capital issuing to the Company an offsetting $106,000 collateralized secured note (the “October 2, 2018 GS Secured
Note”). The terms of the October 2018 GS Back End Note require cash funding prior to any conversion thereunder, and such
cash funding shall occur on or before June 2, 2019.
Both
the October 2, 2018 GS Note and the October 2, 2018 GS Back End Note, which was funded on February 27, 2019, mature on October
2, 2019, upon which any outstanding principal and interest thereon is due and payable. The amounts cash funded plus accrued interest
under both the October 2018 GS Note and the October 2018 GS Back End Note are convertibles into shares of the Company’s
common stock, at any time after April 2, 2019, at a conversion price for each share of common stock equal to 61% of the lowest
closing bid price of the Company’s common stock for the ten prior trading days including the day upon which a notice of
conversion is received by the Company from GS Capital, subject to adjustment in certain events. GS Capital shall be restricted
from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned
by GS Capital and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. The October 2018
GS Note and the October 2018 GS Back End Note are treated as stock settled debt under ASC 480 and accordingly, the Company recorded
a total $67,771 put premium for each note of which $44,690 was released in respect of the October 2018 GS Note in the fiscal year
ended June 30, 2019, and a further $22,901 was released in the six months ended December 31, 2019 following full conversion of
the October 2018 GS Note resulting from conversion of the remaining principal balance of $35,820 and $2,434 in accrued interest.
$31,903 of the put premium was released in respect of the October 2018 GS Back-End Note during the six months to December 31,
2019 following conversion $49,900 of the principal balance.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
The
total principal amount outstanding under the October 2018 GS Note, was $35,820 and accrued interest thereunder totaled $7,813
as of June 30, 2019 and was fully converted as of December 31, 2019 (see Note 6 – Stockholders’ Deficit).
The
maturity date of the October 2, 2018 GS Back-Note was October 2019. The total principal balance under the October 2018 GS Back-End
Note, was $106,000 and accrued interest thereunder totaled $5,715 as of June 30, 2019 and the principal balance was $56,100 and
accrued interest totaled $11,814 as of December 31, 2019 (see Note 6 – Stockholders’ Deficit).
The
October 2, 2018 GS Notes contain certain events of default, upon which principal and accrued interest will become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest
rate of 24% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted
by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
Consulting
Agreement
On
August 10, 2017, the Company entered into a consulting agreement, retroactive to May 16, 2017, with a certain consultant, pursuant
to which the consultant agreed to provide certain consulting and business advisory services in exchange for a $310,000 junior
subordinated convertible note. The maturity date of the August 10, 2017 Convertible Note is August 2019.The note accrues interest
at a rate of 10% per annum and is convertible into common stock at the lesser of $750 or 65% of the three lowest trades in the
ten trading days prior to the conversion. The note was fully earned upon signing the agreement and matures on August 10, 2019.
The Company accrued $155,000 related to this expense at June 30, 2017 and recorded the remaining $155,000 related to this expense
in fiscal year 2018. Upon an event of default, principal and accrued interest will become immediately due and payable under the
note. Additionally, upon an event of default, at the election of the holder, the note would accrue interest at a default
interest rate of 18% per annum or the highest rate of interest permitted by law. The consulting agreement had a three-month term
and expired on August 16, 2017. An aggregate total of $578,212 of this note was bifurcated with the embedded conversion option
recorded as a derivative liability at fair value. During the year ended June 30, 2018, the consultant converted $140,000 of principal
and $10,764 of interest. During the year ended June 30, 2019, the consultant converted an additional $161,000 of principal and
$19,418 of interest, such that the remaining principal outstanding and accrued interest under this note as of December 31, 2019
was $9,000 and $26,653, respectively.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Redstart
Holdings Finance Agreements
May
23, 2019 Securities Purchase Agreement
Effective
May 23, 2019, the Company issued a convertible promissory note (the “May 23 Redstart Holdings Note”) to Redstart Holdings
Corp (“Redstart Holdings”) in the aggregate principal amount of $133,000, with principal and the interest thereon
convertible into shares of the Company’s common stock at the option of Redstart Holdings any time after 180 days of issuance.
At the time of closing on May 31, 2019, Redstart Holdings deducted $3,000 from the principal payment due under the May 2019 Redstart
Holdings Note to be applied to its legal expenses, such that the Company received aggregate net proceeds of $130,000 at closing.
The
maturity date of the May 2019 Redstart Holdings Note is May 23, 2020 and bears interest at a rate of 8% per annum.
Additionally,
Redstart Holdings has the option to convert all or any amount of the principal face amount of the May 2019 Redstart Note, starting
on November 19, 2019 at a conversion price subject to certain Market Price (as defined below) adjustment. If the Market Price
is greater than or equal to $50.00, the conversion price shall be the greater of 65% of the Market Price (“Variable Conversion
Price”) and $32.50. In the event Market Price is less than $50.00, the conversion price shall be the Variable Conversion
Price. As defined in the May 2019 Redstart Holdings Note, the “Market Price” shall be the average of the lowest three
closing bid prices during the ten day trading period prior to and including the day the Company receives a notice of conversion
from Redstart Holdings on the electronic quotation system or applicable principal securities exchange or trading market or, if
no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any
market makers for such security that are listed in the “pink sheets” during the ten prior trading days, including
the day upon which the Company receives a notice of conversion from Redstart Holdings. Notwithstanding the foregoing, Redstart
Holdings shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common
stock beneficially owned by Redstart Holdings and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s
common stock. An aggregate total of $166,564 of this note was bifurcated with the embedded conversion option recorded as a derivative
liability at fair value (See Note 10 - Derivative Financial Instruments and Fair Value Measurements).
The
Company had the right to prepay the May 2019 Redstart Holdings Note until November 19, 2019. If the May 2019 Redstart Holdings
Note was prepaid within 90 days of the issuance date, then the prepayment premium shall be 115% of the face amount plus any accrued
interest; if the May 2019 Redstart Holdings Note was prepaid after 91 days from the issuance date, but prior to 121 days from
the issuance date, then the prepayment premium shall be 120% of the face amount plus any accrued interest; and if the May 2019
Redstart Holdings Note was prepaid after 121 days from the issuance date, but prior to 150 days from the issuance date, then the
prepayment premium shall be 125% of the face amount plus any accrued interest; and if the May 2019 Redstart Holdings Note was
prepaid after 151 days from the issuance date, but prior to 180 days from the issuance date, then the prepayment premium shall
be 129% of the face amount plus any accrued interest.
The
May 23, 2019 Redstart Holdings Note contain certain events of default, upon which principal and accrued interest will become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest
rate of 22% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted
by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amount outstanding and accrued interest under the above Redstart Holdings financing agreement, specifically the
May 23, 2019 agreement at June 30, 2019 was $133,000 and $1,137 respectively and as of December 31, 2019 total principal amount
outstanding and accrued interest totaled $86,400 and $6,322 respectively following conversion of $46,600 of the principal balance
during the six months to December 31, 2019. The Company also recorded an amount of $18,266 of debt discount amortization related
to the conversions during the six months to December 31, 2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Power
Up Lending Group Financing Agreements
July
3, 2019 Securities Purchase Agreement
Effective
July 3, 2019, the Company entered into a securities purchase agreement with Power Up Lending Group Ltd. (“Power Up”),
pursuant to which Power Up purchased a convertible promissory note (the “July 3, 2019 Power Up Note”) from the Company
in the aggregate principal amount of $78,000, such principal and the interest thereon convertible into shares of the Company’s
common stock at the option of Power Up. The transaction closed on July 3, 2019 and the Company received payment on July 8, 2019
in the amount of $78,000, of which $2,500 was paid directly toward legal fees and $500 to Power Up for due diligence fees resulting
in net cash proceeds of $75,000.
The
maturity date of the July 3, 2019 Power Up Note is July 3, 2020. The July 3, 2019, Power Up Note bears interest at a rate of 8%
per annum, which interest may be paid by the Company to Power Up in shares of the Company’s common stock, but shall not
be payable until the July 3, 2019 Power Up Note becomes payable, whether at the maturity date or upon acceleration or by prepayment.
Additionally,
Power Up has the option to convert all or any amount of the principal face amount of the July 3, 2019 Power Up Note, starting
on December 30, 2019 and ending on the later of the maturity date or the date the Default Amount, which is an amount equal to
150% of an amount equal to the then outstanding principal amount of the July 3, 2019 Power Up Note plus any interest accrued,
is paid if an event of default occurs, for shares of the Company’s common stock at the then-applicable conversion price.
The
conversion price for the July 3, 2019 Power Up Note shall be $3.25, subject to certain Market Price (as defined below) adjustment.
If the Market Price is greater than or equal to $5.00, the conversion price shall be the greater of 65% of the Market Price (“Variable
Conversion Price”) and $3.25. In the event Market Price is less than $5.00, the conversion price shall be the Variable Conversion
Price. As defined in the July 3, 2019 Power Up Note, the “Market Price” shall be the average of the lowest three closing
bid prices during the ten day trading period prior to and including the day the Company receives a notice of conversion from Power
Up on the electronic quotation system or applicable principal securities exchange or trading market or, if no closing bid price
of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for
such security that are listed in the “pink sheets” during the ten prior trading days, including the day upon which
the Company receives a notice of conversion from Power Up. Notwithstanding the foregoing, Power Up shall be restricted from effecting
a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Power Up and
its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. An aggregate total of $155,904 of
this note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value (See Note 10 - Derivative
Financial Instruments and Fair Value Measurements).
The
July 3, 2019 Power Up Note contain certain events of default, upon which principal and accrued interest will become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest
rate of 22% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted
by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amount outstanding under the above Power Up financing agreement, specifically the July 3, 2019 Power Up Note,
was $78,000 as of December 31, 2019 and accrued interest of $3,086.
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2019
(unaudited)
November
26, 2019 Securities Purchase Agreement
Effective
November 26, 2019, the Company entered into a securities purchase agreement with Power Up Lending Group Ltd. (“Power Up”),
pursuant to which Power Up purchased a convertible promissory note (the “November 26, 2019 Power Up Note”) from the
Company in the aggregate principal amount of $43,000, such principal and the interest thereon convertible into shares of the Company’s
common stock at the option of Power Up. The transaction closed on November 22, 2019 and the Company received payment on December
3, 2019 in the amount of $40,000, net of $2,500 paid directly toward legal fees and $500 to Power Up for due diligence fees.
The
maturity date of the November 26, 2019 Power Up Note is November 26, 2020. The November 26, 2019, Power Up Note bears interest
at a rate of 8% per annum, which interest may be paid by the Company to Power Up in shares of the Company’s common stock,
but shall not be payable until the November 26, 2019 Power Up Note becomes payable, whether at the maturity date or upon acceleration
or by prepayment.
Additionally,
Power Up has the option to convert all or any amount of the principal face amount of the November 26, 2019 Power Up Note, starting
on May 24, 2020 and ending on the later of the maturity date or the date the Default Amount, which is an amount equal to 150%
of an amount equal to the then outstanding principal amount of the November 26, 2019 Power Up Note plus any interest accrued,
is paid if an event of default occurs, for shares of the Company’s common stock at the then-applicable conversion price.
The
conversion price for the November 26, 2019 Power Up Note shall be $3.05, subject to certain Market Price (as defined below) adjustment.
If the Market Price is greater than or equal to $5.00, the conversion price shall be the greater of 65% of the Market Price (“Variable
Conversion Price”) and $3.05. In the event Market Price is less than $5.00, the conversion price shall be the Variable Conversion
Price. As defined in the November 26, 2019 Power Up Note, the “Market Price” shall be the average of the lowest three
closing bid prices during the ten day trading period prior to and including the day the Company receives a notice of conversion
from Power Up on the electronic quotation system or applicable principal securities exchange or trading market or, if no closing
bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers
for such security that are listed in the “pink sheets” during the ten prior trading days, including the day upon which
the Company receives a notice of conversion from Power Up. Notwithstanding the foregoing, Power Up shall be restricted from effecting
a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Power Up and
its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. An aggregate total of $52,222 of
this note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value (See Note 10 - Derivative
Financial Instruments and Fair Value Measurements).
The
November 26, 2019 Power Up Note contain certain events of default, upon which principal and accrued interest will become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest
rate of 22% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted
by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amount outstanding under the above Power Up financing agreement, specifically the November 26, 2019 Power Up Note,
was $43,000 as of December 31, 2019 and accrued interest of $329.
Odyssey
Capital Financing Agreements
July
30, 2019 Securities Purchase Agreement
Effective
July 30, 2019, the Company entered into a securities purchase agreement with Odyssey Capital Funding LLC,. (“Odyssey”),
pursuant to which Odyssey purchased a convertible promissory note (the “July 30, 2019 Odyssey Note”) from the Company
in the aggregate principal amount of $320,000, such principal and the interest thereon convertible into shares of the Company’s
common stock at the option of Odyssey. The July 30, 2019 Odyssey Note contains an original discount of $25,000. The transaction
closed on July 30, 2019 and the Company received payment on August 1, 2019 in the amount of $295,000, of which $10,000 was paid
directly toward legal fees, resulting in net cash proceeds of $285,000.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
The
maturity date of the July 30, 2019 Odyssey Note is July 30, 2020. The July 2019 Odyssey Note bears interest at a rate of 10% per
annum, which interest may be paid by the Company to Odyssey in shares of the Company’s common stock, but shall not be payable
until the July 30, 2019 Odyssey Note becomes payable, whether at the maturity date or upon acceleration or by prepayment. The
note is treated as stock settled debt under ASC 480 and accordingly the Company recorded a $172,308 put premium.
Additionally,
Odyssey has the option to convert all or any amount of the principal face amount of the July 30, 2019 Odyssey Note, starting on
January 31, 2020 and ending on the later of the maturity date and the date the Default Amount, which is an amount equal to 120%
of an amount equal to the then outstanding principal amount of the July 30, 2019 Odyssey Note plus any interest accrued from July
30, 2019 at the default interest rate of 24% per annum, is paid if an event of default occurs, for shares of the Company’s
common stock at the then-applicable conversion price.
The
conversion price for the July 30, 2019 Odyssey Note shall be equal to 65% of the lowest closing bid price of the Common Stock
as reported on the OTC Markets on which the Company’s shares are then traded or any exchange upon which the Common Stock
may be traded in the future, for the ten prior trading days including the day upon which a Notice of Conversion is received by
the Company.
Common
Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of
the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Holder to the Company).
The
July 30, 2019 Odyssey Note contain certain events of default, upon which principal and accrued interest will become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest
rate of 24% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted
by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amount outstanding under the above Odyssey financing agreement, specifically the July 30, 2019 Odyssey Note, was
$320,000 as of December 31, 2019 and accrued interest of $13,464.
Auctus
Fund Financing Agreements
August
30, 2019 Securities Purchase Agreement
Effective
August 30, 2019, the Company entered into a securities purchase agreement with Auctus Fund, LLC (“Auctus”), pursuant
to which Auctus purchased a convertible promissory note (the “August 30, 2019 Auctus Note”) from the Company in the
aggregate principal amount of $550,000, such principal and the interest thereon convertible into shares of the Company’s
common stock at the option of Auctus. The transaction closed on August 30, 2019 and the Company received payment on September
4, 2019 in the amount of $550,000, of which $5,000 was paid directly toward legal fees and $40,000 to Auctus for due diligence
fees resulting in net cash proceeds of $505,000.
The
maturity date of the August 30, 2019 Auctus Note is August 30, 2020. The August 30, 2019 Auctus Note bears interest at a rate
of 10% per annum, but shall not be payable until the August 30, 2019 Auctus Note becomes payable, whether at the maturity date
or upon acceleration or by prepayment. The note is treated as stock settled debt under ASC 480 and accordingly the Company recorded
a $366,667 put premium. The August 30, 2019 Auctus Note may not be prepaid without the written consent of Auctus. Any amount of
principal or interest which is not paid when due shall bear interest at the rate of 24% per annum.
Additionally,
Auctus has the option to convert all or any amount of the principal face amount and accrued interest of the August 30, 2019 Auctus
Note, at any time following the issue date and ending on the later of the maturity date and the date of payment of the Default
Amount, which is an amount equal to 125% of an amount equal to the then outstanding principal amount of the August 30, 2019 Auctus
Note (but not less than $15,000) plus any interest accrued from August 30, 2019 at the default interest rate of 24% per annum,
is paid if an event of default occurs, for shares of the Company’s common stock at the then-applicable conversion price.
Upon the holder’s election to convert accrued interest, default interest or any penalty amounts as stipulated, the Company
may elect to pay those amounts in cash. The note may also be prepaid by the Company at any time between the date of issuance and
August 13, 2020 at 135% multiplied by the sum of (a) the then outstanding principal amount plus (b) accrued and unpaid interest
plus (c) default interests, if any.
The
conversion price for the August 30, 2019 Auctus Note shall be the Variable Conversion Price, being 60% of the Market Price. Notwithstanding
the foregoing, Auctus shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s
common stock beneficially owned by Auctus and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common
stock.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
In
connection with the issuance of the August 2019 Auctus Note, the Company issued common stock purchase warrants to Auctus to purchase
450,000 shares of the Company’s common stock (the “First Warrant”) as a commitment fee upon the terms and subject
to the limitations and conditions set forth in such First Warrant at an “Exercise Price” of $2.25. In connection with
the issuance of the Note, the Company shall issue a common stock purchase warrant to Buyer to purchase 300,000 shares of the Company’s
common stock (the “Second Warrant”) as a commitment fee upon the terms and subject to the limitations and conditions
set forth in such Second Warrant at an “Exercise Price” of $3.33. In connection with the issuance of the Note, the
Company shall issue a common stock purchase warrant to Buyer to purchase 225,000 shares of the Company’s common stock (the
“Third Warrant”) as a commitment fee upon the terms and subject to the limitations and conditions set forth in such
Third Warrant at an “Exercise Price” of $4.50. The First Warrant, Second Warrant, and Third Warrant shall collectively
be referred as the “Warrants”. The Warrants have an “Exercise Period” of five years from the date of issuance
being August 30, 2019. Under the terms of the Purchase Agreement and the Warrants, the Selling Security Holder may not either
convert the Notes nor exercise the Warrants to the extent (but only to the extent) that the Selling Security Holder or any of
its affiliates would beneficially own a number of shares of our Common Stock which would exceed 4.99% of our outstanding shares.
The Company accounted for the warrants by using the relative fair value method and recorded debt discount from the relative fair
value of the warrants of $375,904 using a simple binomial lattice model (see Note 6).
In
connection with the Purchase Agreement, the Company and the Purchaser entered into a Registration Rights Agreement (the “Registration
Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company agreed to register the shares of Common Stock
underlying the Securities in a Registration Statement with the SEC as well as the Commitment Shares (as defined herein). The Registration
Rights Agreement contains customary representations, warranties, agreements and indemnification rights and obligations of the
parties.
The
Note is subject to customary default provisions and also includes a cross-default provision which provides that a breach or default
by the Borrower of any covenant or other term or condition contained in any of the Other Agreements (as defined therein), after
the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under
this Note and the Other Agreements. Upon occurrence of any such event, the Holder shall be entitled (but in no event required)
to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under
said Other Agreements or the Note.
The
August 30, 2019 Auctus Note contain certain events of default, upon which principal and accrued interest will become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest
rate of 24% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted
by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amount outstanding under the above Auctus financing agreement, specifically the August 30, 2019 Auctus Note, was
$550,000 as of December 31, 2019 and accrued interest of $18,484.
October
1, 2019 GW Holdings Securities Purchase Agreements
Effective
October 1, 2019, the Company entered into a securities purchase agreement with GW Holdings, pursuant to which GW Holdings purchased
a convertible promissory note (the “October 1, 2019 GW Note”) from the Company in the aggregate principal amount of
$131,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option of
GW Holdings any time after the six month anniversary of the October 1, 2019 GW Holdings Note. The transactions contemplated by
the GW Holdings Securities Purchase Agreement closed on October 1, 2019. Pursuant to the terms of the GW Holdings Securities Purchase
Agreement, Eagle Equities deducted $6,000 from the principal payment due under the October 1, 2019 GW Note, at the time of closing,
to be applied to its legal expenses. The Company intends to use the net proceeds of $125,000 from the October 1, 2019 GW Note
for general working capital purposes.
The
maturity date of the October 1, 2019 GW Holdings is October 1, 2020. The October 1, 2019 GW Holdings Note bears interest at a
rate of 8% per annum, which interest may be paid by the Company to GW Holdings in shares of the Company’s common stock;
but shall not be payable until the October 1, 2019 GW Holdings Note becomes payable, whether at the maturity date or upon acceleration
or by prepayment.
Additionally,
GW Holdings has the option to convert all or any amount of the principal face amount of the October 1, 2019 GW Holdings Note at
any time from the date of issuance and ending on the later of the maturity date and the date the Default Amount, which is an amount
between 110% and 150% of an amount equal to the then outstanding principal amount of the October 1, 2019 GW Holdings Note plus
any interest accrued, is paid if an event of default occurs, for shares of the Company’s common stock at the then-applicable
conversion price.
The
conversion price for the October 1, 2019 GW Holdings Note shall be equal to a 40% discount of the lowest closing bid price (“Lowest
Trading Price”) of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of Conversion,
including the day upon which a Notice of Conversion is received. Notwithstanding the foregoing, GW Holdings shall be restricted
from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned
by GW Holdings and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock which may be increased
up to 9.99% upon 60 days prior written notice by the GW Holdings to the Company. The note is treated as stock settled debt under
ASC 480 and accordingly the Company recorded a $87,333 put premium.
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2019
(unaudited)
The
October 1, 2019 GW Holdings Note contain certain events of default, upon which principal and accrued interest will become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest
rate of 24% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted
by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amount outstanding under the above GW Holdings financing agreement, specifically the October 1, 2019 GW Holdings
Note, was $131,000 as of December 31, 2019 and accrued interest of $2,606.
October
3, 2019 Crown Bridge Securities Purchase Agreements
Effective
October 3, 2019, the Company entered into a securities purchase agreement with Crown Bridge Partners, pursuant to which Crown
Bridge purchased a convertible promissory note (the “October 3, 2019 Crown Bridge Note”) from the Company in the aggregate
principal amount of $108,000, such principal and the interest thereon convertible into shares of the Company’s common stock
at the option of Crown Bridge any time from the of issuance of the of the October 3, 2019 Crown Bridge Note. The transactions
contemplated by the Crown Bridge Securities Purchase Agreement closed on October 3, 2019. Pursuant to the terms of the Crown Bridge
Securities Purchase Agreement, Crown Bridge deducted $3,000 from the principal payment due under the October 3, 2019 Crown Bridge
Note, at the time of closing, to be applied to its legal expenses, and there was a $5,000 original issuance discount resulting
in $100,000 net proceeds to the Company. The Company intends to use the net proceeds from the October 3, 2019 Crown Bridge Note
for general working capital purposes.
The
maturity date of the October 3, 2019 Crown Bridge is October 3, 2020. The October 3, 2019 Crown Bridge Note bears interest at
a rate of 10% per annum, which interest may be paid by the Company to Crown Bridge in shares of the Company’s common stock;
but shall not be payable until the October 2019 Crown Bridge Note becomes payable, whether at the maturity date or upon acceleration
or by prepayment.
Additionally,
Crown Bridge has the option to convert all or any amount of the principal face amount of the October 3, 2019 Crown Bridge Note
at any time from the date of issuance and ending on the later of the maturity date and the date the Default Amount, which is an
amount between 110% and 150% of an amount equal to the then outstanding principal amount of the October 3, 2019 Crown Bridge Note
plus any interest accrued, is paid if an event of default occurs, for shares of the Company’s common stock at the then-applicable
conversion price.
The
conversion price for the October 3, 2019 Crown Bridge Note shall be equal to a 40% discount of the lowest closing bid price (“Lowest
Trading Price”) of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of Conversion,
including the day upon which a Notice of Conversion is received. Notwithstanding the foregoing, Crown Bridge shall be restricted
from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned
by Crown Bridge and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock which may be increased
up to 9.99% upon 60 days prior written notice by the Crown Bridge to the Company. The note is treated as stock settled debt under
ASC 480 and accordingly the Company recorded a $72,000 put premium.
The
October 3, 2019 Crown Bridge Note contain certain events of default, upon which principal and accrued interest will become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest
rate of 15% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted
by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amount outstanding under the above Crown Bridge financing agreement, specifically the October 3, 2019 Crown Bridge
Note, was $108,000 as of December 31, 2019 and accrued interest of $2,626. The
Company recorded approximately $591,000 of debt discounts and $698,000 of put premiums related to the above note issuances during
the six months ended December 31, 2019. The debt discounts are being amortized over the term of the debt and the put premiums
are expensed on issuance of the debt with the liability released to additional paid in capital on conversion of the principal.
The
Company recorded approximately $534,000 of debt discounts and $539,000 of put premiums related to the above note issuances during
the six months ended December 31, 2019. The debt discounts are being amortized over the term of the debt and the put premiums
are expensed on issuance of the debt with the liability released to additional paid in capital on conversion of the principal.
Amortization
of all debt discounts for the six months ended December 31, 2019 and 2018 was $307,085 and $303,813, respectively.
See
Note 11 – Subsequent Events for information about financing arrangements post December 31, 2019.
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2019
(unaudited)
NOTE
6 – STOCKHOLDERS’ DEFICIT
On
June 24, 2019, the Company effected a one-for-five hundred (1:500) reverse stock split whereby the Company (i) decreased the number
of authorized shares of common stock, $0.001 par value per share, to 100,000,000 and (ii) decreased by a ratio of one-for-five
hundred (1:500) the number of retroactively issued and outstanding shares of common stock. Proportional adjustments for the reverse
stock split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share
data and amounts have been retroactively adjusted as of the earliest period, presented in the consolidated financial statements
to reflect the reverse stock split.
Preferred
Stock:
The
total number of shares of preferred stock that the Company is authorized to issue is 1,500,005, $0.01 par value per share. These
preferred shares have no rights to dividends, profit sharing or liquidation preferences.
Of
the total preferred shares authorized, 500,000 have been designated as Series A Preferred Stock (“Series A Preferred Stock”),
pursuant to the Certificate of Designation filed with the Secretary of State of the State of Delaware on December 9, 2014. James
Nathanielsz, the Company’s Chief Executive Officer beneficially owns all of the shares of Series A Preferred Stock via North
Horizon Pty Ltd., which entitles him, as a holder of Series A Preferred Stock, to vote on all matters submitted or required to
be submitted to a vote of the Company’s stockholders, except election and removal of directors, and each share of Series
A Preferred Stock entitles him to two votes per share of Series A Preferred Stock. North Horizon Pty Ltd. is a Nathanielsz Family
Trust. Mr. James Nathanielsz, the Chief Executive Officer and a director of our Company, has voting and investment power over
these shares. 500,000 shares of Series A Preferred Stock are issued and outstanding as of December 31, 2019.
Of
the total preferred shares authorized, pursuant to the Certificate of Designation filed with the Secretary of State of the State
of Delaware on June 16, 2015, up to five shares have been designated as Series B Preferred Stock (“Series B Preferred Stock”).
Each holder of outstanding shares of Series B Preferred Stock is entitled to voting power equivalent to the number of votes equal
to the total number of shares of common stock outstanding as of the record date for the determination of stockholders entitled
to vote at each meeting of stockholders of the Company and entitled to vote on all matters submitted or required to be submitted
to a vote of the stockholders of the Company. One share of Series B Preferred Stock is issued and outstanding as of December 31,
2019. Mr. Nathanielsz directly beneficially owns such one share of Series B Preferred Stock.
Common
Stock:
Shares
issued for conversion of convertible debt
During the six months ended December 31,
2019, the Company issued 1,246,859 shares of its common stock at an average contractual conversion price of $0.3575, ranging
from $0.067 to $0.906, as a result of the conversion of principal and interest in the aggregate amount of $318,768 underlying
certain outstanding convertible notes converted during such period. The total recorded to equity was $343,179. Notes
totaling $46,600 contained bifurcated embedded conversion option derivatives. Accordingly, the fair market value of the
shares issued was $71,011 resulting in a loss on extinguishment at the time of conversion of $24,411, $44,587 of derivative
fair value was recorded as a gain on extinguishment at the time of conversion. The Company reclassified $160,205 in put
premiums to additional paid in capital following conversions during the six months ended December 31, 2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
The
Company has 77,292,139 shares of its common stock reserved for future issuances based on lender reserve requirements pursuant
to underlying financing agreements at December 31, 2019.
Shares
issued for services
On
July 19, 2019, the Company entered into an agreement with a certain consultant to provide services over a two-month period beginning
July 1, 2019 and ending September 1, 2019 in exchange for 20,000 shares of the Company’s common stock. On July 19, 2019,
the Company issued the 20,000 shares of the Company’s common stock valued at $1.99 per share; being the closing price of
the stock on the date of the agreement, to such consultant, or $39,800, which will be amortized over the term of the agreement.
The Company recorded $39,800 of consulting expense with respect to such shares of its common stock during the six months ended
December 31, 2019.
Restricted
Stock Units
Pursuant
to employment agreements dated in May 2019 (see Note 8), the Company granted an aggregate of 78,000 and 39,000 restricted stock
unit to the Company’s Chief Executive Officer and Chief Scientific Officer, respectively. The total 117,000 restricted stock
units are subject to vesting terms as defined in the employment agreements. The 117,000 restricted stock units were valued at
the fair value of $4.25 per unit or $497,240 based on the quoted trading price on the date of grant. During the six months ended
December 31, 2019, the Company recognized stock-based compensation of $108,771 related to vested restricted stock units. There
were $357,392 unrecognized restricted stock units expense as of December 31, 2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Warrants:
In
connection with the issuance of the August 2019 Auctus Note, the Company issued common stock purchase warrants to Auctus to purchase
450,000 shares of the Company’s common stock (the “First Warrant”) as a commitment fee upon the terms and subject
to the limitations and conditions set forth in such First Warrant at an “Exercise Price” of $2.25. In connection with
the issuance of the Note, the Company shall issue a common stock purchase warrant to Buyer to purchase 300,000 shares of the Company’s
common stock (the “Second Warrant”) as a commitment fee upon the terms and subject to the limitations and conditions
set forth in such Second Warrant at an “Exercise Price” of $3.33. In connection with the issuance of the Note, the
Company shall issue a common stock purchase warrant to Buyer to purchase 225,000 shares of the Company’s common stock (the
“Third Warrant”) as a commitment fee upon the terms and subject to the limitations and conditions set forth in such
Third Warrant at an “Exercise Price” of $4.50. The First Warrant, Second Warrant, and Third Warrant shall collectively
be referred as the “Warrants”. The Warrants have an “Exercise Period” of five years form the date of issuance
being August 30, 2019 (see Note 5).
On
September 10, 2019, the Company entered into an agreement with a certain consultant to provide services over a three-month period
beginning September 10, 2019 and ending December 10, 2019 in exchange for 1,000,000 warrants to purchase the Company’s common
stock at $2.00 per share with an expiry date of September 10, 2022. The Fair Market Value of the warrants was $984,810 on the
date of grant as calculated under the Black Scholes Option Pricing model. The Company recorded $984,810 of share based compensation
expenses with respect to the grant of such warrants during the six months ended December 31, 2019.
As
of December 31, 2019, there were 1,975,059 warrants outstanding and exercisable with expiration dates commencing May 2020 and
continuing through August 2024, with a weighted average exercise price per share of $2.69.
Options:
As
of December 31, 2019, the Company had entered into agreements to grant options to purchase 59,644 shares of its common stock,
with a weighted average exercise price per share of $76.37.
Pursuant
to employment agreements dated in May 2019 (see Note 8), the Company granted options to purchase 39,000 and 19,500 shares of the
Company’s common stock to the Company’s Chief Executive Officer and Chief Scientific Officer, respectively. The total
58,500 options have a term of 10 years from the date of grant and exercise price ranging from $4.25 to $4.675 per share. 1/3rd
of these options shall vest every successive one-year anniversary, provided, that on each such vesting date, the Chief Executive
Officer and Chief Scientific Officer are employed by the Company and subject to the other provisions of the employment agreement.
The 58,500 stock options were valued using a Black-Scholes model with the following assumptions: stock price at valuation date
of $4.25 based on quoted trading price on date of grant, exercise price of $4.65, dividend yield of zero, years to maturity of
10.00, a risk free rate of 2.42%, and expected volatility 268% for a total value of $248,620.
During
the six months ended December 31, 2019, the Company recognized stock-based compensation of $41,437 related to vested stock options.
There was $196,824 of unvested stock options expense as of December 31, 2019 that will be recognized in future periods.
No
stock options were issued during the six months ended December 31, 2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
NOTE
7 – COMMITMENTS AND CONTINGENCIES
Legal
Matters
A
complaint against us, dated September 26, 2019, has been filed by Foley Shechter Ablovatskiy (“Foley Shechter”), our
former counsel, seeking $151,031.50 in legal fees, in addition to interest and costs of suit. The Company believes these claims
to be unfounded and is vigorously defending itself. To that end, the Company filed a motion to dismiss certain counts of the complaint,
with prejudice. That motion remains pending with the Supreme Court of the State of New York, County of New York. Upon resolution
of the motion, the Company shall file an answer, together with affirmative defenses and counterclaims. The counterclaims shall
include, without limitation, malpractice claims, arising out of Foley Shechter’s grossly negligent mishandling of certain
transactions and excessive billing related thereto. Certain amounts related to this claim are included in accounts payable and
accrued expenses in the accompanying Financial Statements.
Regal
Consulting, LLC (“Regal”) initiated litigation against the Company in Clark County District Court, Nevada. The
Court entered a default judgment against the Company on December 17, 2019. However, Regal, through counsel, has agreed
to execute a stipulation to vacate the default and proceed with litigation. Regal is demanding approximately $400,000 and
60,000 shares of the Company’s common stock as payment for services that Regal purports to have performed. The Company
intends to vigorously defend itself against Regal’s unsubstantiated claims and no loss contingency can be estimated at
this time.
In
addition to the above, from time to time, we may be involved in litigation in the ordinary course of business. Other than as set
forth above, we are not currently involved in any litigation that we believe could have a material adverse effect on our financial
condition or results of operations. Other than as set forth above, to our knowledge, there is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to
the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting our Company, our common stock,
any of our subsidiaries or any of our subsidiaries’ officers or directors in their capacities as such, in which an adverse
decision could have a material adverse effect.
IRS
Liability
As
part of its requirement for having a foreign operating subsidiary, the Company’s parent U.S. entity is required to file
an informational Form 5471 to the Internal Revenue Service (the “IRS”), which is a form that explains the nature of
the relationship between the foreign subsidiary and the parent company. From 2012 through the 2014, the Company did not file this
form in a timely manner. As a result of the non-timely filings, the Company incurred a penalty from the IRS in the amount of $10,000
per year, or $30,000 in total, plus accrued interest, such penalty and interest having been accrued and is included in the Accrued
expenses and other payable figure in the Balance Sheet. The Company recorded the penalties for all three years during the year
ended June 30, 2018 and is negotiating a payment plan. The Company is current on all subsequent filings.
Operating
Agreements
In
November 2009, the Company entered into a commercialization agreement with the University of Bath (UK) (the “University”)
whereby the Company and the University co-owned the intellectual property relating to the Company’s pro-enzyme formulations.
In June 2012, the Company and the University entered into an assignment and amendment whereby the Company assumed full ownership
of the intellectual property while agreeing to pay royalties of 2% of net revenues to the University. Additionally, the Company
agreed to pay 5% of each and every license agreement subscribed for. The contract is cancellable at any time by either party.
To date, no amounts are owed under the agreement.
Operating
Leases
On
May 5, 2016, the Company entered into a new five-year operating lease agreement with a Horizon Pty Ltd., a related party, of which
Mr. Nathanielsz, our CEO, CFO and a director, and his wife are owners and directors, with monthly rent of $3,606 AUD or $2,469
USD, inclusive of GST (See Note 8 – Related Party Transactions).
ROU
is summarized below:
|
|
December
31, 2019
|
|
Office lease ROU
|
|
$
|
48,662
|
|
Less accumulated
reduction
|
|
|
(13,271
|
)
|
Balance of ROU asset as of December
31, 2019
|
|
$
|
35,391
|
|
Operating
lease liability related to the ROU asset is summarized below:
|
|
December
31, 2019
|
|
Office
lease liability
|
|
$
|
48,662
|
|
Reduction
of lease liability
|
|
|
(11,352
|
)
|
Total
|
|
|
37,310
|
|
Less:
current portion
|
|
|
(14,216
|
)
|
Long
term portion of lease liability as of December 31, 2019
|
|
$
|
23,094
|
|
Future
Minimum lease payments under non-cancelable operating lease at December 31, 2019 are as follows:
Remainder
Fiscal Year 2020
|
|
$
|
15,120
|
|
Year
2021
|
|
|
23,119
|
|
Total
|
|
|
38,239
|
|
Imputed
interest
|
|
|
(929
|
)
|
Total
operating lease liability
|
|
$
|
37,310
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Amatsigroup
Agreement
The
Company entered into a Manufacturing Services Agreement (the “MSA”) and Quality Assurance Agreement (the “QAA”),
each with an effective date of August 12, 2016, with Amatsigroup NV (“Amatsigroup”), formerly known as Q-Biologicals,
NV, a contract manufacturing organization located in Belgium. Pursuant to the MSA, Amatsigroup produces certain drug substances
and products containing certain enzymes for the Company at its facility in Belgium. The Company uses these substances and products
for development purposes, including but not limited to future clinical trials. The MSA contemplates payment to Amatsigroup pursuant
to a pre-determined fee schedule based on the completion of certain milestones that depend on our manufacturing requirements and
final batch yield. The Company anticipates that its payments to Amatsigroup under the MSA will range between $2.5 million and
$5.0 million over three years, when the finished drug product is manufactured and released for clinical trials. The Company has
spent a total of $1,689,146 of costs to date under this contract of which $1,689,146 was expensed in prior years. The MSA shall
continue for a term of three years unless extended by mutual agreement in writing. The Company 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.
Each party to the MSA shall have the right to terminate the MSA by written notice to the other party if the other party commits
a material breach of the MSA (subject to a 30-day cure period). 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 Amatsigroup contain certain customary
representations, warranties and limitations of liabilities, and confidentiality and indemnity obligations.
Collaboration
Agreement
On
September 13, 2018, the Company entered into a two-year collaboration agreement with the University of Jaen (the “University”)
to provide certain research services to the Company. In consideration of such services, the Company agreed to pay the University
approximately 52,000 Euros ($59,508 USD) in year one and a maximum of 40,000 Euros ($45,775 USD) in year two. Additionally, in
exchange for full ownership of the intellectual property the Company agreed to pay royalties of 2% of net revenues to the University.
NOTE
8 – RELATED PARTY TRANSACTIONS
Since
its inception, the Company has conducted transactions with its directors and entities related to such directors. These transactions
have included the following:
As
of December 31, 2019 and June 30, 2019, the Company owed a current and a former director a total of $52,022 and $51,867, respectively,
for money loaned to the Company throughout the years. The total loans balance owed at December 31, 2019 and June 30, 2019 is not
interest bearing (See Note 4 – Loans and Notes Payable).
As
of December 31, 2019 and June 30, 2019, the Company owed its former director a total of $31,257 and $31,164, respectively, related
to expenses paid on behalf of the Company related to corporate startup costs and intellectual property (See Note 3 – Due
to Former Director – Related Party).
Effective
May 5, 2016, the Company entered into an agreement for the lease of its principal executive offices with North Horizon Pty Ltd.,
a related party, of which Mr. Nathanielsz, our CEO, CFO and a director, and his wife are owners and directors. The lease has a
five-year term and provides for annual rental payments of $42,048 AUD or $28,790 USD, which includes $3,823 AUD or $2,618 USD
of goods and service tax for total payments of $210,242 AUD or $143,953 USD during the term of the lease. As of December 31, 2019,
total payments of $59,943AUD or $41,044 USD remain on the lease. (See Note 7 – Commitments and Contingencies)
The
Company and Mr. Nathanielsz entered into an employment agreement as of February 25, 2015 (the “Nathanielsz Employment Agreement”)
setting forth the terms and conditions of Mr. Nathanielsz employment as the Company’s President and Chief Executive Officer.
The Nathanielsz Employment Agreement was scheduled to expire on February 25, 2019; however, the term of the Nathanielsz Employment
Agreement automatically renews for successive one-year periods unless either party provides 30 days’ prior written notice
of its intent not to renew. The Nathanielsz Employment Agreement continues in effect as of December 31, 2019. The Nathanielsz
Employment Agreement provides Mr. Nathanielsz with a base salary of $25,000 AUD per month ($300,000 AUD annually or $205,680 USD)
and a monthly contribution to Mr. Nathanielsz’s pension equal to 9.5% of his monthly salary. Mr. Nathanielsz has the ability
to convert any accrued but unpaid salary into common stock at the end of each fiscal year at a conversion price to be determined
by Mr. Nathanielsz and the Company, which will in no event be lower than par value or higher than the closing bid price on the
date of conversion. Pursuant to the Nathanielsz Employment Agreement, Mr. Nathanielsz is entitled to an annual discretionary bonus
in an amount up to 200% of his annual base salary, which bonus shall be determined by the Company’s board of directors based
upon the performance of the Company. On March 16, 2018, the Company’s board of directors approved an increase of Mr. Nathanielsz’s
annual base salary from $300,000 AUD ($205,680 USD) to $400,000 AUD ($274,240 USD), effective February 2018.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
Mr.
Nathanielsz’s wife, Sylvia Nathanielsz, is and has been a non-executive part-time employee of the Company since October
2015. Effective February 1, 2018. Mrs. Nathanielsz receives an annual salary of $82,272 and is entitled to customary benefits.
Pursuant
to a February 25, 2016 board resolution, James Nathanielsz shall be paid $4,481 AUD ($3,205 USD), on a monthly basis for the purpose
of acquiring and maintaining an automobile. For the six months ended December 31, 2019, a total of $21,378 AUD ($14,638 USD) in
payments have been made with respect to Mr. Nathanielsz’s car allowance.
Pursuant
to the approval of the Company’s board of directors, on March 16, 2018, Mr. Nathanielsz was granted a $300,000 AUD ($210,090
USD) bonus for accomplishments achieved while serving as the Company’s Chief Executive Officer during the fiscal year ended
June 30, 2018. A total of $80,046 AUD ($56,056 USD) in payments were made in the year ended June 30, 2018. During the nine months
ended March 31, 2019, an additional $219,954 AUD ($154,100 USD) was paid. Such bonus was fully paid to Mr. Nathanielsz as of June
30, 2019.
Pursuant
to the approval of the Company’s board of directors, on May 14, 2019, Mr. Nathanielsz was granted a $460,000 AUD ($315,376
USD) bonus for accomplishments achieved while serving as the Company’s Chief Executive Officer during the fiscal year ended
June 30, 2019 with $200,000 AUD ($137,120 USD) of such bonus payable by the Corporation to the CEO throughout the Corporation’s
2019 fiscal year as the Corporation’s cash resources allow, with the remaining $260,000 AUD ($178,256 USD) of such bonus
to be deferred by the CEO until a future date when the Corporation’s cash resources allow for such payment, as agreed to
by the CEO. A total of $90,000 AUD ($64,377 USD) in payments were made in the year ended June 30, 2019. A total of $137,620 AUD
($94,228 USD) in payments were made in the six months ended December 31, 2019, with $232,380 AUD ($163,363 USD) remaining due
and payable.
New
Employment and Services Agreements with Management
Amended
and Restated Employment Agreement ― On May 14, 2019 (the “Effective Date”), the Company entered into an Amended
and Restated Employment Agreement (the “Employment Agreement”) with James Nathanielsz, the Company’s Chief Executive
Officer, Chairman, acting Chief Financial Officer and a director, for a term of three years, subject to automatic one-year renewals,
at an annual salary of $400,000 AUD. Pursuant to the Employment Agreement, Mr. Nathanielsz was granted options to purchase 39,000
shares of the Company’s common stock (the “Nathanielsz Options”), with an exercise price per share of $4.675
(110% of the closing market price of the Company’s common stock on May 14, 2019 (or $4.25), the date of approval of such
grant by the Company’s board of directors), (ii) 39,000 restricted stock units of the Company (the “Initial Nathanielsz
RSUs”), and (iii) an additional 39,000 restricted stock units of the Company (the “Additional Nathanielsz RSUs”).
Such options and restricted stock units were granted pursuant to the 2019 Plan (as defined below) approved by the Company’s
board of directors on the Effective Date. The Nathanielsz Options have a term of 10 years from the date of grant. 1/3rd of the
Nathanielsz Options shall vest every successive one-year anniversary following the Effective Date, provided, that on each such
vesting date Mr. Nathanielsz is employed by the Company and subject to the other provisions of the Employment Agreement. The Initial
Nathanielsz RSUs shall vest on the one-year anniversary of the Effective Date, subject to Mr. Nathanielsz’s continued employment
with the Company through such vesting date. The Additional Nathanielsz RSUs will vest as follows, subject to Mr. Nathanielsz’s
continued employment with the Company through the applicable vesting date: (i) 7,800 of the Additional Nathanielsz RSUs shall
vest upon the Company submitting Clinical Trial Application (the “CTA”) for PRP, the Company’s lead product
candidate (“PRP”), for a First-In-Human study for PRP (the “Study”) in an applicable jurisdiction to be
selected by the Company, (ii) 7,800 of the Additional Nathanielsz RSUs shall vest upon the CTA being approved in an applicable
jurisdiction, (iii) 7,800 of the Additional RSUs shall vest upon the Company completing an equity financing in the amount of at
least $4,000,000 in gross proceeds, (iv) 7,800 of the Additional Nathanielsz RSUs shall vest upon the shares of the Company’s
Common Stock being listed on a senior stock exchange (NYSE, NYSEMKT or NASDAQ), and (v) the remaining 7,800 of the Additional
Nathanielsz RSUs shall vest upon the Company enrolling its first patient in the Study. Each vested restricted stock unit shall
be settled by delivery to Mr. Nathanielsz of one share of the Company’s common stock and/or the fair market value of one
share of common stock in cash, at the sole discretion of the Company’s board of directors and subject to the 2019 Plan,
on the first to occur of: (i) the date of a Change of Control (as defined in the Employment Agreement), (ii) the date that is
ten business days following the vesting of such restricted stock unit, (iii) the date of Mr. Nathanielsz’s death or Disability
(as defined in the Employment Agreement), and (iv) Mr. Nathanielsz’s employment being terminated either by the Company without
Cause or by Mr. Nathanielsz for Good Reason (each as defined in the Employment Agreement). In the event of a Change of Control,
any unvested portion of the Nathanielsz Options and such restricted stock units shall vest immediately prior to such event.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
The
78,000 restricted stock units were valued at the fair value of $4.25 per unit or $331,500 based on the quoted trading price on
the date of grant. The 39,000 stock options were valued using a Black-Scholes model with the following assumptions: stock price
at valuation date of $4.25 based on quoted trading price on date of grant, exercise price of $4.65, dividend yield of zero, years
to maturity of 10.00, a risk free rate of 2.42%, and expected volatility 268% for a total value of $165,747 (see Note 6 –
Stockholders’ Deficit).
Amended
and Restated Services Agreement ― On the Effective Date, the Company also entered into an Amended and Restated Services
Agreement (the “Services Agreement”) with Dr. Kenyon, the Company’s Chief Scientific Officer and a director,
for a term of three years, subject to automatic one-year renewals, at an annual salary of $54,000 AUD. In connection with the
execution of the Services Agreement, Dr. Kenyon was designated as an executive officer of the Company and assumed a more active
executive role with the Company. Pursuant to the Services Agreement, Dr. Kenyon was granted options to purchase 19,500 shares
of the Company’s common stock (the “Kenyon Options”), with an exercise price per share of $4.25 (100% of the
closing market price of the Company’s common stock on May 14, 2019, the date of approval of such grant by the Company’s
board of directors), (ii) 19,500 restricted stock units of the Company (the “Initial Kenyon RSUs”), and (iii) an additional
19,500 restricted stock units of the Company (the “Additional Kenyon RSUs”). Such options and restricted stock units
were granted pursuant to the 2019 Plan (as defined below) approved by the Company’s board of directors on the Effective
Date. The Kenyon Options have a term of 10 years from the date of grant. 1/3rd of the Kenyon Options shall vest every successive
one-year anniversary following the Effective Date, provided, that on each such vesting date Dr. Kenyon is employed by the Company
and subject to the other provisions of the Services Agreement. The Initial Kenyon RSUs shall vest on the one-year anniversary
of the Effective Date, subject to Dr. Kenyon’s continued employment with the Company through such vesting date. The Additional
Kenyon RSUs will vest as follows, subject to Dr. Kenyon’s continued employment with the Company through the applicable vesting
date: (i) 4,875 of the Additional Kenyon RSUs shall vest upon the Company submitting the CTA for PRP for the Study in an applicable
jurisdiction to be selected by the Company, (ii) 4,875 of the Additional Kenyon RSUs shall vest upon the Company completing an
equity financing in the amount of at least $4,000,000 in gross proceeds, (iii) 4,875 of the Additional Kenyon RSUs shall vest
upon the shares of the Company’s Common Stock being listed on a senior stock exchange (NYSE, NYSEMKT or NASDAQ), and (iv)
the remaining 4,875 of the Additional Kenyon RSUs shall vest upon the Company enrolling its first patient in the Study. Each vested
Kenyon RSU shall be settled by delivery to Mr. Kenyon of one share of the Company’s common stock and/or the fair market
value of one share of common stock in cash, at the sole discretion of the Company’s board of directors and subject to the
Plan, on the first to occur of: (i) the date of a Change of Control (as defined in the Services Agreement), (ii) the date that
is ten business days following the vesting of such Kenyon RSU, (iii) the date of Dr. Kenyon’s death or Disability (as defined
in the Services Agreement), and (iv) Dr. Kenyon’s employment being terminated either by the Company without Cause or by
Dr. Kenyon for Good Reason (as defined in the Services Agreement). In the event of a Change of Control (as defined in the Services
Agreement), 50% of any unvested portion of the Kenyon Options and the Kenyon RSUs shall vest immediately prior to such event.
The
39,000 restricted stock units were valued at the fair value of $4.25 per unit or $165,750 based on the quoted trading price on
the date of grant. The 19,500 stock options were valued using a Black-Scholes model with the following assumptions: stock price
at valuation date of $4.25 based on quoted trading price on date of grant, exercise price of $4.25, dividend yield of zero, years
to maturity of 10.00, a risk free rate of 2.42%, and expected volatility 268% for a total value of $82,873 (see Note 6 –
Stockholders’ Deficit).
NOTE
9 – CONCENTRATIONS AND RISKS
Concentration
of Credit Risk
The
Company maintains its cash in banks and financial institutions in Australia. Bank deposits in Australian banks are uninsured.
The Company has not experienced any losses in such accounts through December 31, 2019.
Receivable
Concentration
As
of December 31, 2019 and June 30, 2019, the Company’s receivables were 100% related to reimbursements on GST taxes paid.
Patent
and Patent Concentration
The
Company has filed multiple patent applications relating to its lead product, PRP. The Company’s lead patent application
has been granted and remains in force in the United States, Belgium, Czech Republic, Denmark, France, Germany, Ireland, Italy,
Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein, Turkey, United Kingdom, Australia, China, Japan, Indonesia,
Israel, New Zealand, Singapore, Malaysia, South Africa, Mexico, Republic of Korea and India. In Brazil and Canada, the patent
application remains under examination.
In
2016 and early 2017, we filed other patent applications. Three applications were filed under the Patent Cooperation Treaty (the
“PCT”). The PCT assists applicants in seeking patent protection by filing one international patent application under
the PCT, applicants can simultaneously seek protection for an invention in over 150 countries. Once filed, the application is
placed under the control of the national or regional patent offices, as applicable, in what is called the national phase. One
of the PCT applications filed in November 2016, entered national phase in July 2018 and another PCT application is currently entering
national phase in August 2018. A third PCT application entered the national phase in October 2018.
Further
patent applications are expected to be filed to capture and protect additional patentable subject matter based on the Company’s
field of technology relating to pharmaceutical compositions of proenzymes for treating cancer.
Foreign
Operations
As
of December 31, 2019 and June 30, 2019, the Company’s operations are based in Camberwell, Australia, however the majority
of research and development is being conducted in the European Union.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
On
July 22, 2016, the Company formed a wholly owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the
purpose of submitting an orphan drug application with the European Medicines Agency as a small and medium-sized enterprise. As
of December 31, 2019, there has been no activity within this entity.
NOTE
10 - DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Derivative
Financial Instruments:
The
Company had $216,400 of convertible debt, that contain embedded conversion options and is treated as derivative instruments outstanding
at December 31, 2019.
The
Company calculates the estimated fair values of the liabilities for derivative instruments using the Binomial Trees Method. The
closing price of the Company’s common stock at December 31, 2019, the last trading day of the quarter ended December 31,
2019, was $0.38. Volatility, expected remaining term and risk free interest rates used to estimate the fair value of derivative
liabilities at December 31, 2019 are indicated in the table that follows. The expected term is equal to the remaining term of
the warrants or convertible instruments and the risk free rate is based upon rates for treasury securities with the same term.
Convertible
Debt
|
|
Initial
Valuations
(on new derivative
instruments entered
into
during the six
months ended
December 31, 2019)
|
|
|
December
31, 2019
|
|
Volatility
|
|
|
227.82
|
%
|
|
|
227.82
|
%
|
Expected Remaining Term (in years)
|
|
|
1
|
|
|
|
00.39
– 0.91
|
|
Risk Free Interest Rate
|
|
|
1.59
|
%
|
|
|
1.48%
– 1.59
|
%
|
Expected dividend yield
|
|
|
None
|
|
|
|
None
|
|
Fair
Value Measurements:
The
Company measures and reports at fair value the liability for derivative instruments. The fair value liabilities for price adjustable
warrants and embedded conversion options have been recorded as determined utilizing the Binomial Trees model. The following tables
summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31,
2019:
|
|
Balance
at
December 31, 2019
|
|
|
Quoted
Prices
in
Active
Markets
for
Identical
Assets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
|
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Embedded conversion option
liabilities
|
|
$
|
924,744
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
924,744
|
|
Total
|
|
$
|
924,744
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
924,744
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
The
following is a roll forward for the six months ended December 31, 2019 of the fair value liability of price adjustable derivative
instruments:
|
|
Fair
Value of
|
|
|
Liability
for
|
|
|
Derivative
|
|
|
Instruments
|
Balance at June 30, 2019
|
|
$
|
698,264
|
|
Initial fair value of embedded conversion
option derivative liability recorded as debt discount
|
|
|
115,000
|
|
Initial fair value of embedded conversion
option derivative liability recorded as expense
|
|
|
93,125
|
|
Reductions due to conversions
|
|
|
(44,588
|
)
|
Change in fair
value included in statements of operations
|
|
|
62,943
|
|
Balance at December
31, 2019
|
|
$
|
924,744
|
|
NOTE
11 – SUBSEQUENT EVENTS
Note
Conversions
From January 1, 2020 through the date of this
filing , the Company issued 2,804,424 shares of its common stock at an average contractual conversion price of $0.1654, ranging
from $0.0672 to $0.75, as a result of the conversion of principal and interest in the aggregate amount of $267,187 underlying
certain outstanding convertible notes converted during such period. Notes totaling $82,500 contained bifurcated embedded conversion
option derivatives. Accordingly the fair market value of shares issued was $228,863 resulting in a loss on extinguishment of $146,367.
The Company reclassified $410,750 in put premiums to additional paid in capital following conversions from January 1, 2020
through the date of this filing.
Increase
in Authorized Common Stock
On February 4, 2020 the Directors resolved
to increase the Common Stock of the Company from 100,000,000 authorized shares to 1,000,000,000 authorized shares and believes
that such number of authorized shares of Common Stock will be in the best interests of the Corporation and its stockholders because
the Board believes that the availability of more shares of Common Stock for issuance will allow the Corporation greater flexibility
in pursuing financing from investors, meeting business needs as they arise, taking advantage of favorable opportunities and responding
to a changing corporate environment. The Company filed the necessary documents with the U.S. Securities and Exchange Commission
on February 6, 2020 and at the date of this filing the increase in authorized shares to 1,000,000,000 has not yet been effected.
January
7, 2020 Power Up Lending Group Securities Purchase Agreement
Effective January 7, 2020, the Company entered
into a securities purchase agreement with Power Up Lending Group Ltd. (“Power Up”), pursuant to which Power Up purchased
a convertible promissory note (the “January 7, 2020 Power Up Note”) from the Company in the aggregate principal amount
of $75,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of Power Up. The transaction closed on January 7, 2020 and the Company received payment on January 13, 2020 in the amount of $72,000,
net of $2,500 paid directly toward legal fees and $500 to Power Up for due diligence fees.
The
maturity date of the January 7, 2020 Power Up Note is January 7, 2021. The January 7, 2020, Power Up Note bears interest at a
rate of 8% per annum, which interest may be paid by the Company to Power Up in shares of the Company’s common stock, but
shall not be payable until the January 7, 2020 Power Up Note becomes payable, whether at the maturity date or upon acceleration
or by prepayment.
Additionally,
Power Up has the option to convert all or any amount of the principal face amount of the January 7, 2020 Power Up Note, starting
on July 4, 2020 and ending on the later of the maturity date or the date the Default Amount, which is an amount equal to 150%
of an amount equal to the then outstanding principal amount of the January 7, 2020 Power Up Note plus any interest accrued, is
paid if an event of default occurs, for shares of the Company’s common stock at the then-applicable conversion price.
The
conversion price for the January 7, 2020 Power Up Note shall be $3.05, subject to certain Market Price (as defined below) adjustment.
If the Market Price is greater than or equal to $5.00, the conversion price shall be the greater of 65% of the Market Price (“Variable
Conversion Price”) and $3.05. In the event Market Price is less than $5.00, the conversion price shall be the Variable Conversion
Price. As defined in the January 7, 2020 Power Up Note, the “Market Price” shall be the average of the lowest three
closing bid prices during the ten day trading period prior to and including the day the Company receives a notice of conversion
from Power Up on the electronic quotation system or applicable principal securities exchange or trading market or, if no closing
bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers
for such security that are listed in the “pink sheets” during the ten prior trading days, including the day upon which
the Company receives a notice of conversion from Power Up. Notwithstanding the foregoing, Power Up shall be restricted from effecting
a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Power Up and
its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. An aggregate total of $307,400 of
this note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
The
January 7, 2020 Power Up Note contain certain events of default, upon which principal and accrued interest will become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest
rate of 22% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted
by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
January
7, 2020 Consulting Services Agreement
On February 4, 2020, the Company entered into
an agreement with a certain consultant in relation to services provided during the period ended December 31, 2019 whereby the
Company agreed to issue 150,000 vested shares of the Company’s common stock to the consultant in satisfaction of
those services. On February 4, 2020, the Company issued the 150,000 shares of the Company’s common stock valued at $0.14
per share; being the closing price of the stock on the date of the agreement, to such consultant, or $21,000, which amount was
recorded as a share based expense in the financial statements for the six months ended December 31, 2019.
January
13, 2020 Ader Alef Securities Purchase Agreements
Effective
January 13, 2020, the Company entered into a securities purchase agreement with Ader Alef, pursuant to which Ader Alef purchased
a convertible promissory note (the “January 13, 2020 Ader Alef Note”) from the Company in the aggregate principal
amount of $110,250, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Ader Alef any time after the six month anniversary of the January 13, 2020 Ader Alef Note. The January 13, 2020 Ader
Alef Note contains an original discount of $5,250. The transactions contemplated by the Ader Alef Securities Purchase Agreement
closed on January 13, 2020. Pursuant to the terms of the Ader Alef Securities Purchase Agreement, Ader Alef deducted $5,000 from
the principal payment due under the January 13, 2020 Ader Alef Note at the time of closing, to be applied to its legal expenses
and the Company received net cash proceeds of $100,000 on January 15, 2020. The Company intends to use the net proceeds from the
January 13, 2020 Ader Alef Note for general working capital purposes.
The
maturity date of the January 13, 2020 Ader Alef is January 13, 2021. The January 13, 2020 Ader Alef Note bears interest at a rate
of 8% per annum, which interest may be paid by the Company to Ader Alef in shares of the Company’s common stock; but shall
not be payable until the January 13, 2020 Ader Alef Note becomes payable, whether at the maturity date or upon acceleration or
by prepayment.
Additionally,
Ader Alef has the option to convert all or any amount of the principal face amount of the January 13, 2020 Ader Alef Note at any
time from the date of issuance and ending on the later of the maturity date and the date the Default Amount, which is an amount
between 112% and 135% of an amount equal to the then outstanding principal amount of the January 13, 2020 Ader Alef Note plus
any interest accrued, is paid if an event of default occurs, for shares of the Company’s common stock at the then-applicable
conversion price.
The
conversion price for the January 13, 2020 Ader Alef Note during the first 6 months the January 13, 2020 Ader Alef Note is in effect
shall be fixed at $2.50 and thereafter shall be equal to a 35% discount of the lowest closing bid price (“Lowest Trading
Price”) of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of Conversion, including
the day upon which a Notice of Conversion is received. Notwithstanding the foregoing, Ader Alef shall be restricted from effecting
a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Ader Alef and
its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock which may be increased up to 9.99%
upon 60 days prior written notice by the Ader Alef to the Company. The note is treated as stock settled debt under ASC 480 and
accordingly the Company recorded a $59,365 put premium.
The
January 13, 2020 Ader Alef Note contain certain events of default, upon which principal and accrued interest will become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest
rate of 24% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted
by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
January
22, 2020 GS Capital Securities Purchase Agreements
Effective
January 22, 2020, the Company entered into a securities purchase agreement with GS Capital, pursuant to which GS Capital purchased
a convertible promissory note (the “January 22, 2020 GS Note”) from the Company in the aggregate principal amount
of $58,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of GS Capital any time after the six month anniversary of the January 22, 2020 GS Capital Note. The January 22, 2020 GS Note contains
an original discount of $3,500. The transactions contemplated by the GS Capital Securities Purchase Agreement closed on January
22, 2020. Pursuant to the terms of the GS Capital Securities Purchase Agreement, GS Capital deducted $2,500 from the principal
payment due under the January 22, 2020 GW Note, at the time of closing, to be applied to its legal expenses and received net cash
proceeds of $52,000 on January 28, 2020. The Company intends to use the net proceeds from the January 22, 2020 GW Note for general
working capital purposes.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019
(unaudited)
The
maturity date of the January 22, 2020 GS Capital is January 22, 2021. The January 22, 2020 GS Capital Note bears interest at a
rate of 10% per annum, which interest may be paid by the Company to GS Capital in shares of the Company’s common stock;
but shall not be payable until the January 22, 2020 GS Capital Note becomes payable, whether at the maturity date or upon acceleration
or by prepayment.
Additionally,
GS Capital has the option to convert all or any amount of the principal face amount of the January 22, 2020 GS Capital Note at
any time from the date of issuance and ending on the later of the maturity date and the date the Default Amount, which is an amount
between 112% and 130% of an amount equal to the then outstanding principal amount of the January 22, 2020 GS Capital Note plus
any interest accrued, is paid if an event of default occurs, for shares of the Company’s common stock at the then-applicable
conversion price.
The
conversion price for the January 22, 2020 GS Capital Note shall be equal to a 40% discount of the lowest closing bid price (“Lowest
Trading Price”) of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of Conversion,
including the day upon which a Notice of Conversion is received. Notwithstanding the foregoing, GS Capital shall be restricted
from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned
by GS Capital and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock which may be increased
up to 9.99% upon 60 days prior written notice by the GS Capital to the Company. The note is treated as stock settled debt under
ASC 480 and accordingly the Company recorded a $38,667 put premium.
The
January 22, 2020 GS Note contain certain events of default, upon which principal and accrued interest will become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest
rate of 24% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted
by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
Report
of Independent Registered Public Accounting Firm
To
the Stockholders’ and the Board of Directors of:
Propanc
Biopharma, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Propanc Biopharma, Inc. and Subsidiary (the “Company”)
as of June 30, 2019 and 2018, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’
deficit, and cash flows, for each of the two years in the period ended June 30, 2019, and the related notes (collectively referred
to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,
in all material respects, the consolidated financial position of the Company as of June 30, 2019 and 2018, and the consolidated
results of its operations and its cash flows for each of the two years in the period ended June 30, 2019, in conformity with accounting
principles generally accepted in the United States of America.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 2 to the consolidated financial statements, the Company has a net loss and cash used in operations of $5,758,369
and $2,060,037, respectively, in 2019 and has a working capital deficit, stockholders’ deficit and accumulated deficit of
$4,311,756, $4,301,236 and $51,041,047, respectively, at June 30, 2019. These matters raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s Plan in regards to these matters is also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over
financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
Salberg & Company, P.A.
SALBERG
& COMPANY, P.A.
We
have served as the Company’s auditor since 2011.
Boca
Raton, Florida
October
15, 2019
2295
NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431
Phone:
(561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920
www.salbergco.com
• info@salbergco.com
Member
National Association of Certified Valuation Analysts • Registered with the PCAOB
Member
CPAConnect with Affiliated Offices Worldwide • Member Center for Public Company Audit Firms
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEETS
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,394
|
|
|
$
|
19,921
|
|
GST
tax receivable
|
|
|
5,439
|
|
|
|
6,257
|
|
Prepaid
expenses and other current assets
|
|
|
83,299
|
|
|
|
34,712
|
|
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT ASSETS
|
|
|
91,132
|
|
|
|
60,890
|
|
|
|
|
|
|
|
|
|
|
Security
deposit - related party
|
|
|
2,103
|
|
|
|
2,220
|
|
Property
and equipment, net
|
|
|
8,417
|
|
|
|
8,277
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
101,652
|
|
|
$
|
71,387
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
917,337
|
|
|
$
|
1,157,369
|
|
Accrued
expenses and other payables
|
|
|
723,042
|
|
|
|
364,404
|
|
Convertible
notes and related accrued interest, net of discounts and premiums
|
|
|
1,657,377
|
|
|
|
4,699,299
|
|
Embedded
conversion option liabilities
|
|
|
698,264
|
|
|
|
371,532
|
|
Due
to former director - related parties
|
|
|
31,164
|
|
|
|
32,898
|
|
Loans
from directors and officer - related parties
|
|
|
51,867
|
|
|
|
54,753
|
|
Employee
benefit liability
|
|
|
323,837
|
|
|
|
143,052
|
|
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT LIABILITIES
|
|
|
4,402,888
|
|
|
|
6,823,307
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies (See Note 9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT:
|
|
|
|
|
|
|
|
|
Preferred
stock, 1,500,005 shares authorized, $0.01 par value:
|
|
|
|
|
|
|
|
|
Series
A preferred stock, $0.01 par value; 500,000 shares authorized; 500,000 and 500,000 shares issued and outstanding as of June
30, 2019 and 2018, respectively
|
|
|
5,000
|
|
|
|
5,000
|
|
Series
B preferred stock, $0.01 par value; 5 shares authorized; 1 and 1 share issued and outstanding as of June 30, 2019 and 2018,
respectively
|
|
|
-
|
|
|
|
-
|
|
Common
stock, $0.001 par value; 100,000,000 shares authorized; 968,042 and 92,859 shares
issued; 967,993 and 92,810 outstanding as of June 30, 2019 and 2018, respectively
|
|
|
968
|
|
|
|
93
|
|
Additional
paid-in capital
|
|
|
45,713,322
|
|
|
|
38,214,213
|
|
Accumulated
other comprehensive income (loss)
|
|
|
1,066,998
|
|
|
|
357,929
|
|
Accumulated
deficit
|
|
|
(51,041,047
|
)
|
|
|
(45,282,678
|
)
|
Treasury
stock (49 shares)
|
|
|
(46,477
|
)
|
|
|
(46,477
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS’ DEFICIT
|
|
|
(4,301,236
|
)
|
|
|
(6,751,920
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
101,652
|
|
|
$
|
71,387
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
|
Years
Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
Administration
expenses
|
|
|
2,326,350
|
|
|
|
2,103,684
|
|
Occupancy
expenses
|
|
|
28,062
|
|
|
|
30,521
|
|
Research
and development
|
|
|
260,335
|
|
|
|
1,825,728
|
|
TOTAL
OPERATING EXPENSES
|
|
|
2,614,747
|
|
|
|
3,959,933
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(2,614,747
|
)
|
|
|
(3,959,933
|
)
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(1,314,539
|
)
|
|
|
(2,789,196
|
)
|
Interest
income
|
|
|
31
|
|
|
|
87
|
|
Change
in fair value of derivative liabilities
|
|
|
(2,472,146
|
)
|
|
|
(7,612
|
)
|
Gain
(loss) on debt settlements, net
|
|
|
14,101
|
|
|
|
(18,585
|
)
|
Gain
on extinguishment of debt, net
|
|
|
1,204,242
|
|
|
|
251,392
|
|
Foreign
currency transaction loss
|
|
|
(690,748
|
)
|
|
|
(694,614
|
)
|
TOTAL
OTHER EXPENSE
|
|
|
(3,259,059
|
)
|
|
|
(3,258,528
|
)
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE TAXES
|
|
|
(5,873,806
|
)
|
|
|
(7,218,461
|
)
|
|
|
|
|
|
|
|
|
|
TAX
BENEFIT
|
|
|
115,437
|
|
|
|
179,306
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(5,758,369
|
)
|
|
$
|
(7,039,155
|
)
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED NET LOSS PER SHARE
|
|
$
|
(10.97
|
)
|
|
$
|
(178.75
|
)
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
524,939
|
|
|
|
39,381
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(5,758,369
|
)
|
|
$
|
(7,039,155
|
)
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
Unrealized
foreign currency translation gain
|
|
|
709,069
|
|
|
|
499,678
|
|
|
|
|
|
|
|
|
|
|
TOTAL
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
709,069
|
|
|
|
499,678
|
|
|
|
|
|
|
|
|
|
|
TOTAL
COMPREHENSIVE INCOME (LOSS)
|
|
$
|
(5,049,300
|
)
|
|
$
|
(6,539,477
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS DEFICIT
FOR
YEARS ENDED JUNE 30, 2019 AND 2018
|
|
Preferred
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Series
A
|
|
|
Series
B
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
No.
of Shares
|
|
|
Value
|
|
|
No.
of Shares
|
|
|
Value
|
|
|
No.
of Shares
|
|
|
Value
|
|
|
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Treasury
Stock
|
|
|
Comprehensive
Income
(loss)
|
|
|
Stockholders’
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2017
|
|
|
500,000
|
|
|
$
|
5,000
|
|
|
|
1
|
|
|
$
|
-
|
|
|
|
9,156
|
|
|
$
|
9
|
|
|
$
|
32,984,989
|
|
|
$
|
(38,243,523
|
)
|
|
$
|
(46,477
|
)
|
|
$
|
(141,749
|
)
|
|
$
|
(5,441,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for conversion of convertible debt and accrued interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
81,795
|
|
|
|
82
|
|
|
|
2,770,106
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,770,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
of premium upon debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
948,129
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
948,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment
of derivative liability associated with convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
809,642
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
809,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on settlement of debt, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
-
|
|
|
|
55,201
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,938
|
|
|
|
2
|
|
|
|
129,998
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
130,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
option expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
516,148
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
516,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
499,678
|
|
|
|
499,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss, for the fiscal year ended June 30, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,039,155
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,039,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2018
|
|
|
500,000
|
|
|
$
|
5,000
|
|
|
|
1
|
|
|
$
|
-
|
|
|
|
92,859
|
|
|
$
|
93
|
|
|
$
|
38,214,213
|
|
|
$
|
(45,282,678
|
)
|
|
$
|
(46,477
|
)
|
|
$
|
357,929
|
|
|
$
|
(6,751,920
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for conversion of convertible debt and accrued interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
704,258
|
|
|
|
704
|
|
|
|
3,350,079
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,350,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock under equity purchase agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
147,200
|
|
|
|
147
|
|
|
|
1,100,233
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,100,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
of put premium upon debt conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,824,317
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,824,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment
of derivative liability associated with convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,029,039
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,029,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for exercise of warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24
|
|
|
|
-
|
|
|
|
30
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for offering costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,701
|
|
|
|
8
|
|
|
|
298,914
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
298,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,000
|
|
|
|
16
|
|
|
|
168,984
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
169,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
based compensation in connection with stock option grants and restricted stock unit grants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41,436
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of offering costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(313,923
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(313,923
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
709,069
|
|
|
|
709,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss, for the fiscal year ended June 30, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,758,369
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,758,369
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2019
|
|
|
500,000
|
|
|
$
|
5,000
|
|
|
|
1
|
|
|
$
|
-
|
|
|
|
968,042
|
|
|
$
|
968
|
|
|
$
|
45,713,322
|
|
|
$
|
(51,041,047
|
)
|
|
$
|
(46,477
|
)
|
|
$
|
1,066,998
|
|
|
$
|
(4,301,236
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Years
Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(5,758,369
|
)
|
|
$
|
(7,039,155
|
)
|
Adjustments
to Reconcile Net Loss to Net Cash Used in Operating Activities:
|
|
|
|
|
|
|
|
|
Issuance
and amortization of common stock for services
|
|
|
245,145
|
|
|
|
130,000
|
|
Issuance
of convertible promissory notes for services
|
|
|
-
|
|
|
|
310,000
|
|
(Gain)
loss on settlements, net
|
|
|
(14,101
|
)
|
|
|
18,585
|
|
Foreign
currency transaction loss (gain)
|
|
|
690,748
|
|
|
|
694,614
|
|
Depreciation
expense
|
|
|
2,306
|
|
|
|
2,225
|
|
Amortization
of debt discounts
|
|
|
389,673
|
|
|
|
853,459
|
|
Change
in fair value of derivative liabilities
|
|
|
2,472,146
|
|
|
|
7,612
|
|
Gain
on extinguishment of debt
|
|
|
(1,296,376
|
)
|
|
|
(251,392
|
)
|
Stock
option expense
|
|
|
-
|
|
|
|
516,148
|
|
Reduction
of put premium due to payment of debt
|
|
|
-
|
|
|
|
(80,769
|
)
|
Accretion
of put premium
|
|
|
706,154
|
|
|
|
1,784,231
|
|
Changes
in Assets and Liabilities:
|
|
|
|
|
|
|
|
|
GST
receivable
|
|
|
489
|
|
|
|
1,636
|
|
Prepaid
expenses and other assets
|
|
|
(83,296
|
)
|
|
|
(29,842
|
)
|
Accounts
payable
|
|
|
(164,926
|
)
|
|
|
732,794
|
|
Employee
benefit liability
|
|
|
188,326
|
|
|
|
28,052
|
|
Accrued
expenses
|
|
|
377,846
|
|
|
|
(70,537
|
)
|
Accrued
interest
|
|
|
184,198
|
|
|
|
214,694
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
|
|
(2,060,037
|
)
|
|
|
(2,177,645
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase
of equipment
|
|
|
(2,874
|
)
|
|
|
-
|
|
NET
CASH USED IN INVESTING ACTIVITIES
|
|
|
(2,874
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Loan
repayments
|
|
|
-
|
|
|
|
(2,326
|
)
|
Proceeds
from convertible promissory notes
|
|
|
1,369,000
|
|
|
|
2,890,080
|
|
Repayments
of convertible promissory notes
|
|
|
(272,000
|
)
|
|
|
(490,181
|
)
|
Proceeds
from the issuance of common stock
|
|
|
1,100,380
|
|
|
|
-
|
|
Fees
associated with offering costs
|
|
|
(15,000
|
)
|
|
|
-
|
|
Debt
issuance cost
|
|
|
(63,850
|
)
|
|
|
-
|
|
Proceeds
from the exercise of warrants
|
|
|
30
|
|
|
|
-
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
2,118,560
|
|
|
|
2,396,488
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
(73,175
|
)
|
|
|
(267,965
|
)
|
|
|
|
|
|
|
|
|
|
NET
DECREASE IN CASH
|
|
|
(17,527
|
)
|
|
|
(49,122
|
)
|
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF YEAR
|
|
|
19,921
|
|
|
|
69,043
|
|
CASH
AT END OF YEAR
|
|
$
|
2,394
|
|
|
$
|
19,921
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
100,719
|
|
|
$
|
16,899
|
|
Income
Tax
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Non-Cash Investing and Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction
of put premium related to conversions of convertible notes
|
|
$
|
1,824,317
|
|
|
$
|
948,129
|
|
Conversion
of convertible notes and accrued interest to common stock
|
|
$
|
3,350,783
|
|
|
$
|
2,770,187
|
|
Deferred
financing costs associated with equity purchase agreement
|
|
$
|
318,059
|
|
|
$
|
-
|
|
Discounts
related to derivative liability
|
|
$
|
180,000
|
|
|
$
|
543,744
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Nature
of Operations
Propanc
Biopharma, Inc. (the “Company,” “we,” “us” or “our”) was originally incorporated
in Melbourne, Victoria Australia on October 15, 2007 as Propanc PTY LTD, and continues to be based in Camberwell, Victoria Australia.
Since its inception, substantially all of the operations of the Company have been focused on the development of new cancer treatments
targeting high-risk patients, particularly cancer survivors, who need a follow-up, non-toxic, long-term therapy designed to prevent
the cancer from returning and spreading. The Company anticipates establishing global markets for its technologies. Our lead product
candidate, which we refer to as PRP, is an enhanced pro-enzyme formulation designed to enhance the anti-cancer effects of multiple
enzymes acting synergistically. It is currently in the preclinical phase of development.
On
November 23, 2010, the Company was incorporated in the state of Delaware as Propanc Health Group Corporation. In January 2011,
to reorganize the Company, we acquired all of the outstanding shares of Propanc PTY LTD on a one-for-one basis making it a wholly-owned
subsidiary of the Company.
On
July 22, 2016, the Company formed a wholly owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the
purpose of submitting an orphan drug application to the European Medicines Agency as a small and medium-sized enterprise. As of
June 30, 2019, there has been no activity within this entity.
Effective
April 20, 2017, the Company changed its name to “Propanc Biopharma, Inc.” to better reflect the Company’s stage
of operations and development.
The
Company has filed multiple patent applications relating to its lead product, PRP. The first application was filed in October 2010
in each of the countries listed in the table below. This application has been granted and remains in force in the United States,
Belgium, Czech Republic, Denmark, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein,
Turkey, United Kingdom, Australia, China, Japan, Indonesia, Israel, New Zealand, Singapore, Malaysia, South Africa, Mexico, Republic
of Korea and India. In Brazil and Canada, the patent application remains under examination.
In
2016 and 2017 we filed other patent applications, as indicated below. Three applications were filed under the Patent Cooperation
Treaty (the “PCT”). The PCT assists applicants in seeking patent protection by filing one international patent application
under the PCT, which allows the applicants to seek protection for an invention in over 150 countries. Once national or regional
applications are filed, the application is placed under the control of the national or regional patent offices, as applicable,
in what is called the national or regional phase. One PCT application, filed in November 2016, entered the national phase in July
2018 in each of the countries listed in the table below. A second application filed in January 2017 entered the national phase
commencing July 2018. A third application entered the national phase in October 2018.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
No.
|
|
Title
|
|
Country
|
|
Case
Status
|
|
Date
Filed
|
1.
|
|
A
pharmaceutical composition for treating cancer comprising trypsinogen and/or chymotrypsinogen and an active agent selected
from a selenium compound, a vanilloid compound and a cytoplasmic reduction agent.
|
|
USA,
Belgium, Czech Republic, Denmark, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein,
Turkey, United Kingdom, Australia, China, Japan, Indonesia, Israel, New Zealand, Malaysia, Singapore, Malaysia, South Africa,
Mexico, Republic of Korea and India
|
|
Granted
|
|
Oct-22-2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil
and Canada
|
|
Under
Examination
Divisional
applications filed and under examination in Mexico and China
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA
|
|
Divisional
application granted
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
|
Proenzyme
composition
|
|
Australia,
Canada, China, Europe, Hong Kong, India, Indonesia, Israel, Japan, Malaysia, New Zealand, Singapore, South Africa and USA
|
|
Application
filed and pending
|
|
Nov-11-2016
|
|
|
|
|
|
|
|
|
|
3.
|
|
Cancer
Treatment
|
|
Australia,
Canada, China, Europe, Hong Kong, Israel, Japan, Malaysia, New Zealand, Singapore and USA
|
|
Application
filed and pending
|
|
Jan-27-2017
|
|
|
|
|
|
|
|
|
|
4.
|
|
Composition
of proenzymes for cancer treatment
|
|
Australia,
China, Europe, Japan and USA
|
|
Application
filed and pending
|
|
Apr-12-2017
|
The
Company hopes to capture and protect additional patentable subject matter based on the Company’s field of technology relating
to pharmaceutical compositions of proenzymes for treating cancer by filing additional patent applications as it advances its lead
product candidate, PRP, through various stages of development.
Increase
in Authorized Common Stock and Reverse Stock Split
On
January 23, 2018, Company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of
the State of Delaware to increase the number of authorized shares of the Company’s common stock from 100,000,000 to 400,000,000.
On
September 21, 2018, the Company filed a Certificate of Incorporation to increase the number of authorized shares of the Company’s
common stock from 400,000,000 to 4,000,000,000, which was approved by the Company’s board of directors and holders of a
majority of the Company’s voting stock on August 28, 2018.
On
June 24, 2019, the Company effected a one-for-five hundred (1:500) reverse stock split whereby the Company (i) decreased the number
of authorized shares of common stock, $0.001 par value per share, to 100,000,000 and (ii) decreased by a ratio of one-for-five
hundred (1:500) the number of retroactively issued and outstanding shares of common stock. Proportional adjustments for the reverse
stock split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share
data and amounts have been restated as of the earliest period, presented in the consolidated financial statements to reflect the
reverse stock split.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Principles
of Consolidation
The
consolidated financial statements include the accounts of Propanc Biopharma, Inc., the parent entity, and its wholly-owned subsidiary,
Propanc PTY LTD. All inter-company balances and transactions have been eliminated in consolidation. Propanc (UK) Limited was an
inactive subsidiary at June 30, 2019.
Use
of Estimates
The
preparation of financial statements in conformity with the accounting principles generally accepted in the United States of America
(“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates
in the accompanying consolidated financial statements include the estimates of useful lives for depreciation, valuation of 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 Other 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 dollar ($) 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 statements of operations and comprehensive income (loss) as other comprehensive income (loss). There have
been no significant fluctuations in the exchange rate for the conversion of Australian dollars to USD after the balance sheet
date.
Other
Comprehensive Income (Loss) for all periods presented includes only foreign currency translation gains (losses).
Assets
and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing
at the consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency included in the consolidated results of operations as incurred.
As
of June 30, 2019 and 2018, the exchange rates used to translate amounts in Australian dollars into USD for the purposes of preparing
the consolidated financial statements were as follows:
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
Exchange
rate on balance sheet dates
|
|
|
|
|
|
|
|
|
USD
: AUD exchange rate
|
|
|
0.7153
|
|
|
|
0.7399
|
|
|
|
|
|
|
|
|
|
|
Average
exchange rate for the period
|
|
|
|
|
|
|
|
|
USD
: AUD exchange rate
|
|
|
0.7009
|
|
|
|
0.7753
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Change
in Accumulated Other Comprehensive Income (Loss) by component during the years ended June 30, 2019 and 2018 was as follows:
|
|
Foreign
Currency Items:
|
|
Beginning
balance, June 30, 2017
|
|
$
|
(141,749
|
)
|
Foreign
currency translation gain
|
|
|
499,678
|
|
Balance, June
30, 2018
|
|
|
357,929
|
|
Foreign
currency translation gain
|
|
|
709,069
|
|
Ending
balance, June 30, 2019
|
|
$
|
1,066,998
|
|
Fair
Value of Financial Instruments and Fair Value Measurements
The
Company measures its financial assets and liabilities in accordance with US GAAP. For certain financial instruments, including
cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, the carrying amounts approximate fair
value due to their short maturities. Amounts recorded for notes payable, net of discount, and loans payable also approximate fair
value because current interest rates available for debt with similar terms and maturities are substantially the same.
The
Company follows accounting guidance for financial assets and liabilities. This standard defines fair value, provides guidance
for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but
rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply
to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable
market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the
service capacity of an asset or replacement cost).
The
guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three
broad levels. The following is a brief description of those three levels:
Level
1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level
2: Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar
assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not
active.
Level
3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed
by us, which reflect those that a market participant would use.
Also
see Note 12 - Derivative Financial Instruments and Fair Value Measurements.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less
with financial institutions, and bank overdrafts. Bank overdrafts are reflected as a current liability on the balance sheets.
There were no cash equivalents as of June 30, 2019 or June 30, 2018.
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
Patents
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 product costs as long as
we are in the startup stage. Accordingly, as the Company’s products were and are not currently approved for market, all
patent costs incurred from 2013 through June 30, 2019 were expensed immediately. This practice of expensing patent costs immediately
ends when a product receives market authorization from a government regulatory agency.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
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, 2019 and 2018, the Company was owed $5,439 and $6,257, respectively, 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. On the date of conversion
or payoff of debt, the Company records the fair value of the conversion shares, removes the fair value of the related derivative
liability, removes any discounts and records a net gain or loss on debt extinguishment.
Convertible
Notes With Variable Conversion Options
The
Company has entered into convertible notes, some of which contain variable conversion options, whereby the outstanding principal
and accrued interest may be converted, by the holder, into 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, “Distinguishing
Liabilities from Equity” and measures the fair value of the notes at the time of issuance, which is the result of the
share price discount at the time of conversion and records the put premium as 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 ASC 740 “Accounting for Income Taxes,”
when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements
and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws
and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in deferred tax assets and liabilities.
The
Company follows ASC 740, Sections 25 through 60, “Accounting for Uncertainty in Income Taxes.” These sections
provide detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized
in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective
date to be recognized upon the adoption of ASC 740 and in subsequent periods.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
On
December 22, 2017, the passage of legislation commonly referred to as the Tax Cuts and Jobs Act (“TCJA”) was enacted
and significantly revised the U.S. income tax law. The TCJA includes changes, which reduce the corporate income tax rate from
34% to 21% for fiscal years beginning after December 31, 2017. On December 22, 2017, the SEC Staff Accounting Bulletin No. 118
(“SAB 118”) was issued, which allows a company to recognize provisional tax amounts when it does not have the necessary
information available, prepared or analyzed, including computations, in reasonable detail to complete its accounting for the change
in tax law. SAB 118 provides for a measurement of up to one year from the date of enactment.
Research
and Development Costs and Tax Credits
In
accordance with ASC 730-10, “Research and Development-Overall,” research and development costs are expensed
when incurred. Total research and development costs for the fiscal years ended June 30, 2019 and 2018 were $260,335 and $1,825,728,
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
each of the fiscal years ended June 30, 2019 and 2018, the Company applied for, and received from the Australian Taxation Office,
a research and development tax credit in the amount of $115,437 and $179,306, respectively, which is reflected as a 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 718, “Stock Compensation” and the SEC Staff
Accounting Bulletin No. 107 Share Based Payment was issued 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.”
Revenue
Recognition
The
Company adopted and implemented on July 1, 2018, ASC 606 – Revenue from Contracts with Customers (“ASC 606”).
ASC 606 did not have a material impact on the consolidated financial statements.
Upon
implementation of ASC 606, the Company recognizes revenue in accordance with that core principle by applying the following steps:
Step
1: Identify the contract(s) with a customer.
Step
2: Identify the performance obligations in the contract.
Step
3: Determine the transaction price.
Step
4: Allocate the transaction price to the performance obligations in the contract.
Step
5: Recognize revenue when (or as) the entity satisfies a performance obligation.
Subject
to these criteria, the Company intends to recognize revenue relating to royalties on product sales in the period in which the
sale occurs and the royalty term has begun.
Legal
Expenses
All
legal costs for litigation are charged to expense as incurred.
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. As of June 30, 2019 and 2018, there
were 59 and 291 warrants outstanding, 59,644 and 1,144 stock options and 10 and 20 convertible notes payable, which notes are
convertible into approximately 1,810,347 and 207,397 shares of the Company’s common stock respectively. Each holder of the
notes has agreed to a 4.99% beneficial ownership conversion limitation (subject to certain noteholders’ ability to increase
such limitation to 9.99% upon 60 days’ notice to the Company), and each note may not be converted during the first six-month
period from the date of issuance. Such securities are considered dilutive securities which were excluded from the computation
since the effect is anti-dilutive.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Recent
Accounting Pronouncements
Certain
FASB Accounting Standard Updates (“ASU”) that are not effective until after June 30, 2019 are not expected to have
a significant effect on the Company’s consolidated financial position or results of operations.
Future
pronouncements are as follows:
ASU
2016-02 - In February 2016, the FASB issued ASU No. 2016-02: “Leases (Topic 842)” whereby lessees will need to
recognize almost all leases on their balance sheet as a right of use asset and a lease liability. This guidance is effective for
interim and annual reporting periods beginning after December 15, 2018. The Company plans to adopt this ASU effective July 1,
2019 and at present, doesn’t believe the adoption of the ASU will have a material effect on the consolidated financial statements.
ASU
2017-11 - In July 2017, the FASB issued ASU 2017-11 “Earnings Per Share (Topic 260)”. The amendments in the update
change the classification of certain equity-linked financial instruments (or embedded features) with down round features. The
amendments also clarify existing disclosure requirements for equity-classified instruments. For freestanding equity-classified
financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with
Topic 260, Earnings Per Share, to recognize the effect of the down round feature when it is triggered. That effect is treated
as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded
conversion options that have down round features would be subject to the specialized guidance for contingent beneficial conversion
features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260).
For public business entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2018. The Company will adopt this next fiscal year, effective July 1, 2019, and
doesn’t believe, based on current outstanding dilutive instruments, the adoption of this ASU will have a material effect
on the consolidated financial statements.
ASU
2018-07 - In June 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update
(“ASU”) 2018-07, Compensation – Stock Compensation (Topic 718). This update is intended to reduce cost and complexity
and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external
legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock Compensation, which currently
only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods
and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned.
This standard will be effective for financial statements issued by public companies for the annual and interim periods beginning
after December 15, 2018. Early adoption of the standard is permitted. The standard will be applied in a retrospective approach
for each period presented. The Company plans to adopt this ASU, effective July 1, 2019, and at present, doesn’t believe
the adoption of the ASU will have a material effect on the consolidated financial statements.
NOTE
2 – GOING CONCERN
The
accompanying consolidated financial statements have been prepared in conformity with US GAAP, which contemplate continuation of
the Company as a going concern. For the fiscal year ended June 30, 2019, the Company had no revenues, had a net loss of $5,758,369
and had net cash used in operations of $2,060,037. Additionally, as of June 30, 2019, the Company had a working capital deficit,
stockholders’ deficit and accumulated deficit of $4,311,756 $4,301,236 and $51,041,047, respectively. It is management’s
opinion that these conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period
of at least twelve months from the date of this filing.
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Successful
completion of the Company’s development program and, ultimately, the attainment of profitable operations are dependent upon
future events, including obtaining adequate financing to fulfill its development activities, acceptance of the Company’s
patent applications, obtaining additional sources of suitable and adequate financing and ultimately achieving a level of sales
adequate to support the Company’s cost structure and business plan. The Company’s ability to continue as a going concern
is also dependent on its ability to further develop and execute on its business plan. However, there can be no assurances that
any or all of these endeavors will be successful.
NOTE
3 – PROPERTY AND EQUIPMENT
Property
and equipment consist of the following as of June 30,
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Office
equipment at cost
|
|
$
|
26,749
|
|
|
$
|
25,244
|
|
Less:
Accumulated depreciation
|
|
|
(18,332
|
)
|
|
|
(16,967
|
)
|
|
|
|
|
|
|
|
|
|
Total
property, plant, and equipment
|
|
$
|
8,417
|
|
|
$
|
8,277
|
|
Depreciation
expense for the years ended June 30, 2019 and 2018 were $2,306 and $2,225, respectively
NOTE
4 – DUE TO FORMER DIRECTOR - RELATED PARTY
Due
to director - related party represents unsecured advances made primarily by a former director for operating expenses on behalf
of the Company such as intellectual property and formation expenses. The expenses were paid for on behalf of the Company and are
due upon demand. The Company is currently not being charged interest under these advances. The total amount owed the former director
at June 30, 2019 and 2018 is $31,164 and $32,898, respectively. The Company plans to repay the notes as its cash resources allow.
NOTE
5 – LOANS AND NOTES PAYABLE
Loans
from Directors and Officer - Related Parties
Loans
from the Company’s directors and officer at June 30, 2019 and 2018 were $51,867 and $54,753, respectively. The loans bear
no interest and are all payable on demand. The Company did not repay any amount on these loans during the fiscal year ended June
30, 2019.
NOTE
6 – CONVERTIBLE NOTES
The
Company’s convertible notes outstanding at June 30, 2019 and 2018 were as follows:
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
Convertible
notes and debenture
|
|
$
|
1,076,785
|
|
|
$
|
3,096,935
|
|
Unamortized
discounts
|
|
|
(131,893
|
)
|
|
|
(277,733
|
)
|
Accrued
interest
|
|
|
99,482
|
|
|
|
148,930
|
|
Premium,
net
|
|
|
613,003
|
|
|
|
1,731,167
|
|
Convertible
notes, net
|
|
$
|
1,657,377
|
|
|
$
|
4,699,299
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Delafield
Financing Agreements
Initial
Securities Purchase Agreement and Debenture
On
October 28, 2015, the Company entered into a securities purchase agreement with Delafield Investments Limited (the “Purchaser”
or “Delafield”), whereby the Purchaser purchased a $4,000,000 5% convertible debenture in the principal amount of
$4,350,000 from the Company. Additionally, Delafield received 4-year warrants to purchase an aggregate of 104,762 shares of the
Company’s common stock with an exercise price of $1,500 per share. As of June 30, 2017, the principal balance of
the convertible debenture was $720,271 and the related derivative liability associated with the convertible debenture was $252,303.
During the year ended June 30, 2018, the Company converted $380,090 in principal and $8,250 in accrued interest under the debenture
into shares of the Company’s common stock (see Note 8 – Stockholders’ Deficit). On January 2, 2018, the Company
repaid the remaining principal balance of $340,181, the derivative liability was revalued, and the Company recorded $199,339 gain
on the extinguishment of debt.
Additional
Debenture
On
September 13, 2016, the Company entered into an Additional Issuance Agreement (“Additional Debenture”) with the Purchaser
whereby the Purchaser loaned an additional $150,000 to the Company in exchange for a 5% Original Issue Discount Senior Secured
Convertible Debenture of the Company in the principal amount of $165,000. As of June 30, 2017, the Company recorded accrued interest
of $8,250 and had a principal balance of $165,000 outstanding under the Additional Debenture. Additional at June 30, 2017, the
derivative liability related to the Additional Debenture was $54,727. At June 30, 2018, all $165,000 in outstanding principal
under the Additional Debenture along with $8,250 of accrued interest was fully converted into shares of the Company’s common
stock (see Note 8 – Stockholders’ Deficit).
December
2016 Letter Agreement
On
December 2, 2016, the Company entered into a Letter Agreement with the Purchaser pursuant to which the parties agreed to cancel
the warrants to purchase up to 960,000 shares of the Company’s common stock issued to the Purchaser as of such date in exchange
for an 8% convertible redeemable promissory note in the principal amount of $150,000. As of June 30, 2017, the Company recorded
accrued interest of $6,937 and had a principal balance of $150,000 outstanding. On January 2, 2018, the Company repaid the remaining
principal balance of $150,000 and accrued interest of $16,899. In connection with the Letter Agreement, the Company issued the
Purchaser a 2-year common stock purchase warrants to purchase 208 shares of Company’s common stock at an exercise price
of $6,250 per share.
Eagle
Equities Financing Agreements
December
12, 2016 Securities Purchase Agreement
On
December 12, 2016, the Company entered into a Securities Purchase Agreement, with Eagle Equities, pursuant to which Eagle Equities
purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal amount of $100,000. The first
note (the “December 12 Note”) was funded with cash and the second note (the “December 12 Eagle Back-End Note”)
was initially paid for by an offsetting promissory note issued by Eagle Equities to the Company (the “December 12 Note Receivable”).
The terms of the December 12 Eagle Back-End Note require cash funding prior to any conversion thereunder. The December 12 Note
Receivable is due December 12, 2017, unless certain conditions are not met, in which case both the December 12 Eagle Back-End
Note and the December 12 Note Receivable may both be cancelled. Both the December 12 Note and the December 12 Eagle Back-End Note
have a maturity date one year from the date of issuance upon which any outstanding principal and interest is due and payable.
The outstanding principal amounts plus accrued interest under both the December 12 Note and the December 12 Eagle Back-End Note
are convertible into the Company’s common stock at a conversion price equal to 60% of the lowest closing bid price of the
common stock for the ten trading days prior to the conversion, subject to adjustment in certain events. On April 11, 2017, the
Company received payment of the December 12 Note Receivable in the amount of $100,000 that offset the December Eagle Back-End
Note. Proceeds from the Note Receivable of $5,000 were paid directly to legal fees resulting in net cash proceeds of $95,000 received
by the Company. As a result, the December 12 Eagle Back-End Note is now convertible. The December 12 Note and the December 12
Eagle Back-End Note are treated as stock settled debt under ASC 480 and accordingly the Company recorded a put premium of $66,667
as each of the notes were funded. As of June 30, 2018, the outstanding principal under the December 12 Note along with $8,296
of accrued interest was fully converted into shares of the Company’s common stock. As of June 30, 2019, the outstanding
balance of $100,000 under the December 12 Eagle Back-End Note along with $13,144 of accrued interest was fully converted (see
Note 8 – Stockholders’ Deficit) resulting in full repayment of the note and a full reduction of the put premium.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
December
21, 2016 Securities Purchase Agreement
On
December 21, 2016, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities
purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal amount of $157,500. The first
note (the “December 21 Eagle Note”) was funded with cash and the second note (the “December 21 Eagle Back-End
Note”) was initially paid for by an offsetting promissory note issued by Eagle Equities to the Company (the “December
21 Eagle Note Receivable”). The terms of the December 21 Eagle Back-End Note require cash funding prior to any conversion
thereunder. The December 21 Eagle Note Receivable was due December 21, 2017, unless certain conditions were not met, in which
case both the December 21 Eagle Back-End Note and the December 21 Eagle Note Receivable may have both been cancelled. Both the
December 21 Eagle Note and the December 21 Eagle Back-End Note had a maturity date one year from the date of issuance upon which
any outstanding principal and interest is due and payable. The outstanding principal amounts plus accrued interest under both
the December 21 Eagle Note and the December 21 Eagle Back-End Note were convertible into shares of the Company’s common
stock at a conversion price equal to 60% of the lowest closing bid price of the common stock for the ten trading days prior to
the conversion, subject to adjustment in certain events. On May 4, 2017, the Company received payment of the December 21 Eagle
Note Receivable in the amount of $157,500 that offset the December 21 Eagle Back-End Note. Proceeds from the December 21 Eagle
Note Receivable of $7,500 were paid directly to legal fees resulting in net cash proceeds of $150,000 received by the Company.
As a result, the December 21 Eagle Back-End Note then became convertible. The December 21 Eagle Note and the December 21 Eagle
Back-End Note are treated as stock settled debt under ASC 480 and accordingly the Company recorded a put premium of $105,000 as
each of the notes were funded. As of June 30, 2018, the outstanding principal under the December 21 Eagle Note and the December
21 Eagle Back-End Note along with $7,773 and $5,656, respectively, of accrued interest was fully converted (see Note 8 –
Stockholders’ Deficit) and the repayments resulted in a full reduction of the put premiums.
January
27, 2017 Securities Purchase Agreement
On
January 27, 2017, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC, pursuant to which Eagle Equities
purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal amount of $230,000. The first
note (the “January 2017 Eagle Note”) was funded with cash and the second note (the “January 2017 Eagle Back-End
Note”) was initially paid for by an offsetting promissory note issued by Eagle Equities to the Company (the “January
2017 Eagle Note Receivable”). The terms of the January 2017 Eagle Back-End Note require cash funding prior to any conversion
thereunder. The January 2017 Eagle Note Receivable is due September 27, 2017, unless certain conditions are not met, in which
case both the January 2017 Eagle Back-End Note and the January 2017 Eagle Note Receivable may both be cancelled. Both the January
2017 Eagle Note and the January 2017 Eagle Back-End Note have a maturity date one year from the date of issuance upon which any
outstanding principal and interest is due and payable. The outstanding principal amounts plus accrued interest under both the
January 2017 Eagle Note and the January 2017 Eagle Back-End Note are convertible into common stock of the Company at a conversion
price equal to 60% of the lowest closing bid price of the common stock for the ten trading days prior to the conversion, subject
to adjustment in certain events. On May 4, 2017, the Company received a partial payment of the January 2017 Note Receivable in
the amount of $40,000 and on June 3, 2017 the balance of $190,000 was funded, of which $11,250 was paid directly to legal fees.
As a result, the January 2017 Eagle Back-End Note is now convertible. The January 2017 Eagle Note and the January 2017 Eagle Back-End
Note are treated as stock settled debt under ASC 480 and accordingly the Company is recording a put premium of $153,333 as each
of the notes were funded. As of June 30, 2018, the outstanding principal under the January 2017 Eagle Note along with $14,988
of accrued interest was fully converted. As of June 30, 2019, the outstanding balance of $230,000 under the January 2017 Eagle
Back-End Note along with $33,356 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting
in full repayment of the note and a full reduction of the put premium.
March
1, 2017 Securities Purchase Agreement
On
March 1, 2017, the Company entered into a Securities Purchase Agreement with Eagle Equities, pursuant to which Eagle Equities
purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal amount of $220,500. The first
note (the “March 2017 Eagle Note”) was funded with cash and the second note (the “March 2017 Eagle Back-End
Note”) was initially paid for by an offsetting promissory note issued by Eagle Equities to the Company (the “March
2017 Eagle Note Receivable”). The terms of the March 2017 Eagle Back-End Note require cash funding prior to any conversion
thereunder. Both the March 2017 Eagle Note and the March 2017 Eagle Back-End Note had a maturity date of March 1, 2018, upon which
any outstanding principal and interest was due and payable. The outstanding principal amounts plus accrued interest under both
the March 2017 Eagle Note and the March 2017 Eagle Back-End Note are convertible into shares of common stock, of the Company at
a conversion price equal to 60% of the lowest closing bid price of the common stock for the ten trading days prior to the conversion,
subject to adjustment in certain events. On July 5, 2017, the Company received payment of the March 2017 Eagle Note Receivable
in the amount of $220,500 that offset the March 2017 Eagle Back-End Note. Proceeds from the March 2017 Eagle Note Receivable of
$10,500 were paid directly to legal fees resulting in net cash proceeds of $210,000 received by the Company. As a result, the
March 2017 Eagle Back-End Note is now convertible. The March 2017 Eagle Note and the March 2017 Eagle Back-End Note are treated
as stock settled debt under ASC 480 and accordingly the Company recorded a put premium of $147,000 as each of the notes were funded.
As of June 30, 2018, the outstanding principal balance under the March 2017 Eagle Note along with $20,061 of accrued interest
was fully converted. As of June 30, 2019, the outstanding balance of $220,500 under the March 2017 Back-End Note along with $19,526
of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in a full reduction of the
put premium.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
August
9, 2017 Securities Purchase Agreement
On
August 9, 2017, the Company entered into a Securities Purchase Agreement dated as of August 8, 2017, with Eagle Equities, pursuant
to which Eagle Equities purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal amount
of $200,000. The first note (the “August 2017 Eagle Note”) was funded with cash and the second note (the “August
2017 Eagle Back-End Note”) was initially paid for by an offsetting promissory note issued by Eagle Equities to the Company
(the “August 2017 Eagle Note Receivable”). The terms of the August 2017 Eagle Back-End Note require cash funding prior
to any conversion thereunder. The August 2017 Eagle Note Receivable is due August 8, 2018, unless certain conditions are not met,
in which case both the August 2017 Eagle Back-End Note and the August 2017 Eagle Note Receivable may both be cancelled. Both the
August 2017 Eagle Note and the August 2017 Eagle Back-End Note have a maturity date one year from the date of issuance upon which
any outstanding principal and interest is due and payable. The outstanding principal amounts plus accrued interest under both
the August 2017 Eagle Note and the August 2017 Eagle Back-End Note are convertible into common stock of the Company at a conversion
price equal to 60% of the lowest closing bid price of the common stock for the ten trading days prior to the conversion, subject
to adjustment in certain events. On September 14, 2017, the Company received payment of the August 2017 Eagle Note Receivable
in the amount of $200,000 that offset the August 2017 Eagle Back-End Note. Proceeds from the August 2017 Eagle Note Receivable
of $10,000 were paid directly to legal fees resulting in net cash proceeds of $190,000 received by the Company. As a result, the
August 2017 Eagle Back-End Note is now convertible. The August 2017 Eagle Note and the August 2017 Eagle Back-End Note are treated
as stock settled debt under ASC 480 and accordingly the Company recorded a put premium of $133,333 as each of the notes were funded.
As of June 30, 2018 $120,000 of principal under the August 2017 Eagle Note along with $5,273 in interest was converted. As of
June 30, 2019, the remaining outstanding balance of $80,000 under the August 2017 Eagle Note along with $6,850 of accrued interest
was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment of the note and a full reduction
of the put premium. As of June 30, 2019, the remaining outstanding principal balance of $200,000 under the August 2017 Eagle Back-Note
along with $30,568 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full
repayment of the note and a full reduction of the put premium. The Company is currently in discussions with Eagle Equities to
extend the maturity date.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
October
25, 2017 Securities Purchase Agreement
On
November 3, 2017, the Company entered into a Securities Purchase Agreement dated as of October 25, 2017, with Eagle Equities,
pursuant to which Eagle Equities purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal
amount of $200,000. The first note (the “October 2017 Eagle Note”) was funded with cash and the second note (the “October
2017 Eagle Back-End Note”) was initially paid for by an offsetting promissory note issued by Eagle Equities to the Company
(the “October 2017 Eagle Note Receivable”). The terms of the October 2017 Eagle Back-End Note require cash funding
prior to any conversion thereunder. The October 2017 Eagle Note Receivable is due June 25, 2018, unless certain conditions are
not met, in which case both the October 2017 Eagle Back-End Note and the October 2017 Eagle Note Receivable may both be cancelled.
Both the October 2017 Eagle Note and the October 2017 Eagle Back-End Note have a maturity date one year from the date of issuance
upon which any outstanding principal and interest is due and payable. The amounts cash funded plus accrued interest under both
the October 2017 Eagle Note and the October 2017 Eagle Back-End Note are convertible into common stock, par value $0.001 of the
Company at a conversion price equal to 60% of the lowest closing bid price of the common stock for the ten trading days prior
to the conversion, subject to adjustment in certain events. On December 6, 2017, the Company received payment of the October 2017
Eagle Note Receivable in the amount of $200,000 that offset the October 2017 Eagle Back-End Note. Proceeds from the October 2017
Eagle Note Receivable of $10,000 were paid directly to legal fees resulting in net cash proceeds of $190,000 received by the Company.
As a result, the October 2017 Eagle Back-End Note is now convertible. The October 2017 Eagle Note and the October 2017 Eagle Back-End
Note are treated as stock settled debt under ASC 480 and accordingly the Company recorded a put premium of $133,333 as each of
the notes were funded. As of June 30, 2019, the outstanding principal balance under the October 2017 Eagle Note along with $14,653
of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment of the note
and a full reduction of the put premium.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
December
29, 2017 Securities Purchase Agreement
The
Company entered into an executory contract on December 29, 2017, whereby the Company entered into a securities purchase agreement
with Eagle Equities, pursuant to which Eagle Equities purchased a convertible promissory note (the “December 2017 Eagle
Note”) from the Company in the aggregate principal amount of $532,435, with principal and the interest thereon convertible
into shares of the Company’s common stock at the option of Eagle Equities at any time. The transactions closed on January
2, 2018.
The
December 2017 Eagle Note contains an original issue discount of $25,354 such that the purchase price was $507,081. The maturity
date of the December 2017 Eagle Note was December 29, 2018. The December 2017 Eagle Note bears interest at a rate of 8% per annum,
which interest shall be paid by the Company to Eagle Equities in shares of the Company’s common stock upon receipt of a
notice of conversion by the Company from Eagle Equities at any time. The Company has recorded $20,065 of accrued interest for
the December 2017 Eagle Note and total principal outstanding as of June 30, 2019 under the December 2017 Eagle Note was $171,965
following conversion of $360,470 of principal and $43,535 of accrued interest during the fiscal year ended June 30, 2019. The
Company is currently in discussions with Eagle Equities to extend the maturity date.
Eagle
Equities has the option to convert all or any amount of the principal face amount of the December 2017 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s
common stock as reported on the OTCQB for the ten prior trading days, including the day upon which the Company receives a notice
of conversion from Eagle Equities. The note is treated as stock settled debt under ASC 480 and accordingly the Company recorded
a $354,956 put premium of which $240,313 was released to additional paid in capital following conversion of $360,470 of principal
during the fiscal year to June 30, 2019.
June
14, 2018 Securities Purchase Agreement
Effective
June 14, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “June 2018 Eagle Note”) from the Company in the aggregate principal amount
of $105,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of Eagle Equities any time after the six-month anniversary of the June 2018 Eagle Note. The transactions contemplated by the Purchase
Agreement closed on June 19, 2018. Pursuant to the terms of the Purchase Agreement, Eagle Equities deducted $5,000 from the principal
payment due under the June 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.
The
maturity date of the June 2018 Eagle Note is June 14, 2019. The June 2018 Eagle Note bears interest at a rate of 8% per annum,
which interest shall be paid by the Company to Eagle Equities in shares of the Company’s common stock upon receipt of a
notice of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the June 2018 Eagle Note.
As
of June 30, 2019, the remaining outstanding principal balance of $105,000 under the June 14, 2018 Eagle Equities Note along with
$6,674 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment of
the note and a full reduction of the put premium.
Additionally,
Eagle Equities has the option to convert all or any amount of the principal face amount of the June 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s
common stock as reported on the OTC quotation system for the ten prior trading days, including the day upon which the Company
receives a notice of conversion from Eagle Equities. However, in the event that the Company’s common stock is restricted
by the Depository Trust Company (“DTC”) for any reason, the Conversion Price shall be lowered to 50% of the lowest
closing bid price for the duration of such restriction. If the Company fails to maintain a reserve of shares of its common stock
at least four times the number of shares issuable upon conversion of the Note for at least 60 days after the issuance of the Note,
the conversion discount shall be increased by 10%. Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting
a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities
and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. The June 2018 Eagle Note is treated
as stock settled debt under ASC 480 and accordingly, the Company recorded a $70,000 put premium which was released to additional
paid in capital upon conversion of the note as discussed above.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Upon
an event of default, principal and accrued interest will become immediately payable under the note. Interest on the outstanding
principal shall accrue at a default interest rate of 24% per annum or at the highest rate permitted by law. Further, certain events
of default may trigger penalty and liquidated damage provisions.
July
13, 2018 Securities Purchase Agreement
Effective
July 13, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “July 2018 Note”) from the Company in the aggregate principal amount
of $75,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of Eagle Equities any time after the six month anniversary of the July 2018 Eagle Note. The transaction closed on July 16, 2018
and on July 19, 2018 the Company received proceeds of $71,250 as $3,750 was paid directly to legal fees.
The
maturity date of the July 2018 Eagle Note is July 13, 2019. The July 2018 Eagle Note bears interest at a rate of 8% per annum,
which interest shall be paid by the Company to Eagle Equities in shares of the Company’s common stock upon receipt of a
notice of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the Note.
Additionally,
Eagle Equities has the option to convert all or any amount of the principal face amount of the July 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s
common stock for the ten prior trading days, including the day upon which the Company receives a notice of conversion, subject
to adjustment in certain events. Eagle Equities shall be restricted from effecting a conversion if such conversion, along with
other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the
outstanding shares of the Company’s common stock. The July 2018 Eagle Note is treated as stock settled debt under ASC 480
and accordingly, the Company recorded a $50,000 put premium. The Company has recorded $5,786 of accrued interest and the total
principal outstanding under the July 2018 Eagle Note was $75,000 as of June 30, 2019. The Company had the right to prepay the
July 2018 Eagle Note with certain penalties until January 9, 2019. No prepayment was made as of such date. As a result, the July
2018 Eagle Note is now convertible.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
August
29, 2018 Securities Purchase Agreement
Effective
August 29, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “August 2018 Eagle Note”) from the Company in the aggregate principal
amount of $105,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the August 2018 Eagle Note. The transactions contemplated
by the agreement closed on August 30, 2018 the Company received proceeds of $100,000 as $5,000 was paid directly to legal fees.
The
maturity date of the August 29, 2018 Eagle Note is August 2019. The August 2018 Eagle Note bears interest at a rate of 8% per
annum, which interest shall be paid by the Company to Eagle Equities in shares of the Company’s common stock upon receipt
of a notice of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the August 2018 Eagle
Note.
Additionally,
Eagle Equities has the option to convert all or any amount of the principal face amount of the August 2018 Eagle Note, at any
time, into shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price (the “Closing
Bid Price”) of the Company’s common stock as reported on the OTC Markets quotation system for the ten prior trading
days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the “Conversion Price”).
However, in the event that the Company’s common stock is restricted by the DTC for any reason, the Conversion Price shall
be lowered to 50% of the lowest Closing Bid Price for the duration of such restriction. If the Company fails to maintain a reserve
of shares of its common stock at least four times the number of shares issuable upon conversion of the August 2018 Eagle Note
for at least 60 days after the issuance of the August 28, 2018 Eagle Note, the conversion discount shall be increased by 10%.
Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion if such conversion, along with other
shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the outstanding
shares of the Company’s common stock. The August 2018 Eagle Note is treated as stock settled debt under ASC 480 and accordingly,
the Company recorded a $70,000 put premium. The Company has recorded $7,042 of accrued interest and the total principal outstanding
under the August 2018 Eagle Note was $105,000 as of June 30, 2019.The Company had the right to prepay the August 2018 Eagle Note
with certain penalties until February 25, 2019. No prepayment was made as of such date. As a result, the August 2018 Eagle Note
is now convertible.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Upon
an event of default, interest on the outstanding principal shall accrue at a default interest rate of 24% per annum or at the
highest rate permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
October
2, 2018 Securities Purchase Agreement
Effective
October 2, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “October 2018 Eagle Note”) from the Company in the aggregate principal
amount of $210,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the October 2018 Eagle Note. The transactions contemplated
by the purchase agreement closed on October 3, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted
$10,000 from the principal payment due under the October 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.
The
maturity date of the October 2018 Eagle Note is October 2, 2019. The October 2018 Eagle Note shall bear interest at a rate of
8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice
of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the October 2018 Eagle Note.
Additionally,
Eagle Equities has the option to convert all or any amount of the principal amount of the October 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s
common stock for the ten prior trading days, including the day upon which the Company receives a notice of conversion, subject
to adjustment in certain events. Eagle Equities shall be restricted from effecting a conversion if such conversion, along with
other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the
outstanding shares of the Company’s common stock. The October 2, 2018 Eagle Note is treated as stock settled debt under
ASC 480 and accordingly, the Company recorded a $140,000 put premium. The Company has recorded $12,473 of accrued interest and
the total principal outstanding under the October 2018 Eagle Note was $210,000 as of June 30, 2019. The Company had the right
to prepay the October 2018 Eagle Note with certain penalties until March 31, 2019. No prepayment has been made as of such date.
As a result, the October 2018 Eagle Note is now convertible.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
November
30, 2018 Securities Purchase Agreement
Effective
November 30, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “November 2018 Eagle Note”) from the Company in the aggregate principal
amount of $105,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the November 2018 Eagle Note. The transactions contemplated
by the purchase agreement closed on December 3, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted
$5,000 from the principal payment due under the November 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.
The
maturity date of the November 2018 Eagle Note is November 30, 2019. The November 2018 Eagle Note shall bear interest at a rate
of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice
of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the November 2018 Eagle Note.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Additionally,
Eagle Equities has the option to convert all or any amount of the principal amount of the November 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 61% of the lowest closing bid price (the “Closing Bid
Price”) of the Company’s common stock as reported on the OTC Markets Group, Inc. quotation system for the ten prior
trading days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the “Conversion
Price”). However, in the event that the Company’s common stock is restricted by the Depository Trust Company for any
reason, the Conversion Price shall be lowered to 51% of the lowest Closing Bid Price for the duration of such restriction. If
the Company fails to maintain a reserve of shares of its common stock at least two and a half times the number of shares issuable
upon conversion of the November 2018 Eagle Note for at least 60 days after the issuance of the November 2018 Eagle Note, the conversion
discount shall be increased by 10%. Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion
if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates,
exceeds 4.99% of the outstanding shares of the Company’s common stock. The November 2018 Eagle Note is treated as stock
settled debt under ASC 480 and accordingly, the Company recorded a $67,131 put premium. The Company has recorded $4,879 of accrued
interest and the total principal outstanding under the November 2018 Eagle Note was $105,000 as of June 30, 2019. The November
2018 Eagle Note may be prepaid with certain penalties by the Company until May 29, 2019. No prepayment has been made as of June
30, 2019.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
December
24, 2018 Securities Purchase Agreement
Effective
December 24, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “December 2018 Eagle Note”) from the Company in the aggregate principal
amount of $126,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the December 2018 Eagle Note. The transactions contemplated
by the purchase agreement closed on December 24, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted
$6,000 from the principal payment due under the December 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.
The Company used the net proceeds from the December 2018 Eagle Note to repay an outstanding convertible promissory note before
such note became convertible.
The
maturity date of the December 2018 Eagle Note is December 24, 2019. The December 2018 Eagle Note shall bear interest at a rate
of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice
of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the December 2018 Eagle Note.
Additionally,
Eagle Equities has the option to convert all or any amount of the principal amount of the December 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 61% of the lowest closing bid price (the “Closing Bid
Price”) of the Company’s common stock as reported on the OTC Markets Group, Inc. quotation system for the ten prior
trading days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the “Conversion
Price”). However, in the event that the Company’s common stock is restricted by the Depository Trust Company for any
reason, the Conversion Price shall be lowered to 51% of the lowest Closing Bid Price for the duration of such restriction. If
the Company fails to maintain a reserve of shares of its common stock at least two and a half times the number of shares issuable
upon conversion of the December 2018 Eagle Note for at least 60 days after the issuance of the December 2018 Eagle Note, the conversion
discount shall be increased by 10%. Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion
if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates,
exceeds 4.99% of the outstanding shares of the Company’s common stock. The December 2018 Eagle Note is treated as stock
settled debt under ASC 480 and accordingly, the Company recorded an $80,557 put premium. The Company has recorded $5,220 of accrued
interest and the total principal outstanding under the November 2018 Eagle Note was $126,000 as of June 30, 2019. The December
2018 Eagle Note may be prepaid with certain penalties until June 22, 2019. No prepayment has been made as of June 30, 2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amount outstanding under the above Eagle Equities financing agreements, specifically the August 9, 2017, December
29, 2017, the July 13, 2018, the August 29, 2018, the October 2, 2018, the November 30, 2018 and the December 24, 2018 agreements
was $792,965 and accrued interest totaled $55,675 as of June 30, 2019 and $1,867,935 and accrued interest totaled $107,726 as
of June 30, 2018.
GS
Capital Financing Agreements
May
26, 2017 Securities Purchase Agreement
On
May 26, 2017, the Company entered into a Securities Purchase Agreement with GS Capital Partners, LLC (“GS Capital”),
dated as of May 17, 2017, pursuant to which GS Capital purchased an 8% convertible redeemable junior subordinated promissory note
of the Company in the principal amount of $160,000. The note matured on May 26, 2018, upon which any outstanding principal and
interest is due and payable. The note may be prepaid with certain penalties within 180 days of issuance. The amounts funded plus
accrued interest are convertible at any time after 180 days into common stock at a conversion price equal to 62% of the lowest
closing bid price of the Company’s common stock for the ten trading days prior to the conversion, including the date upon
which the conversion notice was received by the Company, subject to adjustment in certain events. The note is treated as stock
settled debt under ASC 480 and accordingly the Company recorded a $98,065 put premium. As of June 30, 2018, the outstanding principal
under the note along with $7,499 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) and
the repayment resulted in a full reduction of the put premium.
July
24, 2017 Securities Purchase Agreement
On
July 24, 2017, the Company entered into a Securities Purchase Agreement with GS Capital, pursuant to which GS Capital purchased
two 8% convertible redeemable junior subordinated promissory notes, each in the principal amount of $160,000. The first note (the
“July 2017 GS Note”) was funded with cash and the second note (the “July 2017 GS Back-End Note”) was initially
paid for by an offsetting promissory note issued by GS Capital to the Company (the “July 2017 GS Note Receivable”).
The terms of the July 2017 GS Back-End Note required cash funding prior to any conversion thereunder. The July 2017 GS Note Receivable
was due March 24, 2018, unless certain conditions were not met, in which case both the July 2017 GS Back-End Note and the July
2017 GS Note Receivable may both be cancelled. Both the July 2017 GS Note and the July 2017 GS Back-End Note matured on July 24,
2018 upon which any outstanding principal and interest is due and payable. The amounts cash funded plus accrued interest under
both the July 2017 GS Note and the July 2017 GS Back-End Note are convertible into common stock of the Company at a conversion
price equal to 62% of the lowest closing bid price of the common stock for the ten trading days prior to the conversion, subject
to adjustment in certain events. On January 25, 2018, the Company received payment of the July 2017 GS Note Receivable in the
amount of $160,000 that offset the July 2017 GS Back-End Note. Proceeds from the July 2017 GS Note Receivable of $8,000 were paid
directly to legal fees resulting in net cash proceeds of $152,000 received by the Company. As a result, the July 2017 GS Back-End
Note is now convertible. The July 2017 GS Note and the July 2017 GS Back-End Note are treated as stock settled debt under ASC
480 and accordingly the Company recorded a $98,065 put premium as each of the notes was funded.
As
of June 30, 2018, the outstanding principal under the July 2017 GS Note and $8,169 of accrued interest was fully converted into
shares of the Company’s common stock. As of June 30, 2018, $125,000 of principal under the July 2017 GS Back-End Note along
with $3,420 in interest was converted. As of June 30, 2019, the remaining outstanding principal balance of $35,000 under the July
2017 GS Back-End Note along with $5,829 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit)
resulting in full repayment of the note and a full reduction of the put premium.
September
21, 2017 Securities Purchase Agreement
On
September 21, 2017, the Company entered into Securities Purchase Agreements, with GS Capital, dated as of September 12, 2017,
pursuant to which GS Capital purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal
amount of $160,000. The first note (the “September 2017 GS Note”) was funded with cash and the second note (the “September
2017 GS Back-End Note”) was initially paid for by an offsetting promissory note issued by GS Capital to the Company (the
“September 2017 GS Note Receivable”). The terms of the September 2017 GS Back-End Note require cash funding prior
to any conversion thereunder. The September 2017 GS Note Receivable was due March 24, 2018, unless certain conditions are not
met, in which case both the September 2017 GS Back-End Note and the September 2017 GS Note Receivable may both be cancelled. Both
the September 2017 GS Note and the September 2017 GS Back-End Note matured on September 12, 2018, upon which any outstanding principal
and interest is due and payable. The amounts cash funded plus accrued interest under both the September 2017 GS Note and the September
2017 GS Back-End Note are convertible into common stock of the Company at a conversion price equal to 62% of the lowest closing
bid price of the common stock for the ten trading days prior to the conversion, subject to adjustment in certain events. On February
27, 2018, the Company received payment of the September 2017 GS Note Receivable in the amount of $160,000 that offset the September
2017 GS Back-End Note. Proceeds from the September 2017 GS Note Receivable of $8,000 were paid directly to legal fees resulting
in net cash proceeds of $152,000 received by the Company. As a result, the September 2017 GS Back-End Note is now convertible.
The September 2017 GS Note and the September 2017 GS Back-End Note are treated as stock settled debt under ASC 480 and accordingly
the Company recorded a $98,065 put premium as each of the notes was funded.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
As
of June 30, 2018, $30,000 of principal under the September 2017 GS Note along with $1,289 in interest was converted. As of June
30, 2019, the remaining outstanding principal balance of $130,000 under the September 2017 GS Note along with $9,695 of accrued
interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment of the note and a full
reduction of the put premium. As of June 30, 2019, the outstanding principal balance of $160,000 under the September 2017 GS Back-End
note along with $7,119 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full
repayment of the note and a full reduction of the put premium.
March
23, 2018 Securities Purchase Agreement
On
March 23, 2018, the Company entered into a securities purchase agreement with GS Capital, pursuant to which GS Capital purchased
two 8% convertible redeemable junior subordinated promissory notes of the Company, each in the principal amount of $106,000. The
first note (the “March 2018 GS Note”) was funded with cash and the second note (the “March 2018 GS Back-End
Note”) was initially paid for by an offsetting promissory note issued by GS Capital to the Company (the “March 2018
GS Note Receivable”). The terms of the March 2018 GS Back-End Note require cash funding prior to any conversion thereunder.
The March 2018 GS Note Receivable is due November 23, 2018, unless certain conditions are not met, in which case both the March
2018 GS Back-End Note and the March 2018 GS Note Receivable may both be cancelled. Both the March 2018 GS Note and the March 2018
GS Back-End Note mature on March 23, 2019, upon which any outstanding principal and interest is due and payable. The amounts cash
funded plus accrued interest under both the March 2018 GS Note and the March 2018 GS Back-End Note are convertible into shares
of common stock of the Company at a conversion price equal to 62% of the lowest closing bid price of the common stock for the
ten trading days prior to the conversion, subject to adjustment in certain events. On May 31, 2018, the Company received payment
of the March 2018 GS Note Receivable in the amount of $106,000 that offset the March 2018 GS Back-End Note. Proceeds from the
March 2018 GS Note Receivable of $5,300 were paid directly to legal fees resulting in net cash proceeds of $100,700 received by
the Company. As a result, the March 2018 GS Back-End Note is now convertible. The March 2018 GS Note and the March 2018 GS Back-End
Note are treated as stock settled debt under ASC 480 and accordingly the Company recorded a $64,968 put premium as each of the
notes was funded.
As
of June 30, 2019, the outstanding principal balance of $106,000 under the March 2018 GS Note along with $2,765 of accrued interest
was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment of the note and a full reduction
of the put premium. As of June 30, 2019, the outstanding principal balance of $106,000 under the March 2018 GS Back-End note along
with $4,740 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment
of the note and a full reduction of the put premium.
April
13, 2018 Securities Purchase Agreement
On
April 13, 2018, the Company entered into a securities purchase agreement with GS Capital, pursuant to which GS Capital purchased
two 8% unsecured convertible promissory notes (the “April 2018 GS Notes”) from the Company each in the principal amount
of $150,000. The first note (the “April 2018 GS Note”) was funded with cash and the second note (the “April
2018 GS Back-End Note”) was initially paid for by an offsetting promissory note issued by GS Capital to the Company (the
“April 2018 GS Note Receivable”). The terms of the April 2018 Back-End Note require cash funding prior to any conversion
thereunder.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Both
the April 2018 GS Note and the April 2018 GS Back-End Note mature on April 13, 2019, upon which any outstanding principal and
interest thereon is due and payable. The amounts cash funded plus accrued interest under both the April 2018 GS Note and the April
2018 GS Back-End Note are convertibles into shares of the Company’s common stock, at any time after October 13, 2018, at
a conversion price for each share of common stock equal to 61% of the lowest closing bid price of the Company’s common stock
for the ten prior trading days including the day upon which a notice of conversion is received by the Company from GS Capital,
subject to adjustment in certain events. On September 12, 2018, the Company received payment of the April 2018 GS Note Receivable
in the amount of $150,000 that offset the March 2018 GS Back-End Note. Proceeds from the March 2018 GS Note Receivable of $7,500
were paid directly to legal fees resulting in net cash proceeds of $142,500 received by the Company. Both the April 2018 GS Note
and the April 2018 GS Back-End Note are treated as stock settled debt under ASC 480 and accordingly the Company recorded a $95,902
put premium as each of the notes were funded.
As
of June 30, 2019, the outstanding principal balance of $150,000 under the April 2018 GS Note along with $9,632 of accrued interest
was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment of the note and a full reduction
of the put premium. As of June 30, 2019, the outstanding principal balance of $150,000 under the April 2018 GS Back-End Note along
with $1,606 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment
of the note and a full reduction of the put premium.
October
2, 2018 Securities Purchase Agreement
Effective
October 2, 2018, the Company entered into a securities purchase agreement with GS Capital, pursuant to which GS Capital purchased
two 8% unsecured convertible redeemable notes (the “October 2018 GS Notes”) from the Company in the aggregate principal
amount of $212,000, such principal and the interest thereon convertible into shares of the Company’s common stock. The purchase
price of $106,000 of the first note (the “October 2018 GS Note”) was paid in cash by GS Capital on October 3, 2018.
After payment of certain legal fees and expenses, net proceeds to the Company from the October 2018 GS Note totaled $100,700.
The purchase price of $106,000 of the second note (the “October 2018 GS Back End Note”) was initially paid for by
GS Capital issuing to the Company an offsetting $106,000 collateralized secured note (the “October 2018 GS Secured Note”).
The terms of the October 2018 GS Back End Note require cash funding prior to any conversion thereunder, and such cash funding
shall occur on or before June 2, 2019.
Both
the October 2018 GS Note and the October 2018 GS Back End Note, which was funded on February 27, 2019, mature on October 2, 2019,
upon which any outstanding principal and interest thereon is due and payable. The amounts cash funded plus accrued interest under
both the October 2018 GS Note and the October 2018 GS Back End Note are convertibles into shares of the Company’s common
stock, at any time after April 2, 2019, at a conversion price for each share of common stock equal to 61% of the lowest closing
bid price of the Company’s common stock for the ten prior trading days including the day upon which a notice of conversion
is received by the Company from GS Capital, subject to adjustment in certain events. GS Capital shall be restricted from effecting
a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by GS Capital
and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. The October 2018 GS Note and
the October 2018 GS Back End Note are treated as stock settled debt under ASC 480 and accordingly, the Company recorded a total
$67,771 put premium for each note.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
The
October 2018 GS Notes contain certain events of default, upon which principal and accrued interest will become immediately due
and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate
of 24% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted
by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amount outstanding under the above GS Capital financing agreements, specifically the October 2, 2018 agreements,
was $141,820 and accrued interest thereunder totaled $14,247 as of June 30, 2019 and was $687,000 and accrued interest thereunder
totaled $19,877 as of June 30, 2018.
Consulting
Agreement
November
2016 Consulting Agreement
On
November 18, 2016 (the “Effective Date”), the Company entered into a consulting agreement with a certain consultant
(the “Consultant”) for strategic and business advisory services. As compensation for services rendered, the Company
issued Consultant two fully earned $250,000 convertible junior subordinated promissory notes. Both notes have a two-year maturity
date and interest of 10% per annum. Both notes are junior and subordinate in all respects to the existing debt of the Company.
These notes may not be prepaid without the written consent of the Consultant.
The
Company issued the first $250,000 convertible note on November 18, 2016. This note is convertible at a conversion price of the
lesser of $1,250 or 65% of the average of the three lowest 10 trading days prior to the conversion. An aggregate total of $255,757
of this note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value. During the year
ended June 30, 2017, $27,500 of principal and accrued interest of $1,664 was converted into shares of the Company’s common
stock. As of June 30, 2018, the outstanding principal balance of the note along with $19,639 of accrued interest was converted
into shares of the Company’s common stock (See Note 8 – Stockholders’ Deficit).
The
Company issued the second $250,000 convertible note on February 16, 2017. This note is convertible at a conversion price of the
lesser of $1,250 or 65% of the average of the three lowest 10 trading days prior to the conversion. An aggregate total of $409,416
of this note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value. As of June 30,
2018, the outstanding principal balance of the note along with $31,021 of accrued interest was converted into shares of the Company’s
common stock (see Note 8 – Stockholders’ Deficit).
August
10, 2017 Consulting Agreement
On
August 10, 2017, the Company entered into a consulting agreement, retroactive to May 16, 2017, with a certain consultant, pursuant
to which the consultant agreed to provide certain consulting and business advisory services in exchange for a $310,000 junior
subordinated convertible note. The note accrues interest at a rate of 10% per annum and is convertible into common stock at the
lesser of $750 or 65% of the three lowest trades in the ten trading days prior to the conversion. The note was fully earned
upon signing the agreement and matures on August 10, 2019. This note may not be prepaid without the written consent of the consultant.
The Company accrued $155,000 related to this expense at June 30, 2017 and recorded the remaining $155,000 related to this expense
in fiscal year 2018. Upon an event of default, principal and accrued interest will become immediately due and payable under the
note. Additionally, upon an event of default the note would accrue interest at a default interest rate of 18% per annum or the
highest rate of interest permitted by law. The consulting agreement had a three-month term and expired on August 16, 2017. An
aggregate total of $578,212 of this note was bifurcated with the embedded conversion option recorded as a derivative liability
at fair value. During the year ended June 30, 2018, the consultant converted $140,000 of principal and $10,764 of interest. During
the fiscal year ended June 30, 2019, the consultant converted an additional $161,000 of principal and $19,418 of interest (see
Note 8 – Stockholders’ Deficit), such that the remaining principal outstanding and accrued interest under this note
as of June 30, 2019 was $9,000 and $25,917, respectively.
Power
Up Lending Group Financing Agreements
January
22, 2018 Securities Purchase Agreement
Effective
January 22, 2018, the Company entered into a securities purchase agreement with Power Up Lending Group Ltd. (“Power Up”),
pursuant to which Power Up purchased a convertible promissory note (the “January 2018 Power Up Note”) from the Company
in the aggregate principal amount of $153,000, such principal and the interest thereon convertible into shares of the Company’s
common stock at the option of Power Up. The transaction closed on January 25, 2018 and the Company received payment on January
29, 2018 in the amount of $153,000, of which $2,500 was paid directly toward legal fees and $500 to Power Up for due diligence
fees resulting in net cash proceeds of $150,000.
The
maturity date of the January 2018 Power Up Note is January 22, 2019. The January 2018 Power Up Note bears interest at a rate of
8% per annum, which interest may be paid by the Company to Power Up in shares of the Company’s common stock, but shall not
be payable until the January 2018 Power Up Note becomes payable, whether at the maturity date or upon acceleration or by prepayment.
An aggregate total of $180,251 of this note was bifurcated with the embedded conversion option recorded as a derivative liability
at fair value.
Additionally,
Power Up has the option to convert all or any amount of the principal face amount of the January 2018 Power Up Note, starting
on July 21, 2018 and ending on the later of the maturity date and the date the Default Amount, which is an amount equal to 150%
of an amount equal to the then outstanding principal amount of the January 2018 Power Up Note plus any interest accrued, is paid
if an event of default occurs, for shares of the Company’s common stock at the then-applicable conversion price.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
The
conversion price for the January 2018 Power Up Note shall be $32.50, subject to certain Market Price (as defined below)
adjustment. If the Market Price is greater than or equal to $50.00, the conversion price shall be the greater of 65% of
the Market Price (“Variable Conversion Price”) and $32.50. In the event Market Price is less than $50.00,
the conversion price shall be the Variable Conversion Price. As defined in the January 2018 Power Up Note, the “Market
Price” shall be the average of the lowest three closing bid prices during the ten day trading period prior to and including
the day the Company receives a notice of conversion from Power Up on the electronic quotation system or applicable principal securities
exchange or trading market or, if no closing bid price of such security is available in any of the foregoing manners, the average
of the closing bid prices of any market makers for such security that are listed in the “pink sheets” during the ten
prior trading days, including the day upon which the Company receives a notice of conversion from Power Up. Notwithstanding the
foregoing, Power Up shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s
common stock beneficially owned by Power Up and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s
common stock.
During
the fiscal year ended June 30, 2019, the outstanding principal balance of $153,000 along with $6,185 of accrued interest was converted
into shares of the Company’s common stock (See Note 8 – Stockholders’ Deficit) resulting in a full repayment
of the note.
March
5, 2018 Securities Purchase Agreement
On
March 5, 2018, the Company entered into a securities purchase agreement with Power Up, pursuant to which Power Up purchased a
convertible promissory note (the “March 2018 Power Up Note”) from the Company in the aggregate principal amount of
$53,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option of
Power Up. The Company received payment on March 12, 2018 in the amount of $53,000, of which $2,500 was paid directly toward legal
fees and $500 to Power Up for due diligence fees resulting in net cash proceeds of $50,000.
The
maturity date of the March 2018 Power Up Note is March 5, 2019. The March 2018 Power Up Note shall bear interest at a rate of
8% per annum, which interest may be paid by the Company to Power Up in shares of the Company’s common stock, but shall not
be payable until the March 2018 Power Up Note becomes payable, whether at the maturity date or upon acceleration or by prepayment.
An aggregate total of $65,231 of this note was bifurcated with the embedded conversion option recorded as a derivative liability
at fair value.
Additionally,
Power Up has the option to convert all or any amount of the principal face amount of the March 2018 Power Up Note, starting on
September 1, 2018 and ending on the later of the maturity date and the date the Default Amount, which is an amount equal to 150%
of an amount equal to the then outstanding principal amount of the March 2018 Power Up Note plus any interest accrued, is paid
if an event of default occurs, for shares of the Company’s common stock at the then-applicable conversion price.
The
conversion price for the March 2018 Power Up Note shall be $32.50, subject to certain Market Price (as defined below) adjustment.
If the Market Price is greater than or equal to $50.00, the conversion price shall be the greater of 65% of the Market Price (the
“Variable Conversion Price”) and $32.50. In the event Market Price is less than $50.00, the conversion price shall
be the Variable Conversion Price. As defined in the March 2018 Power Up Note, the “Market Price” shall be the average
of the lowest three closing bid prices during the ten day trading period prior to and including the day the Company receives a
notice of conversion from Power Up on the electronic quotation system or applicable principal securities exchange or trading market
or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices
of any market makers for such security that are listed in the “pink sheets” during the ten prior trading days, including
the day upon which the Company receives a notice of conversion from Power Up. Notwithstanding the foregoing, Power Up shall be
restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially
owned by Power Up and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock.
The
Company had the right to prepay the March 2018 Power Up Note within 180 days of issuance with certain penalties. On August 28,
2018, the Company prepaid the outstanding principal balance of $53,000 and related accrued interest of $2,033 that was due under
the March 5, 2018 Power Up Note and the note was deemed fully satisfied. The Company incurred a penalty in the amount of $20,362
as a result of the pre-payment.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
May
15, 2018 Securities Purchase Agreement
On
May 15, 2018, the Company entered into a securities purchase agreement with Power Up, pursuant to which Power Up purchased a convertible
promissory note (the “May 2018 Power Up Note”) from the Company in the aggregate principal amount of $53,000, such
principal and the interest thereon convertible into shares of the Company’s common stock at the option of Power Up. The
Company received payment on May 18, 2018 in the amount of $53,000, of which $2,500 was paid directly toward legal fees and $500
to Power Up for due diligence fees resulting in net cash proceeds of $50,000.
The
maturity date of the May 2018 Power Up Note is May 5, 2019. The May 2018 Power Up Note shall bear interest at a rate of 8% per
annum, which interest may be paid by the Company to Power Up in shares of common stock, but shall not be payable until the May
2018 Power Up Note becomes payable, whether at the maturity date or upon acceleration or by prepayment. An aggregate total of
$33,744 of this note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value.
Additionally,
Power Up had the option to convert all or any amount of the principal face amount of the May 2018 Power Up Note, starting on November
11, 2018 and ending on the later of the maturity date and the date the Default Amount, which is an amount equal to 150% of an
amount equal to the then outstanding principal amount of the May 2018 Power Up Note plus any interest accrued, is paid if an event
of default occurs, for shares of the Company’s common stock at the then-applicable conversion price.
The
conversion price for the May 2018 Power Up Note shall be $32.50, subject to certain Market Price (as defined below) adjustment.
If the Market Price is greater than or equal to $50.00, the conversion price shall be the greater of 65% of the Market Price (“Variable
Conversion Price”) and $32.50. In the event Market Price is less than $50.00, the conversion price shall be the Variable
Conversion Price. As defined in the May 2018 Power Up Note, the “Market Price” shall be the average of the lowest
three closing bid prices during the ten day trading period prior to and including the day the Company receives a notice of conversion
from Power Up on the electronic quotation system or applicable principal securities exchange or trading market or, if no closing
bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers
for such security that are listed in the “pink sheets” during the ten prior trading days, including the day upon which
the Company receives a notice of conversion from Power Up. Notwithstanding the foregoing, Power Up was restricted from effecting
a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Power Up and
its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock.
The
Company had the right to prepay the May 2018 Power Up Note within 180 days of issuance with certain penalties. On November 7,
2018, the Company prepaid the outstanding principal balance of $53,000 and related accrued interest of $1,696 that was due under
the May 2018 Power Up Note and the note was deemed fully satisfied. The Company incurred a penalty in the amount of $20,715 as
a result of the pre-payment.
August
28, 2018 Securities Purchase Agreement
On
August 28, 2018, the Company entered into a securities purchase agreement with Power Up, pursuant to which Power Up purchased
a convertible promissory note (the “August 2018 Power Up Note”) from the Company in the aggregate principal amount
of $53,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of Power Up. The Company received payment on August 29, 2018 in the amount of $53,000, of which $2,500 was paid directly toward
legal fees and $500 to Power Up for due diligence fees resulting in net cash proceeds of $50,000.
The
maturity date of the August 2018 Power Up Note is August 28, 2019 (the “Maturity Date”). The August 2018 Power Up
Note bears interest at a rate of 8% per annum, which interest may be paid by the Company to Power Up in shares of the Company’s
common stock, but shall not be payable until the August 2018 Power Up Note becomes payable, whether at the Maturity Date or upon
acceleration or by prepayment, as described below.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Additionally,
Power Up has the option to convert all or any amount of the principal face amount of the August 2018 Power Up Note, starting on
February 24, 2019 at a conversion price of shall be $32.50, subject to certain Market Price (as defined below) adjustment. If
the Market Price is greater than or equal to $50.00, the conversion price shall be the greater of 65% of the Market Price (“Variable
Conversion Price”) and $32.50. In the event Market Price is less than $50.00, the conversion price shall be the Variable
Conversion Price. As defined in the August 2018 Power Up Note, the “Market Price” shall be the average of the lowest
three closing bid prices during the ten day trading period prior to and including the day the Company receives a notice of conversion
from Power Up on the electronic quotation system or applicable principal securities exchange or trading market or, if no closing
bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers
for such security that are listed in the “pink sheets” during the ten prior trading days, including the day upon which
the Company receives a notice of conversion from Power Up. Notwithstanding the foregoing, Power Up shall be restricted from effecting
a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Power Up and
its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. An aggregate total of $396,380 of
this note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value (See Note 12 - Derivative
Financial Instruments and Fair Value Measurements).
Upon
an event of default, interest on the outstanding principal shall accrue at a default interest rate of 22% per annum. In the event
that the Company fails to deliver to Power Up shares of common stock issuable upon conversion of principal or interest under the
August 2018 Power Up Note within three business days of a notice of conversion by Power Up, the Company shall incur a penalty
of $500, provided, however, that such fee shall not be due if the failure to deliver the shares is a result of a third party such
as the transfer agent.
On
February 25, 2019, the Company prepaid the outstanding principal balance of $53,000 and related accrued interest of $395 that
was due under the August 2018 Power Up Note and the note was deemed fully satisfied. The Company incurred a penalty in the amount
of $22,047 as a result of the pre-payment.
JSJ
Investments, Inc. Financing Agreement
June
26, 2018 Securities Purchase Agreement
Effective
June 26, 2018, the Company issued a convertible promissory note (the “June 2018 JSJ Note”) to JSJ Investments, Inc.
(“JSJ”) in the aggregate principal amount of $113,000, with principal and the interest thereon convertible into shares
of the Company’s common stock at the option of JSJ any time after 180 days of issuance. At the time of closing on June 27,
2018, JSJ deducted $3,000 from the principal payment due under the June 2018 JSJ Note to be applied to its legal expenses, such
that the Company received aggregate net proceeds of $110,000 at closing.
The
maturity date of the June 2018 JSJ Note is June 26, 2019, unless extended for up to one year at JSJ’s discretion (the “Maturity
Date”). The June 2018 JSJ Note bears interest at a rate of 8% per annum, and after the maturity date shall compound quarterly.
Additionally,
JSJ had the option to convert all or any amount of the principal face amount of the June 2018 JSJ Note, at any time beginning
December 23, 2018, for shares of the Company’s common stock at the conversion prices set forth in the note. The June 2018
JSJ Note was treated as stock settled debt under ASC 480 and accordingly the Company recorded a $60,846 put premium.
The
Company had the right to prepay the June 2018 JSJ Note until December 23, 2018. If the June 2018 JSJ Note was prepaid within 90
days of the issuance date, then the prepayment premium shall be 135% of the face amount plus any accrued interest; if the JSJ
Note was prepaid after 90 days from the issuance date, but prior to 121 days from the issuance date, then the prepayment premium
shall be 140% of the face amount plus any accrued interest; and if the June 2018 JSJ Note was prepaid after 120 days from the
issuance date, but prior to 180 days from the issuance date, then the prepayment premium shall be 145% of the face amount plus
any accrued interest.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
On
December 24, 2018, the Company prepaid the outstanding principal balance of $113,000 and related accrued interest of $4,508 that
was due under the June 2018 JSJ Note and the note was deemed fully satisfied. The Company incurred a penalty in the amount of
$51,380 as a result of the pre-payment.
Coventry
Enterprises, LLC Financing Agreement
June
29, 2018 Securities Purchase Agreement
Effective
June 29, 2018, the Company entered into a securities purchase agreement with Coventry Enterprises, LLC (“Coventry Enterprises”),
pursuant to which Coventry Enterprises purchased two 8% unsecured convertible promissory notes from the Company in the aggregate
principal amount of $200,000, such principal and the interest thereon convertible into shares of the Company’s common stock
at the option of Coventry Enterprises.
The
purchase price of $100,000 of the first note (the “July 2018 Coventry Note”) was paid in cash by Coventry Enterprises
on July 2, 2018. After payment of certain legal fees and expenses, net proceeds to the Company from the First Note totaled $95,000.
The purchase price of $100,000 of the second note (the “July 2018 Coventry Back-End Note”) was initially paid for
by the issuance of an offsetting $100,000 collateralized secured note issued to Company by Coventry Enterprises (the “July
2018 Coventry Enterprises Note”). The terms of the July 2018 Coventry Back-End Note require cash funding prior to any conversion
thereunder. The July 2018 Coventry Back-End Note is due February 29, 2019, unless certain conditions are not met, in which case
both the July 2018 Coventry Back-End Note and the July 2018 Coventry Enterprise Note may both be cancelled. On September 6, 2018,
the Company received payment of the July 2018 Coventry Enterprise Note in the amount of $100,000 that offset the July 2018 Coventry
Back-End Note. Proceeds from the July 2018 Coventry Enterprise Note of $5,000 were paid directly to legal fees resulting in net
cash proceeds of $95,000 received by the Company. As a result, the July 2018 Coventry Back-End Note is now convertible.
The
maturity date of the July 2018 Coventry Note and the July 2018 Coventry Back-End Note is June 29, 2019. The outstanding principal
amounts plus accrued interest under both the July 2018 Coventry Note and the July 2018 Coventry Back-End Note are convertible
into shares of common stock of the Company at a conversion price equal to 61% of the lowest closing bid price of the Company’s
common stock as reported on the exchange or quotation system on which the Company’s shares are then traded for the ten prior
trading days including the day upon which a notice of conversion is received by the Company from Coventry Enterprises. Coventry
Enterprises shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s
common stock beneficially owned by Coventry Enterprises and its affiliates, exceeds 9.9% of the outstanding shares of the Company’s
common stock. Both the July 2018 Coventry Note and the July 2018 Coventry Back-End Notes are treated as stock settled debt under
ASC 480 and accordingly the Company recorded a $63,934 put premium as each of the notes was funded.
As
of June 30, 2019, the outstanding principal balance of $100,000 under the June 2018 Coventry Enterprises Note along with $7,479
of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment of the note
and a full reduction of the put premium. As of June 30, 2019, the outstanding principal balance of $100,000 under the June 2018
Coventry Enterprises Back-End Note along with $8,137 of accrued interest was fully converted (see Note 8 – Stockholders’
Deficit) resulting in full repayment of the note and a full reduction of the put premium. The July 2018 Coventry Note may no longer
be prepaid by the Company. The July 2018 Coventry Back-End Note may not be prepaid by the Company as well.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
Redstart
Holdings Corp Financing Agreement
May
23, 2019 Securities Purchase Agreement
Effective
May 23, 2019, the Company issued a convertible promissory note (the “May 23 Redstart Holdings Note”) to Redstart Holdings
Corp (“Redstart Holdings”) in the aggregate principal amount of $133,000, with principal and the interest thereon
convertible into shares of the Company’s common stock at the option of Redstart Holdings any time after 180 days of issuance.
At the time of closing on May 31, 2019, Redstart Holdings deducted $3,000 from the principal payment due under the May 2019 Redstart
Holdings Note to be applied to its legal expenses, such that the Company received aggregate net proceeds of $130,000 at closing.
The
maturity date of the May 2019 Redstart Holdings Note is May 23, 2020 and bears interest at a rate of 8% per annum.
Additionally,
Redstart Holdings has the option to convert all or any amount of the principal face amount of the May 2019 Redstart Note, starting
on November 19, 2019 at a conversion price subject to certain Market Price (as defined below) adjustment. If the Market Price
is greater than or equal to $50.00, the conversion price shall be the greater of 65% of the Market Price (“Variable Conversion
Price”) and $32.50. In the event Market Price is less than $50.00, the conversion price shall be the Variable Conversion
Price. As defined in the May 2019 Redstart Holdings Note, the “Market Price” shall be the average of the lowest three
closing bid prices during the ten day trading period prior to and including the day the Company receives a notice of conversion
from Redstart Holdings on the electronic quotation system or applicable principal securities exchange or trading market or, if
no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any
market makers for such security that are listed in the “pink sheets” during the ten prior trading days, including
the day upon which the Company receives a notice of conversion from Redstart Holdings. Notwithstanding the foregoing, Redstart
Holdings shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common
stock beneficially owned by Redstart Holdings and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s
common stock. An aggregate total of $166,564 of this note was bifurcated with the embedded conversion option recorded as a derivative
liability at fair value (See Note 12 - Derivative Financial Instruments and Fair Value Measurements).
The
Company had the right to prepay the May 2019 Redstart Holdings Note until November 19, 2019. If the May 2019 Redstart Holdings
Note was prepaid within 90 days of the issuance date, then the prepayment premium shall be 115% of the face amount plus any accrued
interest; if the May 2019 Redstart Holdings Note was prepaid after 91 days from the issuance date, but prior to 121 days from
the issuance date, then the prepayment premium shall be 120% of the face amount plus any accrued interest; and if the May 2019
Redstart Holdings Note was prepaid after 121 days from the issuance date, but prior to 150 days from the issuance date, then the
prepayment premium shall be 125% of the face amount plus any accrued interest; and if the May 2019 Redstart Holdings Note was
prepaid after 151 days from the issuance date, but prior to 180 days from the issuance date, then the prepayment premium shall
be 129% of the face amount plus any accrued interest.
The
total principal amount outstanding under the above Redstart Holdings financing agreement, specifically the May 23, 2019 agreement,
was $133,000 as of June 30, 2019 and accrued interest thereunder totaled $1,137.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
The
Company recorded $180,000 and $543,744 of debt discounts related to the above note issuances during the years ended June 30, 2019
and 2018, respectively. The debt discounts are being amortized over the term of the debt.
Amortization
of all debt discounts for the years ended June 30, 2019 and 2018 was $389,673 and $853,459, respectively.
See
Note 13 – Subsequent Events for information about financing arrangements post June 30, 2019.
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, the Company was incorporated in the state of Delaware. In January 2011, the Company acquired all of the outstanding
shares of Propanc PTY LTD on a one-for-one basis with Propanc PTY LTD becoming a wholly owned subsidiary of the Company. 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, 2013 through June 30, 2019.
The
reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended
June 30, 2019 and 2018 is as follows:
|
|
Year
Ended
|
|
US
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
Income
before Income taxes
|
|
$
|
(5,758,369
|
)
|
|
$
|
(7,039,155
|
)
|
|
|
|
|
|
|
|
|
|
Taxes
under statutory US tax rates
|
|
$
|
(1,209,258
|
)
|
|
$
|
(1,478,222
|
)
|
Increase
(decrease) in valuation allowance
|
|
|
1,394,444
|
|
|
|
1,418,349
|
|
Change
in Federal tax rates
|
|
|
-
|
|
|
|
(99,013
|
)
|
Foreign
tax rate differential
|
|
|
(186,286
|
)
|
|
|
(5,043
|
)
|
Other
|
|
|
1,100
|
|
|
|
(114,391
|
)
|
Income
tax (expense) benefit
|
|
$
|
-
|
|
|
$
|
(278,320
|
)
|
On
December 22, 2017, the Tax Cuts and Jobs Act (“The Act”), was signed into law by President Trump. The Act includes
a number of provisions, including the lowering of the U.S. corporate tax rate from 34 percent to 21 percent, effective January
1, 2018 and the establishment of a territorial-style system for taxing foreign-source income of domestic multinational corporations.
In December 2017, the SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Act (“SAB118”),
which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment. The
Company remeasured its deferred tax assets and liabilities as of June 30, 2018 applying the reduced corporate income tax rate
and recorded a decrease to the deferred tax assets of $416,339, with a corresponding adjustment to the valuation allowance.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
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 deferred tax assets
and liabilities consist of the following:
|
|
Year
Ended
|
|
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
Deferred
tax assets
|
|
|
|
|
|
|
|
|
Warrant
Derivative Liability
|
|
$
|
7,403
|
|
|
$
|
7,403
|
|
Provision
for Annual Leave
|
|
|
96,759
|
|
|
|
44,969
|
|
Superannuation
|
|
|
9,473
|
|
|
|
4,041
|
|
Prepaid
Investor Services
|
|
|
414,396
|
|
|
|
353,553
|
|
Capital
Raising Costs
|
|
|
-
|
|
|
|
23,559
|
|
Legal
Costs
|
|
|
91,961
|
|
|
|
23,885
|
|
Intellectual
Property
|
|
|
41,686
|
|
|
|
11,760
|
|
Patent
Costs
|
|
|
171,195
|
|
|
|
171,195
|
|
Formation
Expense
|
|
|
7,208
|
|
|
|
7,208
|
|
Net
Operating Loss CF
|
|
|
6,573,215
|
|
|
|
5,668,743
|
|
Foreign
Exchange Loss (OCI)
|
|
|
(39,379
|
)
|
|
|
(39,379
|
)
|
Revalue
of derivative liability
|
|
|
519,151
|
|
|
|
-
|
|
Stock
Based Compensation
|
|
|
51,481
|
|
|
|
-
|
|
Total
Deferred tax assets
|
|
$
|
7,944,549
|
|
|
$
|
6,276,937
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
|
|
|
|
|
|
|
R&D
|
|
$
|
(139,833
|
)
|
|
$
|
-
|
|
Capital
Raising Costs
|
|
|
(133,335
|
)
|
|
|
-
|
|
Total
deferred tax liabilities
|
|
$
|
(273,168
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
deferred tax assets (liabilities)
|
|
$
|
7,671,381
|
|
|
$
|
6,276,937
|
|
Valuation
allowance
|
|
|
(7,671,381
|
)
|
|
|
(6,276,937
|
)
|
Net
deferred tax assets (liabilities)
|
|
$
|
-
|
|
|
$
|
-
|
|
At
June 30, 2019, the Company had U.S. net operating loss carry forwards of $2,942,144 that may be offset against future taxable
income, subject to limitation under IRC Section 382. Of the $2.9 million, of Federal net operating loss carryforwards, $2.7 million
begin to expire in 2030. The remaining balance of $0.2 million is limited in annual usage of 80% of current years taxable income,
but do not have an expiration. At June 30, 2019, the Company had Australia net operating loss carry forwards of approximately
$21,655,871 million which can be carried forward without expiration. No tax benefit has been reported in the June 30, 2019 and
2018 consolidated financial statements due to the uncertainty surrounding the realizability of the benefit, based on a more likely
than not criteria and in consideration of available positive and negative evidence.
The
Company applied the “more-likely-than-not” recognition threshold to all tax positions taken or expected to be taken
in a tax return, which resulted in no unrecognized tax benefits as of June 30, 2019 and 2018, respectively.
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
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, 2019, the Company had no unrecognized tax benefits. There were no changes in the
Company’s unrecognized tax benefits during the years ended June 30, 2019 and 2018. The Company did not recognize any interest
or penalties during fiscal 2019 or 2018 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
Increase
in Authorized Shares of Common Stock and Reverse Stock Split
On
September 21, 2018, the Company filed a Certificate of Amendment to its Certificate of Incorporation to increase the number of
authorized shares of its common stock from 400,000,000 to 4,000,000,000, which was approved by the Company’s board of directors
and holders of a majority of the Company’s voting stock on August 28, 2018.
On
June 24, 2019, the Company effected a one-for-five hundred (1:500) reverse stock split whereby the Company (i) decreased the number
of authorized shares of common stock, $0.001 par value per share, to 100,000,000 and (ii) decreased by a ratio of one-for-five
hundred (1:500) the number of retroactively issued and outstanding shares of common stock. Proportional adjustments for the reverse
stock split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share
data and amounts have been restated as of the earliest period, presented in the consolidated financial statements to reflect the
reverse stock split.
Preferred
Stock
The
total number of shares of preferred stock that the Company is authorized to issue is 1,500,005, $0.01 par value per share. These
preferred shares have no rights to dividends, profit sharing or liquidation preferences.
Of
the total preferred shares authorized, 500,000 have been designated as Series A Preferred Stock (“Series A Preferred Stock”),
pursuant to the Certificate of Designation filed with the Secretary of State of the State of Delaware on December 9, 2014. James
Nathanielsz, the Company’s Chief Executive Officer and Chief Financial Officer, beneficially owns all of the shares of Series
A Preferred Stock via North Horizon Pty Ltd., which entitles him, as a holder of Series A Preferred Stock, to vote on all matters
submitted or required to be submitted to a vote of the Company’s stockholders, except election and removal of directors,
and each share of Series A Preferred Stock entitles him to two votes per share of Series A Preferred Stock. North Horizon Pty
Ltd. is a Nathanielsz Family Trust. Mr. James Nathanielsz, the Chief Executive Officer, Chief Financial Officer and a director
of our Company, has voting and investment power over these shares. 500,000 shares of Series A Preferred Stock are issued and outstanding
as of June 30, 2019 and 2018.
Of
the total preferred shares authorized, pursuant to the Certificate of Designation filed with the Secretary of State of the State
of Delaware on June 16, 2015, up to five shares have been designated as Series B Preferred Stock (“Series B Preferred Stock”).
Each holder of outstanding shares of Series B Preferred Stock is entitled to voting power equivalent to the number of votes equal
to the total number of shares of common stock outstanding as of the record date for the determination of stockholders entitled
to vote at each meeting of stockholders of the Company and entitled to vote on all matters submitted or required to be submitted
to a vote of the stockholders of the Company. One share of Series B Preferred Stock is issued and outstanding as of June 30, 2019
and 2018. Mr. Nathanielsz directly beneficially owns such one share of Series B Preferred Stock.
No
shares of Series A Preferred Stock or Series B Preferred Stock were issued in fiscal years 2019 or 2018.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Common
Stock
Shares
Issued for Services
Fiscal
2018:
On
August 1, 2017, the Company received an invoice for $30,000 from a third party for six months of consulting services provided
to the Company during the period of February 1, 2017 through July 31, 2017. The invoice was payable in shares of the Company’s
common stock. The Company recorded $25,000 in consulting fees related to this invoice for the year ended June 30, 2017 and the
balance was recorded in fiscal year 2018. On February 15, 2018, the Company issued 469 shares of its common stock and an additional
loss on settlement of debt was recorded of $68,438 based on the fair market value on July 31, 2017, when the shares were fully
earned, of $210 per share.
On
December 29, 2017, the Company entered into a one-year consulting agreement with a certain consultant (the “Consultant”)
for certain consulting, advisory and media services to be provided to the Company. As compensation for such services, the Company
agreed to pay the consultant (i) an hourly fee of $950 per hour, for up to $71,250 of time-based services; (ii) $9,772 for the
preparation of certain marketing materials; (iii) an upfront fee of 1,000 restricted shares of the Company’s common stock,
with up to 1,500 additional shares to be issued on the six month anniversary of the date of the consulting agreement at the Company’s
sole discretion, and (iv) a marketing bonus equal to 6% of the value of any: (x) business collaboration with the Company which
is identified or introduced by the Consultant; or (y) joint venture, licensing, collaboration or similar monetization or strategic
transaction (other than any capital-raising transaction) which is identified or introduced by the Consultant. The Company could,
in its sole discretion, pay any of the aforementioned fees in cash or shares of the Company’s common stock. If such fees
are paid in stock, the number of shares to be paid was to be calculated by dividing the dollar amount of time (or value of the
transaction, as the case may be) invoiced in such pay period by, as of the applicable calculation date, the most recent price
at which the Company has sold shares of its common stock (or securities convertible into common stock) in a bona fide public or
private financing including third party investors. The Company valued the 1,000 shares based on the market price on the agreement
date of $70 and will recognize $70,000 of consulting expense through the term of the agreement. For the year ended June 30, 2018,
the Company recorded $35,287 of expense related to this agreement. On February 15, 2018, the Company issued the 1,000 shares to
the Consultant.
On
February 1, 2018, the Company received an invoice for $30,000 from a third party for six months of consulting services provided
to the Company during the period of August 1, 2017 through January 31, 2018. The invoice was payable in shares of the Company’s
common stock. The Company issued 469 shares on February 15, 2018 and recorded $30,000 in consulting fees during fiscal 2018. An
additional loss on settlement of debt was recorded of $2,813 based on the fair market value on January 31, 2018, when the shares
were fully earned, or $70 per share.
Fiscal
2019:
On
December 6, 2018, the Company entered into an agreement with a certain consultant to provide services over a six-month period
beginning November 1, 2018 and ending May 1, 2019 in exchange for 4,000 shares of the Company’s common stock. On December
27, 2018, the Company issued the 4,000 shares of the Company’s common stock valued at $10.00 per share to such consultant,
or $39,000, which will be amortized over the term of the agreement. The Company recorded $39,000 of consulting expense with respect
to such shares of its common stock during the year ended June 30, 2019.
On
November 20, 2018, the Company’s Board of Directors authorized the issuance of 2,000 shares of the Company’s common
stock in connection with certain legal services provided to the Company. On November 28, 2018, the Company issued such 2,000 shares
of its common stock valued at $15.00, or $30,000.
In
March 2019 and effective as of December 21, 2018, the Company entered into a certain consulting services agreement with a certain
consultant to provide services over a twelve-month period beginning December 21, 2018 in exchange for issuance of two tranches
of 10,000 shares (subject to certain true-up provisions), for services to be rendered between December 21, 2018 and March 20,
2019, and 6,000 shares (subject to certain true-up provisions), for services to be rendered between March 21, 2019 and December
20, 2019 of the Company’s common stock. On May 8, 2019, the Company terminated the agreement with the consent of the consultant.
The consultant agreed that the issuance of the first tranche of 10,000 shares (including the true-up provision) together with
cash payments already made by the Company to the consultant fully satisfied the obligations (past and future) that the Company
has under the consulting agreement including any claims under the true-up provisions of the agreement. In March 2019, the Company
issued the first tranche of 10,000 shares of its common stock valued at $10.00 per share based on the quoted trading price to
the consultant, or $100,000. The Company recorded $100,000 of consulting expense with respect to such shares of its common stock
during the fiscal year ended June 30, 2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Restricted
Stock Units
Pursuant
to employment agreements dated in May 2019 (see Note 10), the Company granted an aggregate of 78,000 and 39,000 restricted stock
unit to the Company’s Chief Executive Officer and Chief Scientific Officer, respectively. The total 117,000 restricted stock
units are subject to vesting terms as defined in the employment agreements. The 117,000 restricted stock units were valued at
the fair value of $4.25 per unit or $497,240 based on the quoted trading price on the date of grant. During the year ended June
30, 2019, the Company recognized stock-based compensation of $31,077 related to vested restricted stock units. There were $466,163
unrecognized restricted stock units expense as of June 30, 2019.
Shares
Issued for Cash
October
5, 2018 Equity Purchase Agreement
On
October 5, 2018 (the “L2 Closing Date”), the Company entered into an Equity Purchase Agreement (the “L2 Purchase
Agreement”) with L2 Capital, LLC (“L2 Capital”) pursuant to which L2 Capital committed to purchase up to $10,000,000
(the “Maximum Amount”) of the Company’s common stock (the “L2 Financing”). On the L2 Closing Date,
the Company issued 7,701 shares of its common stock to L2 Capital as a commitment fee (the “Commitment Shares”), at
a fair market value of $41.30 or $318,059, which was recorded as deferred offing costs and were amortized as a percentage of the
Maximum Amount on a pro-rata conversion amount. Additionally, the proceeds received from the first put notice were net of $15,000
in legal fees and were recorded as deferred offering costs. Total amortization expense for the fiscal year ended June 30, 2019
was $333,059. The Commitment Shares are subject to a lock-up/leak-out limitation as described below. In connection with the L2
Financing, on the L2 Closing Date, the Company and L2 Capital also entered into a Registration Rights Agreement (the “L2
Registration Rights Agreement”, and together with the Purchase Agreement, the “L2 Transaction Documents”). The
Company received net proceeds from the sale of the Put Shares directly to the Investor pursuant to the Purchase Agreement, however,
the Company did not receive any proceeds from the resale of the Put Shares by L2 Capital thereafter.
Upon
filing and effectiveness of the Company’s Registration Statement on Form S-1, which was declared effective by the SEC on
October 30, 2018, and provided other closing conditions are met, from time to time over the term of the Purchase Agreement, the
Company had the right, but not the obligation, to direct the Investor to purchase shares of the Company’s common stock (the
“L2 Put Shares”) in a maximum amount of $1,000,000, provided that the number of L2 Put Shares did not exceed 250%
of the Average Daily Trading Volume (as defined in the L2 Purchase Agreement). At any time and from time to time during the 3-year
term of the L2 Purchase Agreement (the “Commitment Period”), the Company had the right to deliver a notice L2 Capital
(the “L2 Put Notice”) and was obligated to deliver the Put Shares to Investor via DWAC (as defined in the L2 Purchase
Agreement) within two trading days. The purchase price (the “L2 Purchase Price”) for the Put Shares was 87.5% of the
one lowest daily volume weighted average price on the Principal Market (as defined in the L2 Purchase Agreement) (as reported
by Bloomberg Finance L.P.) during the five trading days immediately following the date L2 Capital receives the L2 Put Shares via
DWAC associated with the applicable Put Notice (the “L2 Valuation Period”). The closing of a Put Notice occurred within
one trading day following the end of the respective L2 Valuation Period, whereby (i) L2 Capital was obligated to deliver the L2
Investment Amount (as defined below) to the Company by wire transfer of immediately available funds and (ii) L2 Capital was obligated
to return surplus L2 Put Shares if the value of the L2 Put Shares delivered to L2 Capital caused the Company to exceed the maximum
commitment amount. The Company could not deliver another L2 Put Notice to L2 Capital within ten trading days of a prior Put Notice.
The “L2 Investment Amount” means the aggregate L2 Purchase Price for the L2 Put Shares purchased by L2 Capital, minus
clearing costs due to L2 Capital’s broker or to the Company’s transfer agent for the issuance of the L2 Put Shares
(the “L2 Clearing Costs”).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
The
right of the Company to issue and sell the L2 Put Shares to L2 Capital was subject to the satisfaction of certain closing conditions,
including, but not limited to, (i) the Company’s Registration Statement on Form S-1 registering for resale by the Investor
of the L2 Put Shares and Commitment Shares continuing to be effective as was declared by the U.S. Securities and Exchange Commission
(the “SEC”) on October 30, 2018, (ii) accuracy of the Company’s representations and warranties, (iii) the Company’s
performance under the L2 Purchase Agreement in all material respects, (iv) no suspension of trading or delisting of the Company’s
common stock, (v) limitation of L2 Capital’s beneficial ownership to no more than 9.99%, (vi) the Company maintaining its
DWAC-eligible status, (vii) the Company maintaining a sufficient share reserve, and (viii) the minimum pricing for the L2 Put
Shares must exceed $.05.
Pursuant
to the terms of the L2 Registration Rights Agreement, the Company filed the L2 Registration Statement on October 17, 2018 and
the Registration Statement was declared effective by the SEC on October 30, 2018.
L2
Capital agreed, for a period of 180 days from the L2 Closing Date, not to sell, on any given day, a number of Commitment Shares
that exceeds the greater of (i) 5% of the average daily trading volume of the Company’s shares of common stock for the period
ended one trading day prior to the date of such sale, as reported on the Principal Market; and (ii) such number of Commitment
Shares that equals (x) $5,000, divided by, (y) the closing price of the Company’s shares of common stock one trading day
prior to the date of such sale, as reported on the Principal Market.
Effective
as of the L2 Closing Date, the Company reserved 924,143 shares of its common stock from its authorized and unissued shares of
common stock to provide for all issuances of shares of common stock under the L2 Transaction Documents (in the event that the
Company issued and sold the L2 Put Shares up to the Maximum Amount) and was required to reserve and keep available out of its
authorized and unissued shares of common stock a number of shares of common stock at least three times the number of shares of
common stock obtained by dividing the remaining balance on the maximum commitment amount by the L2 Purchase Price. While the Company
had the obligation to maintain such reserve while the Purchase Agreement was effective, the Company did not have the obligation
to sell any L2 Put Shares to L2 Capital. L2 Capital agreed, and agreed to cause any affiliate of L2 Capital acting on its behalf
or pursuant to any understanding with it, not to execute any short sales during the period from the date hereof to the end of
the Commitment Period.
As
of about February 7, 2019, the Company reached the maximum number of shares that it could put under the L2 Purchase Agreement,
and therefore, the Company would have had to file with the SEC a new registration statement registering additional shares under
the L2 Purchase Agreement if the Company had determined to continue to utilize the L2 Purchase Agreement.
During
the fiscal year ended June 30, 2019, the Company issued 113,200 shares of its common stock at an average price per share of $8.50,
ranging from $6.50 to $20.00, as a result of delivering 14 L2 Put Notices to L2 Capital. As of June 30, 2019, the Company received
gross aggregate proceeds of $964,009 from such put notices. Effective as of February 25, 2019, the Company terminated the L2 Purchase
Agreement.
February
25, 2019 Equity Purchase Agreement
On
February 25, 2019 (the “Closing Date”), the Company entered into an Equity Purchase Agreement (the “Purchase
Agreement”) with a certain institutional investor (the “Investor”) pursuant to which the Investor committed
to purchase up to $10,000,000 (the “Maximum Amount”) of the Company’s common stock (the “Financing”).
In connection with the Financing, on the Closing Date, the Company and the Investor also entered into a Registration Rights Agreement
(the “Registration Rights Agreement”, and together with the Purchase Agreement, the “Transaction Documents”).
The Company will receive net proceeds from the sale of the Put Shares directly to the Investor pursuant to the Purchase Agreement,
however, the Company will not receive any proceeds from the resale of the Put Shares by the Investor thereafter.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Upon
filing and effectiveness of the Company’s Registration Statement on Form S-1, which was declared effective by the SEC on
March 7, 2019, and provided other closing conditions are met, from time to time over the term of the Purchase Agreement, the Company
has the right, but not the obligation, to direct the Investor to purchase shares of the Company’s common stock (the “Put
Shares”) in a maximum amount of $1,000,000, provided that the number of Put Shares did not exceed 250% of the Average Daily
Trading Volume (as defined in the Purchase Agreement). At any time and from time to time during the 3-year term of the Purchase
Agreement (the “Commitment Period”), the Company has the right to deliver a notice to the Investor (the “Put
Notice”) and is obligated to deliver the Put Shares to Investor via DWAC (as defined in the Purchase Agreement) within two
trading days. The purchase price (the “Purchase Price”) for the Put Shares was 87.5% of the one lowest daily volume
weighted average price on the Principal Market (as defined in the Purchase Agreement) (as reported by Bloomberg Finance L.P.)
during the five trading days immediately following the date the Investor receives the Put Shares via DWAC associated with the
applicable Put Notice (the “Valuation Period”). The closing of a Put Notice occurs within one trading day following
the end of the respective Valuation Period, whereby (i) the Investor is obligated to deliver the Investment Amount (as defined
below) to the Company by wire transfer of immediately available funds and (ii) the Investor is obligated to return surplus Put
Shares if the value of the Put Shares delivered to the Investor causes the Company to exceed the maximum commitment amount. The
Company cannot deliver another Put Notice to the Investor within ten trading days of a prior Put Notice. The “Investment
Amount” means the aggregate Purchase Price for the Put Shares purchased by the Investor, minus clearing costs due to the
Investor’s broker or to the Company’s transfer agent for the issuance of the Put Shares (the “Clearing Costs”).
The
right of the Company to issue and sell the Put Shares to the Investor is subject to the satisfaction of certain closing conditions,
including, but not limited to, (i) the Company’s Registration Statement on Form S-1 registering for resale by the Investor
of the Put Shares continuing to be effective as was declared by the SEC on March 7, 2019, (ii) accuracy of the Company’s
representations and warranties, (iii) the Company’s performance under the Purchase Agreement in all material respects, (iv)
no suspension of trading or delisting of the Company’s common stock, (v) limitation of the Investor’s beneficial ownership
to no more than 9.99%, (vi) the Company maintaining its DWAC-eligible status, (vii) the Company maintaining a sufficient share
reserve, and (viii) the minimum pricing for the Put Shares must exceed $0.05.
Pursuant
to the terms of the Registration Rights Agreement, the Company filed the Registration Statement on February 25, 2019 and the Registration
Statement was declared effective by the SEC on March 7, 2019.
Effective
as of the Closing Date, the Company reserved 1,333,333 shares of its common stock from its authorized and unissued shares of common
stock to provide for all issuances of shares of common stock under the Transaction Documents (in the event that the Company issued
and sold the Put Shares up to the Maximum Amount) and was required to reserve and keep available out of its authorized and unissued
shares of common stock a number of shares of common stock at least three times the number of shares of common stock obtained by
dividing the remaining balance on the maximum commitment amount by the Purchase Price.
While
the Company has the obligation to maintain such reserve while the Purchase Agreement was effective, the Company does not have
the obligation to sell any Put Shares to the Investor. The Investor agreed, and agreed to cause any affiliate of the Investor
acting on its behalf or pursuant to any understanding with it, not to execute any short sales during the period from the date
hereof to the end of the Commitment Period.
During
the year ended June 30, 2019, the Company issued 34,000 shares of its common stock at an average price per share of $4.01, ranging
from $3.06 to $4.90, as a result of delivering five Put Notices to the Investor. As of June 30, 2019, the Company received gross
aggregate proceeds of $136,371 from such put notices.
Shares
issued for conversion of convertible debt
Fiscal
2018:
On
July 5, 2017, pursuant to a conversion notice, $26,000 of principal and $1,121 of interest was converted at $270 per share into
100 shares of common stock.
On
July 13, 2017, pursuant to a conversion notice, $42,500 of principal was converted at $315 per share into 135 shares of common
stock.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
On
July 17, 2017, pursuant to a conversion notice, $16,000 of principal and $732 of interest was converted at $200 per share into
83 shares of common stock.
On
July 20, 2017, pursuant to a conversion notice, $28,000 of principal and $1,300 of interest was converted at $145 per share into
203 shares of common stock.
On
July 28, 2017, pursuant to a conversion notice, $22,500 in principal and $1,593 in interest was converted at $130 per share into
187 shares of common stock.
On
August 2, 2017, pursuant to a conversion notice, $20,000 of principal was converted at $140 per share into 142 shares of common
stock.
On
August 2, 2017, pursuant to a conversion notice, $25,000 of principal and $1,233 of interest was converted at $105 per share into
250 shares of common stock.
On
August 16, 2017, pursuant to a conversion notice, $25,000 of principal and $1,311 of interest was converted at $115 per share
into 224 shares of common stock.
On
August 17, 2017, pursuant to a conversion notice, $20,000 of principal was converted at $150 per share into 132 shares of common
stock.
On
August 22, 2017, pursuant to a conversion notice, $20,000 of principal and $1,500 of interest was converted at $125 per share
into 170 shares of common stock.
On
August 25, 2017, pursuant to a conversion notice, $25,000 of principal and $1,361 of interest was converted at $115 per share
into 225 shares of common stock.
On
August 29, 2017, pursuant to a conversion notice, $20,000 of principal was converted at $120 per share into 164 shares of common
stock.
On
September 3, 2017, pursuant to a conversion notice, $20,000 of principal and $1,661 of interest was converted at $100 per share
into 213 shares of common stock.
On
September 6, 2017, pursuant to a conversion notice, $12,500 of principal and $714 of interest was converted at $95 per share into
142 shares of common stock.
On
September 8, 2017, pursuant to a conversion notice, $20,000 of principal was converted at 120 per share into 166 shares of common
stock.
On
September 14, 2017, pursuant to a conversion notice, $15,000 of principal and $450 of interest was converted at $75 per share
into 206 shares of common stock.
On
September 14, 2017, pursuant to a conversion notice, $20,000 of principal and $1,665 of interest was converted at $80 per share
into 278 shares of common stock.
On
September 18, 2017, pursuant to a conversion notice, $20,000 of principal was converted at $95 per share into 215 shares of common
stock.
On
September 25, 2017, pursuant to a conversion notice, $20,000 of principal and $649 of interest was converted at $70 per share
into 299 shares of common stock.
On
September 26, 2017, pursuant to a conversion notice, $30,000 of principal was converted at $90 per share into 337 shares of common
stock.
On
September 26, 2017, pursuant to a conversion notice, $20,000 of principal and $1,716 of interest was converted at $75 per share
into 291 shares of common stock.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
On
October 2, 2017, pursuant to a conversion notice, $25,000 of principal and $850 of interest was converted at $70 per share into
375 shares of common stock.
On
October 4, 2017, pursuant to a conversion notice, $40,000 of principal was converted at $90 per share into 449 shares of common
stock.
On
October 5, 2017, pursuant to a conversion notice, $20,000 of principal and $1,716 of interest was converted at $75 per share into
291 shares of common stock.
On
October 9, 2017, pursuant to a conversion notice, $30,000 of principal and $1,067 of interest was converted at $70 per share into
431 shares of common stock.
On
October 10, 2017, pursuant to a conversion notice, $45,000 of principal was converted at $95 per share into 484 shares of common
stock.
On
October 11, 2017, pursuant to a conversion notice, $20,000 of principal and $1,812 of interest was converted at $80 per share
into 280 shares of common stock.
On
October 16, 2017, pursuant to a conversion notice, $20,000 of principal and $1,834 of interest was converted at $80 per share
into 269 shares of common stock.
On
October 18, 2017, pursuant to a conversion notice, $25,000 of principal and $939 of interest was converted at $65 per share into
393 shares of common stock.
On
October 19, 2017, pursuant to a conversion notice, $30,000 of principal was converted at $80 per share into 387 shares of common
stock.
On
October 23, 2017, pursuant to a conversion notice, $20,000 of principal and $1,884 of interest was converted at $55 per share
into 396 shares of common stock.
On
October 24, 2017, pursuant to a conversion notice, $21,000 of principal and $817 of interest was converted at $55 per share into
404 shares of common stock.
On
October 27, 2017, pursuant to a conversion notice, $15,000 of principal was converted at $45 per share into 320 shares of common
stock.
On
October 30, 2017, pursuant to a conversion notice, $8,750 of principal and $352 of interest was converted at $35 per share into
289 shares of common stock.
On
October 30, 2017, pursuant to a conversion notice, $20,000 of principal and $1,902 of interest was converted at $35 per share
into 602 shares of common stock.
On
November 2, 2017, pursuant to a conversion notice, $5,000 of principal and $8,250 of interest was converted at $45 per share into
311 shares of common stock.
On
November 6, 2017, pursuant to a conversion notice, $12,750 of principal and $533 of interest was converted at $25 per share into
490 shares of common stock.
On
November 6, 2017, pursuant to a conversion notice, $17,500 of principal was converted at $35 per share into 502 shares of common
stock.
On
November 8, 2017, pursuant to a conversion notice, $20,000 in principal and $2,356 in interest was converted at $30 per share
into 764 shares of common stock.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
On
November 13, 2017, pursuant to a conversion notice, $11,000 in principal and $623 in interest was converted at $25 per share into
430 shares of common stock.
On
November 15, 2017, pursuant to a conversion notice, $20,000 in principal and $2,443 in interest was converted at $30 per share
into 767 shares of common stock.
On
November 17, 2017, pursuant to a conversion notice, $15,000 in principal was converted at $35 per share into 430 shares of common
stock.
On
November 26, 2017, pursuant to a conversion notice, $20,000 in principal and $2,568 in interest was converted at $30 per share
into 772 shares of common stock.
On
November 27, 2017, pursuant to a conversion notice, $20,000 in principal and $1,196 in interest was converted at $25 per share
into 785 shares of common stock.
On
December 1, 2017, pursuant to a conversion notice, $20,000 in principal and $802 in interest was converted at $30 per share into
746 shares of common stock.
On
December 6, 2017, pursuant to a conversion notice, $21,000 in principal and $1,297 in interest was converted at $25 per share
into 826shares of common stock.
On
December 8, 2017, pursuant to a conversion notice, $9,900 in principal and $792 in interest was converted at $25 per share into
396 shares of common stock.
On
December 8, 2017, pursuant to a conversion notice, $42,666 in principal was converted at $35 per share into 1,223 shares of common
stock.
On
December 11, 2017, pursuant to a conversion notice, $9,900 in principal and $799 in interest was converted at $25 per share into
396 shares of common stock.
On
December 11, 2017, pursuant to a conversion notice, $27,000 in principal and $1,142 in interest was converted at $30 per share
into 1,009 shares of common stock.
On
December 11, 2017, pursuant to a conversion notice, $42,666 in principal was converted at $35 per share into 1,223 shares of common
stock.
On
December 15, 2017, pursuant to a conversion notice, $56,758 in principal was converted at $40 per share into 1,465 shares of common
stock.
On
December 18, 2017, pursuant to a conversion notice, $30,000 in principal and $2,467 in interest was converted at $35 per share
into 958 shares of common stock.
On
December 19, 2017, pursuant to a conversion notice, $23,000 in principal and $1,013 in interest was converted at $35 per share
into 738 shares of common stock.
On
December 21, 2017, pursuant to a conversion notice, $63,000 in principal was converted at $40 per share into 1,578 shares of common
stock.
On
December 22, 2017, pursuant to a conversion notice, $25,000 in principal and $2,078 in interest was converted at per share into
860 shares of common stock.
On
January 2, 2018, pursuant to a conversion notice, $25,000 in principal and $1,178 in interest was converted at $35 per share into
804 shares of common stock.
On
January 3, 2018, pursuant to a conversion notice, $25,200 in principal and $2,162 in interest was converted at $30 per share into
869 shares of common stock.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
On
January 4, 2018, pursuant to a conversion notice, $25,000 in principal and $1,372 in interest was converted at $35 per share into
798 shares of common stock.
On
January 9, 2018, pursuant to a conversion notice, $40,000 in principal and $4,581 in interest was converted at $35 per share into
1,261 shares of common stock.
On
January 12, 2018, pursuant to a conversion notice, $25,000 in principal and $1,233 in interest was converted at $40 per share
into 691 shares of common stock.
On
January 12, 2018, pursuant to a conversion notice, $7,500 in principal and $875 in interest was converted at $35 per share into
232 shares of common stock.
On
January 26, 2018, pursuant to a conversion notice, $30,000 in principal and $1,793 in interest was converted at $45 per share
into 707 shares of common stock.
On
January 30, 2018, pursuant to a conversion notice, $40,000 in principal and $2,130 in interest was converted at $45 per share
into 985 shares of common stock.
On
February 4, 2018, pursuant to a conversion notice, $22,500 in principal and $2,650 in interest was converted at $40 per share
into 629 shares of common stock.
On
February 13, 2018, pursuant to a conversion notice, $20,000 in principal and $1,276 in interest was converted at $35 per share
into 572 shares of common stock.
On
February 21, 2018, pursuant to a conversion notice, $40,000 in principal and $4,986 in interest was converted at $40 per share
into 1,144 shares of common stock
On
February 23, 2018, pursuant to a conversion notice, $25,000 in principal and $1,173 in interest was converted at $35 per share
into 704 shares of common stock.
On
February 23, 2018, pursuant to a conversion notice, $20,000 in principal and $1,320 in interest was converted at $35 per share
into 592 shares of common stock.
On
February 28, 2018, pursuant to a conversion notice, $60,000 in principal and $4,027 in interest was converted at $30 per share
into 2,023 shares of common stock.
On
March 4, 2018, pursuant to a conversion notice, $40,000 in principal and $5,012 in interest was converted at $30 per share into
1,522 shares of common stock.
On
March 5, 2018, pursuant to a conversion notice, $28,000 in principal and $1,375 in interest was converted at $30 per share into
987 shares of common stock.
On
March 8, 2018, pursuant to a conversion notice, $27,000 in principal and $1,343 in interest was converted at $30 per share into
1,016 shares of common stock.
On
March 8, 2018, pursuant to a conversion notice, $50,000 in principal and $3,444 in interest was converted at $25 per share into
1,979 shares of common stock.
On
March 11, 2018, pursuant to a conversion notice, $60,000 in principal and $7,906 in interest was converted at $30 per share into
2,348 shares of common stock.
On
March 14, 2018, pursuant to a conversion notice, $25,000 in principal and $1,756 in interest was converted at $25 per share into
991 shares of common stock.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
On
March 16, 2018, pursuant to a conversion notice, $28,000 in principal and $1,442 in interest was converted at $30 per share into
1,055 shares of common stock.
On
March 21, 2018, pursuant to a conversion notice, $50,000 in principal and $2,089 in interest was converted at $25 per share into
1,929 shares of common stock.
On
March 26, 2018, pursuant to a conversion notice, $27,000 in principal and $1,450 in interest was converted at $30 per share into
1,009 shares of common stock.
On
April 2, 2018, pursuant to a conversion notice, $50,000 in principal and $2,916 in interest was converted at $30 per share into
1,825 shares of common stock.
On
April 3, 2018, pursuant to a conversion notice, $25,000 in principal and $1,386 in interest was converted at $30 per share into
1,013 shares of common stock.
On
April 5, 2018, pursuant to a conversion notice, $50,000 in principal and $2,256 in interest was converted at $25 per share into
2,177 shares of common stock.
On
April 11, 2018, pursuant to a conversion notice, $20,000 in principal and $929 in interest was converted at $20 per share into
1,163 shares of common stock.
On
April 12, 2018, pursuant to a conversion notice, $30,000 in principal and $1,289 in interest was converted at $20 per share into
1,682 shares of common stock.
On
April 18, 2018, pursuant to a conversion notice, $50,000 in principal and $3,750 in interest was converted at $15 per share into
3,120 shares of common stock.
On
April 26, 2018, pursuant to a conversion notice, $35,000 in principal and $3,259 in interest was converted at $20 per share into
2,125 shares of common stock
On
April 30, 2018, pursuant to a conversion notice, $25,000 in principal and $526 in interest was converted at $20 per share into
1,372 shares of common stock.
On
May 14, 2018, pursuant to a conversion notice, $30,000 in principal and $723 in interest was converted at $20 per share into 1,537
shares of common stock.
On
May 15, 2018, pursuant to a conversion notice, $20,000 in principal and $2,000 in interest was converted at $20 per share into
1,055 shares of common stock.
On
May 18, 2018, pursuant to a conversion notice, $33,500 in principal and $3,283 in interest was converted at $20 per share into
1,916 shares of common stock.
On
June 7, 2018, pursuant to a conversion notice, $33,000 in principal and $3,381 in interest was converted at $15 per share into
2,091 shares of common stock.
On
June 8, 2018, pursuant to a conversion notice, $35,000 in principal and $1,035 in interest was converted at $20 per share into
2,004 shares of common stock.
On
June 15, 2018, pursuant to a conversion notice, $32,000 in principal and $3,335 in interest was converted at $15 per share into
2,031 shares of common stock.
On
June 20, 2018, pursuant to a conversion notice, $35,000 in principal and $3,687 in interest was converted at $15 per share into
2,223 shares of common stock.
On
June 21, 2018, pursuant to a conversion notice, $35,000 in principal and $1,135 in interest was converted at $20 per share into
2,006 shares of common stock.
On
June 23, 2018, pursuant to a conversion notice, $20,000 in principal and $2,098 in interest was converted at $15 per share into
1,408 shares of common stock.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Fiscal
2019:
On
July 2, 2018, pursuant to a conversion notice, $35,000 in principal and $2,808 in interest was converted at $14.97 per share into
2,526 shares of common stock.
On
July 6, 2018, pursuant to a conversion notice, $40,000 in principal and $4,570 in interest was converted at $13.80 per share into
3,230 shares of common stock.
On
July 10, 2018, pursuant to a conversion notice, $25,000 in principal and $2,050 in interest was converted at $13.20 per share
into 2,049 shares of common stock.
On
July 10, 2018, pursuant to a conversion notice, $35,000 in principal and $1,281 in interest was converted at $13.64 per share
into 2,660 shares of common stock.
On
July 13, 2018, pursuant to a conversion notice, $30,000 in principal and $2,480 in interest was converted at $10.26 per share
into 3,166 shares of common stock.
On
July 15, 2018, pursuant to a conversion notice, $30,000 in principal and $3,484 in interest was converted at $10.80 per share
into 3,100 shares of common stock.
On
July 17, 2018, pursuant to a conversion notice, $20,000 in principal and $1,671 in interest was converted at $9.60 per share into
2,257 shares of common stock.
On
July 22, 2018, pursuant to a conversion notice, $30,000 in principal and $3,529 in interest was converted at $8.15 per share into
4,114 shares of common stock.
On
July 23, 2018, pursuant to a conversion notice, $30,000 in principal and $1,959 in interest was converted at $9.30 per share into
3,437 shares of common stock.
On
July 24, 2018, pursuant to a conversion notice, $30,000 in principal and 2,553 in interest was converted at $7.50 per share into
4,340 shares of common stock.
On
July 25, 2018, pursuant to a conversion notice, $20,000 in principal and NIL in interest was converted at $8.99 per share into
2,225 shares of common stock.
On
July 26, 2018, pursuant to a conversion notice, $20,000 in principal and NIL in interest was converted at 7.85 per share into
2,548 shares of common stock.
On
July 30, 2018, pursuant to a conversion notice, $20,000 in principal and NIL in interest was converted at $7.20 per share into
2,778 shares of common stock.
On
July 31, 2018, pursuant to a conversion notice, $20,000 in principal and $1,733 in interest was converted at $5.85 per share into
3,715 shares of common stock.
On
July 31, 2018, pursuant to a conversion notice, $15,000 in principal and NIL in interest was converted at $7.20 per share into
2,083 shares of common stock.
On
August 2, 2018, pursuant to a conversion notice, $20,000 in principal and $1,742 in interest was converted at $5.13 per share
into 4,238 shares of common stock.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
On
August 2, 2018, pursuant to a conversion notice, $15,000 in principal and NIL in interest was converted at $5.95 per share into
2,521 shares of common stock.
On
August 3, 2018, pursuant to a conversion notice, $10,000 in principal and $873 in interest was converted at $4.59 per share into
2,369 shares of common stock.
On
August 3, 2018, pursuant to a conversion notice, $25,000 in principal and $1,693 in interest was converted at $5.30 per share
into 5,035 shares of common stock.
On
August 7, 2018, pursuant to a conversion notice, $20,000 in principal and NIL in interest was converted at $4.60 per share into
4,348 shares of common stock.
On
August 8, 2018, pursuant to a conversion notice, $15,000 in principal and $1,871 in interest was converted at $3.90 per share
into 4,326 shares of common stock.
On
August 8, 2018, pursuant to a conversion notice, $18,000 in principal and $2,195 in interest was converted at $2.80 per share
into 7,225 shares of common stock.
On
August 13, 2018, pursuant to a conversion notice, $15,000 in principal and $1,343 in interest was converted at $2.85 per share
into 5,735 shares of common stock.
On
August 13, 2018, pursuant to a conversion notice, $15,000 in principal and $1,049 in interest was converted at $2.95 per share
into 5,449 shares of common stock.
On
August 13, 2018, pursuant to a conversion notice, $20,000 in principal and NIL in interest was converted at $3.20 per share into
6,250 shares of common stock.
On
August 20, 2018, pursuant to a conversion notice, $10,000 in principal and $647 in interest was converted at $1.59 per share into
6,696 shares of common stock.
On
August 20, 2018, pursuant to a conversion notice, $12,430 in principal and NIL in interest was converted at $1.90 per share into
6,542 shares of common stock.
On
August 22, 2018, pursuant to a conversion notice, $14,000 in principal and $1,006 in interest was converted at $1.64 per share
into 9,134 shares of common stock.
On
August 22, 2018, pursuant to a conversion notice, $10,570 in principal and $885 in interest was converted at $1.75 per share into
6,546 shares of common stock.
On
August 24, 2018, pursuant to a conversion notice, $10,000 in principal and $656 in interest was converted at $1.38 per share into
7,721 shares of common stock.
On
August 27, 2018, pursuant to a conversion notice, NIL in principal and $5,235 in interest was converted at $1.48 per share into
3,537 shares of common stock.
On
August 28, 2018, pursuant to a conversion notice, $8,500 in principal and $565 in interest was converted at $1.17 per share into
7,748 shares of common stock.
On
August 28, 2018, pursuant to a conversion notice, $10,250 in principal and $750 in interest was converted at $1.21 per share into
9,099 shares of common stock.
On
August 29, 2018, pursuant to a conversion notice, $8,450 in principal and $563 in interest was converted at $1.17 per share into
7,704 shares of common stock.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
On
August 31, 2018, pursuant to a conversion notice, $9,000 in principal and $1,159 in interest was converted at $1.28 per share
into 7,946 shares of common stock.
On
September 4, 2018, pursuant to a conversion notice, $3,000 in principal and $237 in interest was converted at $1.17 per share
into 2,766 shares of common stock.
On
September 5, 2018, pursuant to a conversion notice, $3,000 in principal and $237 in interest was converted at $1.17 per share
into 2,767 shares of common stock.
On
September 6, 2018, pursuant to a conversion notice, $28,750 in principal and NIL in interest was converted at $1.15 per share
into 25,000 shares of common stock.
On
September 6, 2018, pursuant to a conversion notice, $7,250 in principal and $545 in interest was converted at $1.21 per share
into 6,448 shares of common stock.
On
September 6, 2018, pursuant to a conversion notice, $9,000 in principal and $1,194 in interest was converted at $1.28 per share
into 7,973 shares of common stock.
On
September 7, 2018, pursuant to a conversion notice, $5,000 in principal and $343 in interest was converted at $1.17 per share
into 4,567 shares of common stock.
On
September 11, 2018, pursuant to a conversion notice, $28,500 in principal and $2,174 in interest was converted at $7.75 per share
into 3,958 shares of common stock.
On
September 12, 2018, pursuant to a conversion notice, $25,000 in principal and $3,288 in interest was converted at $6.60 per share
into 4,289 shares of common stock.
On
September 14, 2018, pursuant to a conversion notice, $50,000 in principal and $4,056 in interest was converted at $13.95 per share
into 3,875 shares of common stock.
On
September 14, 2018, pursuant to a conversion notice, $131,500 in principal and $5,707 in interest was converted at $14.42 per
share into 9,518 shares of common stock.
On
September 19, 2018, pursuant to a conversion notice, $28,500 in principal and $1,268 in interest was converted at $17.86 per share
into 1,667 shares of common stock.
On
September 21, 2018, pursuant to a conversion notice, $30,000 in principal and $2,153 in interest was converted at $17.28 per share
into 1,861 shares of common stock.
On
September 26, 2018, pursuant to a conversion notice, $128,500 in principal and $9,333 in interest was converted at $16.80 per
share into 8,178 shares of common stock.
On
September 26, 2018, pursuant to a conversion notice, $106,000 in principal and $2,765 in interest was converted at $17.36 per
share into 6,265 shares of common stock.
On
September 27, 2018, pursuant to a conversion notice, $75,000 in principal and $4,917 in interest was converted at $16.80 per share
into 4,757 shares of common stock.
On
October 8, 2018, pursuant to a conversion notice, $125,000 in principal and $8,500 in interest was converted at $16.80 per share
into 7,946 shares of common stock.
On
October 8, 2018, pursuant to a conversion notice, $65,000 in principal and $6,110 in interest was converted at $16.80 per share
into 4,233 shares of common stock.
On
October 16, 2018, pursuant to a conversion notice, $106,000 in principal and $4,740 in interest was converted at $21.70 per share
into 5,103 shares of common stock.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
On
October 19, 2018, pursuant to a conversion notice, $50,000 in principal and $6,956 in interest was converted at $21.00 per share
into 2,712 shares of common stock.
On
October 24, 2018, pursuant to a conversion notice, $100,000 in principal and $14,022 in interest was converted at $20.40 per share
into 5,589 shares of common stock.
On
October 25, 2018, pursuant to a conversion notice, $85,000 in principal and $820 in interest was converted at $20.74 per share
into 4,138 shares of common stock.
On
November 5, 2018, pursuant to a conversion notice, $65,000 in principal and $784 in interest was converted at $13.76 per share
into 4,782 shares of common stock.
On
November 16, 2018, pursuant to a conversion notice, $50,000 in principal and $6,500 in interest was converted at $8.40 per share
into 6,726 shares of common stock.
On
November 23, 2018, pursuant to a conversion notice, $24,000 in principal and $2,320 in interest was converted at $7.53 per share
into 3,495 shares of common stock.
On
November 29, 2018, pursuant to a conversion notice, $50,000 in principal and $6,644 in interest was converted at $7.53 per share
into 7,523 shares of common stock.
On
December 4, 2018, pursuant to a conversion notice, $28,000 in principal and $1,405 in interest was converted at $7.32 per share
into 4,017 shares of common stock.
On
December 13, 2018, pursuant to a conversion notice, $30,000 in principal and $3,260 in interest was converted at $5.10 per share
into 6,522 shares of common stock.
On
December 18, 2018, pursuant to a conversion notice, $40,000 in principal and $4,391 in interest was converted at $3.90 per share
into 11,382 shares of common stock.
On
December 18, 2018, pursuant to a conversion notice, $37,000 in principal and $1,971 in interest was converted at $3.97 per share
into 9,829 shares of common stock.
On
December 20, 2018, pursuant to a conversion notice, $20,000 in principal and $3,058 in interest was converted at $3.90 per share
into 5,912 shares of common stock.
On
December 31, 2018, pursuant to a conversion notice, $75,000 in principal and $4,300 in interest was converted at $3.97 per share
into 20,000 shares of common stock.
On
December 31, 2018, pursuant to a conversion notice, $60,000 in principal and $9,320 in interest was converted at $3.90 per share
into 17,774 shares of common stock.
On
January 3, 2019, pursuant to a conversion notice, $45,000 in principal and $2,555 in interest was converted at $5.52 per share
into 8,614 shares of common stock.
On
January 16, 2019, pursuant to a conversion notice, $50,000 in principal and $2,400 in interest was converted at $4.26 per share
into 12,300 shares of common stock.
On
January 29, 2019, pursuant to a conversion notice, $25,000 in principal and NIL in interest was converted at $4.33 per share into
5,772 shares of common stock.
On
January 29, 2019, pursuant to a conversion notice, $55,000 in principal and $2,799 in interest was converted at $4.26 per share
into 13,568 shares of common stock.
On
January 29, 2019, pursuant to a conversion notice, $40,000 in principal and $2,499 in interest was converted at $4.33 per share
into 9,813 shares of common stock.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
On
February 8, 2019, pursuant to a conversion notice, $49,990 in principal and $4,466 in interest was converted at $4.53 per share
into 12,021 shares of common stock.
On
February 19, 2019, pursuant to a conversion notice, $40,000 in principal and $3,671 in interest was converted at $4.26 per share
into 10,251 shares of common stock.
On
February 26, 2019, pursuant to a conversion notice, $60,000 in principal and $5,600 in interest was converted at $4.20 per share
into 15,619 shares of common stock.
On
March 7, 2019, pursuant to a conversion notice, $25,000 in principal and NIL in interest was converted at $3.97 per share into
6,305 shares of common stock.
On
March 8, 2019, pursuant to a conversion notice, $60,000 in principal and $5,733 in interest was converted at $3.90 per share into
16,855 shares of common stock.
On
March 15, 2019, pursuant to a conversion notice, $40,000 in principal and $3,884 in interest was converted at $3.60 per share
into 12,190 shares of common stock.
On
March 25, 2019, pursuant to a conversion notice, $21,250 in principal and NIL in interest was converted at $3.48 per share into
6,112 shares of common stock.
On
March 26, 2019, pursuant to a conversion notice, $35,000 in principal and $3,484 in interest was converted at $3.42 per share
into 11,253 shares of common stock.
On
April 8, 2019, pursuant to a conversion notice, $25,000 in principal and $2,561 in interest was converted at $3.00 per share into
9,187 shares of common stock.
On
April 18, 2019, pursuant to a conversion notice, $30,000 in principal and $3,140 in interest was converted at $2.79 per share
into 11,878 shares of common stock.
On
April 22, 2019, pursuant to a conversion notice, $26,000 in principal and $1,111 in interest was converted at $2.84 per share
into 9,558 shares of common stock.
On
May 1, 2019, pursuant to a conversion notice, $24,700 in principal and NIL in interest was converted at $2.44 per share into 10,123
shares of common stock.
On
May 6, 2019, pursuant to a conversion notice, $30,000 in principal and $4,220 in interest was converted at $2.40 per share into
14,258 shares of common stock.
On
May 17, 2019, pursuant to a conversion notice, $23,700 in principal and $1,143 in interest was converted at $2.20 per share into
11,313 shares of common stock.
On
May 24, 2019, pursuant to a conversion notice, $20,000 in principal and $2,893 in interest was converted at $1.80 per share into
12,719 shares of common stock.
On
June 16, 2019, pursuant to a conversion notice, $15,000 in principal and $2,240 in interest was converted at $1.98 per share into
8,707 shares of common stock.
On
June 26, 2019, pursuant to a conversion notice, NIL in principal and $2,723 in interest was converted at $0.15 per share into
17,855 shares of common stock.
On
June 28, 2019, pursuant to a conversion notice, $20,480 in principal and $2,467 in interest was converted at $0.61 per share into
37,348 shares of common stock.
On
June 28, 2019, pursuant to a conversion notice, $20,480 in principal and $1,176 in interest was converted at $0.62 per share into
34,669 shares of common stock.
The
Company has 6,819 shares of its common stock reserved for future issuances based on lender reserve requirements pursuant to underlying
financing agreements at June 30, 2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Options
On
April 14, 2016 (“Grant Date”), the board of directors of the Company, approved a grant of 572 stock options at an
exercise price of $3,750 (market value of the Company’s stock on the Grant Date), to each of the Company’s CEO and
a non-executive director. 191 of such stock options vested on the Grant Date and expire on April 14, 2021, 191 of such stock options
vested on April 14, 2017 (first anniversary of the Grant Date) and expire on April 14, 2021 and 191 of such stock options vested
on April 14, 2018 (second anniversary of the Grant Date) and expire on April 14, 2021. The fair value of each grant of the 572
options at Grant Date was $1,962,440 (aggregate total of $3,924,880).
The
Company expensed $516,148 for these stock option grants during the years ended June 30, 2018. As of June 30, 2018, these options
are fully expensed.
On
the Effective Date, the Company’s board of directors approved and adopted the Company’s 2019 Equity Incentive Plan
(the “2019 Plan”), which reserves a total of 234,000 shares of the Company’s common stock for issuance under
the 2019 Plan. Incentive awards authorized under the 2019 Plan include, but are not limited to, incentive stock options, non-qualified
stock options, restricted stock awards and restricted stock units.
Pursuant
to employment agreements dated in May 2019 (see Note 10), the Company granted options to purchase 39,000 and 19,500 shares of
the Company’s common stock to the Company’s Chief Executive Officer and Chief Scientific Officer, respectively. The
total 58,500 options have a term of 10 years from the date of grant and exercise price ranging from $4.25 to $4.675 per share.
1/3rd of these options shall vest every successive one-year anniversary, provided, that on each such vesting date,
the Chief Executive Officer and Chief Scientific Officer are employed by the Company and subject to the other provisions of the
employment agreement. The 58,500 stock options were valued using a Black-Scholes model with the following assumptions: stock price
at valuation date of $4.25 based on quoted trading price on date of grant, exercise price of $4.65, dividend yield of zero, years
to maturity of 10.00, a risk free rate of 2.42%, and expected volatility 268% for a total value of $248,620.
During
the year ended June 30, 2019, the Company recognized stock-based compensation of $10,360 related to vested stock options. There
was $238,261 of unvested stock options expense as of June 30, 2019 that will be recognized in future periods.
A
summary of the Company’s option activity during the years ended June 30, 2019 and 2018 is presented below:
|
|
|
|
|
Weighted
|
|
|
|
Number
of
|
|
|
Average
|
|
|
|
Shares
|
|
|
Price
Per Share
|
|
Outstanding
at June 30, 2017
|
|
|
1,144
|
|
|
$
|
3,750
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at June 30, 2018
|
|
|
1,144
|
|
|
$
|
3,750
|
|
Issued
|
|
|
58,500
|
|
|
$
|
4.53
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at June 30, 2019
|
|
|
59,644
|
|
|
$
|
76.37
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at June 30, 2019
|
|
|
1,144
|
|
|
$
|
3,750
|
|
Outstanding
and Exercisable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average remaining contractual term
|
|
|
9.72
|
|
|
|
|
|
Weighted
average fair value of options granted during the period
|
|
$
|
4.25
|
|
|
|
|
|
Aggregate
intrinsic value
|
|
$
|
85,800
|
|
|
|
|
|
|
|
|
Options
Outstanding
|
|
|
Options
Exercisable
|
|
Range
of
Exercise Price
|
|
|
Number
Outstanding at
June 30, 2019
|
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Weighted
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value
|
|
|
Number
Exercisable
at
June 30, 2019
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value
|
|
$
|
4.25-4.68
|
|
|
|
58,500
|
|
|
9.88
Years
|
|
$
|
4.53
|
|
|
$
|
85,800
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
$
|
3,750.00
|
|
|
|
1,144
|
|
|
1.79
Years
|
|
|
3,750.00
|
|
|
|
-
|
|
|
|
1,144
|
|
|
|
3,750.00
|
|
|
|
-
|
|
|
|
|
|
|
59,644
|
|
|
9.72
Years
|
|
$
|
76.37
|
|
|
$
|
85,800
|
|
|
|
1,144
|
|
|
$
|
3,750.00
|
|
|
$
|
-
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Warrants
On
August 29, 2018, the Company received payment of $39 AUD for the exercise of a warrant for 24 shares of the Company’s common
stock and issued such shares as a result of the exercise.
On
December 2, 2018, a total of 208 warrants expired.
No
warrants were issued during the year ended June 30, 2019.
As
of June 30, 2019, there were 59 warrants outstanding and exercisable with expiration dates commencing May 2020 and continuing
through November 2020, with a weighted average exercise price per share of $4,765.
The
following table summarizes warrant activity for the years ended June 30, 2019 and 2018:
|
|
|
|
|
Weighted
|
|
|
|
Number
of
|
|
|
Average
|
|
|
|
Shares
|
|
|
Price
Per Share
|
|
Outstanding
at June 30, 2017
|
|
|
299
|
|
|
$
|
5,625
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
(8
|
)
|
|
|
-
|
|
Outstanding
at June 30, 2018
|
|
|
291
|
|
|
$
|
5,555
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(24
|
)
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
(208
|
)
|
|
|
-
|
|
Outstanding
at June 30, 2019
|
|
|
59
|
|
|
$
|
4,765
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at June 30, 2019
|
|
|
59
|
|
|
$
|
4,765
|
|
Outstanding
and Exercisable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average remaining contractual term
|
|
|
0.50
|
|
|
|
|
|
Aggregate
intrinsic value
|
|
$
|
-
|
|
|
|
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
NOTE
9 – COMMITMENTS AND CONTINGENCIES
Legal
Matters
A
complaint against us, dated September 26, 2019, has been filed by Foley Shechter Ablovatskiy (“Foley Shechter”), our
former counsel, seeking $150,000 for legal fees, among other fees. The Company believes these claims to be unfounded and the Company
is continuing to vigorously defend itself against this lawsuit and is preparing to file an answer with the Supreme Court of the
State of New York County of New York, together with counterclaims against the plaintiff, including, without limitation, malpractice
claims, arising out of Foley Shechter’s grossly negligent mishandling of the matter and excessive billing. Certain amounts
related to this claim are included in accounts payable and accrued expenses in the accompanying Financial Statements.
We
have received a demand letter, dated October 10, 2019, from Regal Consulting, LLC (“Regal”), our former consultant.
Notwithstanding the termination of our agreement with Regal, Regal is demanding approximately $400,000 and 60,000 shares of our
common stock as payment for services that Regal purports to have performed, even though no timely invoices were sent and no descriptions
of the services were ever provided. The Company is continuing to vigorously defend itself against Regal’s unsubstantiated
claims and no loss contingency can be estimated at this time.
In
addition to the above, from time to time, we may be involved in litigation in the ordinary course of business. Other than as set
forth above, we are not currently involved in any litigation that we believe could have a material adverse effect on our financial
condition or results of operations. Other than as set forth above, to our knowledge, there is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to
the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting our Company, our common stock,
any of our subsidiaries or any of our subsidiaries’ officers or directors in their capacities as such, in which an adverse
decision could have a material adverse effect.
IRS
Liability
As
part of its requirement for having a foreign operating subsidiary, the Company is required to file an informational Form 5471
to the Internal Revenue Service (the “IRS”), which is a form that explains the nature of the relationship between
the foreign subsidiary and the parent company. From 2012 through the 2014, the Company did not file this form in a timely manner.
As a result of the non-timely filings, the Company incurred a penalty from the IRS in the amount of $10,000 per year, or $30,000
in total, plus accrued interest. The Company recorded the penalties for all three years during the year ended June 30, 2018 and
is negotiating a payment plan. The Company is current on all subsequent filings.
Operating
Agreements
In
November 2009, the Company entered into a commercialization agreement with the University of Bath (UK) (the “University”)
whereby the Company and the University co-owned the intellectual property relating to the Company’s pro-enzyme formulations.
In June 2012, the Company and the University entered into an assignment and amendment whereby the Company assumed full ownership
of the intellectual property while agreeing to pay royalties of 2% of net revenues to the University. Additionally, the Company
agreed to pay 5% of each and every license agreement subscribed for. The contract is cancellable at any time by either party.
To date, no amounts are owed under the agreement.
Operating
Leases
On
May 4, 2016, the Company entered into a new five-year operating lease agreement with a Horizon Pty Ltd., a related party, of which
Mr. Nathanielsz, our CEO and a director, and his wife are owners and directors, with monthly rent of $3,300 AUD or $2,325 USD,
inclusive of GST (See Note 10 – Related Party Transactions).
Future
minimum operating lease commitments consisted of the following at June 30, 2019:
Fiscal
Year Ended June 30,
|
|
Amount
(USD)
|
|
2020
|
|
$
|
27,756
|
|
2021
|
|
$
|
25,443
|
|
Rent
expense for the fiscal year ended June 30, 2019 and 2018 was $28,062 and $30,521, respectively.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Amatsigroup
Agreement
The
Company entered into a Manufacturing Services Agreement (the “MSA”) and Quality Assurance Agreement (the “QAA”),
each with an effective date of August 12, 2016, with Amatsigroup NV (“Amatsigroup”), formerly known as Q-Biologicals,
NV, a contract manufacturing organization located in Belgium. Pursuant to the MSA, Amatsigroup produces certain drug substances
and products containing certain enzymes for the Company at its facility in Belgium. The Company uses these substances and products
for development purposes, including but not limited to future clinical trials. The MSA contemplates payment to Amatsigroup pursuant
to a pre-determined fee schedule based on the completion of certain milestones that depend on our manufacturing requirements and
final batch yield. The Company anticipates that its payments to Amatsigroup under the MSA will range between $2.5 million and
$5.0 million over three years, when the finished drug product is manufactured and released for clinical trials. The Company has
spent a total of $1,689,146 of costs to date under this contract of which $1,639,192 was expensed in prior years and $49,854 was
expensed in the year ended June 30, 2019. The MSA shall continue for a term of three years unless extended by mutual agreement
in writing. The Company 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. Each party to the MSA shall have the right to terminate the
MSA by written notice to the other party if the other party commits a material breach of the MSA (subject to a 30-day cure period).
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 Amatsigroup contain certain customary representations, warranties and limitations
of liabilities, and confidentiality and indemnity obligations.
Investment
Banking Agreements
On
February 23, 2018, the Company entered into an agreement with an effective date of February 14, 2018 with a certain investment
bank, pursuant to which the Company retained the investment bank as its placement agent. As of December 31, 2018, no funds have
been raised pursuant to this agreement and the agreement expired on its terms.
On
February 4, 2019, the Company entered into an agreement with a certain investment bank (the “Investment Bank”), pursuant
to which the Company retained the Investment Bank as its exclusive placement agent through May 31, 2019. In the event of the closing
of an offering during such period (or the tail period after, if applicable) the Investment Bank would receive a percentage of
the proceeds in cash and a percentage of the shares of common stock issued by the Company in the offering as warrants. As of June
30, 2019, no funds have been raised pursuant to this agreement.
Collaboration
Agreement
On
September 13, 2018, the Company entered into a two-year collaboration agreement with the University of Jaén (the “University”)
to provide certain research services to the Company. In consideration of such services, the Company agreed to pay the University
approximately 52,000 Euros ($59,508 USD) in year one and a maximum of 40,000 Euros ($45,775 USD) in year two. Additionally, in
exchange for full ownership of the intellectual property the Company agreed to pay royalties of 2% of net revenues to the University.
NOTE
10 – RELATED PARTY TRANSACTIONS
Since
its inception, the Company has conducted transactions with its directors and entities related to such directors. These transactions
have included the following:
As
of June 30, 2019 and 2018, the Company owed a current and a former director a total of $51,867 and $54,753, respectively, for
money loaned to the Company throughout the years. The total loans balance owed at June 30, 2019 and 2018 is not interest bearing
(See Note 5 – Loans and Notes Payable).
As
of June 30 2019, and 2018, the Company owed its former director a total of $31,164 and $32,898, respectively, related to expenses
paid on behalf of the Company related to corporate startup costs and intellectual property (See Note 4 – Due to Former Director
– Related Party).
Effective
May 5, 2016, the Company entered into an agreement for the lease of its principal executive offices with North Horizon Pty Ltd.,
a related party, of which Mr. Nathanielsz, our CEO, CFO and a director, and his wife are owners and directors. The lease has a
five-year term and provides for annual rental payments of $39,600 AUD or $28,325 USD, which includes $3,600 AUD or $2,575 USD
of goods and service tax for total payments of $198,000 AUD or $141,629 USD during the term of the lease. As of June 30, 2019,
total payments of $75,900 AUD or $54,291 USD remain on the lease.
The
Company and Mr. Nathanielsz entered into an employment agreement as of February 25, 2015 (the “Nathanielsz Employment Agreement”)
setting forth the terms and conditions of Mr. Nathanielsz employment as the Company’s President and Chief Executive Officer.
The Nathanielsz Employment Agreement was scheduled to expire on February 25, 2019; however, the term of the Nathanielsz Employment
Agreement automatically renews for successive one-year periods unless either party provides 30 days’ prior written notice
of its intent not to renew. The Nathanielsz Employment Agreement continues in effect as of June 30, 2019. Also see Note 13 –
Subsequent Events. The Nathanielsz Employment Agreement provides Mr. Nathanielsz with a base salary of $25,000 AUD per month ($300,000
AUD annually or $214,590 USD) and a monthly contribution to Mr. Nathanielsz’s pension equal to 9.5% of his monthly salary.
Mr. Nathanielsz has the ability to convert any accrued but unpaid salary into common stock at the end of each fiscal year at a
conversion price to be determined by Mr. Nathanielsz and the Company, which will in no event be lower than par value or higher
than the closing bid price on the date of conversion. Pursuant to the Nathanielsz Employment Agreement, Mr. Nathanielsz is entitled
to an annual discretionary bonus in an amount up to 200% of his annual base salary, which bonus shall be determined by the Company’s
board of directors based upon the performance of the Company. On March 16, 2018, the Company’s board of directors approved
an increase of Mr. Nathanielsz’s annual base salary from $300,000 AUD ($211,380 USD) to $400,000 AUD ($286,120 USD), effective
February 2018.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
Mr.
Nathanielsz’s wife, Sylvia Nathanielsz, is and has been a non-executive part-time employee of the Company since October
2015. Effective February 1, 2018, Mrs. Nathanielsz receives an annual salary of $75,000 AUD ($53,648 USD) and is entitled to customary
benefits.
Pursuant
to a February 25, 2016 board resolution, James Nathanielsz shall be paid $4,481 AUD ($3,205 USD), on a monthly basis for the purpose
of acquiring and maintaining an automobile. For the fiscal year ended June 30, 2019, a total of $53,772 AUD ($38,463 USD) in payments
have been made with respect to Mr. Nathanielsz’s car allowance.
Pursuant
to the approval of the Company’s board of directors, on March 16, 2018, Mr. Nathanielsz was granted a $300,000 AUD bonus
for accomplishments achieved while serving as the Company’s Chief Executive Officer during the fiscal year ended June 30,
2018. A total of $80,046 AUD in payments were made in the year ended June 30, 2018. During the nine months ended March 31, 2019,
an additional $219,954 AUD was paid. Such bonus was fully paid to Mr. Nathanielsz as of June 30, 2019.
Pursuant
to the approval of the Company’s board of directors, on May 14, 2019, Mr. Nathanielsz was granted a $460,000 AUD ($329,038
USD) bonus for accomplishments achieved while serving as the Company’s Chief Executive Officer during the fiscal year ended
June 30, 2019 with $200,000 AUD ($143,060 USD) of such bonus payable by the Corporation to the CEO throughout the Corporation’s
2019 fiscal year as the Corporation’s cash resources allow, with the remaining $260,000 AUD ($185,978 USD) of such bonus
to be deferred by the CEO until a future date when the Corporation’s cash resources allow for such payment, as agreed to
by the CEO. A total of $90,000 AUD ($64,377 USD) in payments were made in the year ended June 30, 2019. During the fiscal year
ended June 30, 2019, an additional $219,954 AUD ($157,333) was paid in relation to the bonus awarded to Mr. Nathanielsz on March
16, 2018. Such bonus has now been fully paid to Mr. Nathanielsz.
New
Employment and Services Agreements with Management
Amended
and Restated Employment Agreement ― On May 14, 2019 (the “Effective Date”), the Company entered into an Amended
and Restated Employment Agreement (the “Employment Agreement”) with James Nathanielsz, the Company’s Chief Executive
Officer, Chairman, acting Chief Financial Officer and a director, for a term of three years, subject to automatic one-year renewals,
at an annual salary of $400,000 AUD. Pursuant to the Employment Agreement, Mr. Nathanielsz was granted options to purchase 39,000
shares of the Company’s common stock (the “Nathanielsz Options”), with an exercise price per share of $4.675
(110% of the closing market price of the Company’s common stock on May 14, 2019 (or $4.25), the date of approval of such
grant by the Company’s board of directors), (ii) 39,000 restricted stock units of the Company (the “Initial Nathanielsz
RSUs”), and (iii) an additional 39,000 restricted stock units of the Company (the “Additional Nathanielsz RSUs”).
Such options and restricted stock units were granted pursuant to the 2019 Plan (as defined below) approved by the Company’s
board of directors on the Effective Date. The Nathanielsz Options have a term of 10 years from the date of grant. 1/3rd
of the Nathanielsz Options shall vest every successive one-year anniversary following the Effective Date, provided, that on each
such vesting date Mr. Nathanielsz is employed by the Company and subject to the other provisions of the Employment Agreement.
The Initial Nathanielsz RSUs shall vest on the one-year anniversary of the Effective Date, subject to Mr. Nathanielsz’s
continued employment with the Company through such vesting date. The Additional Nathanielsz RSUs will vest as follows, subject
to Mr. Nathanielsz’s continued employment with the Company through the applicable vesting date: (i) 7,800 of the Additional
Nathanielsz RSUs shall vest upon the Company submitting Clinical Trial Application (the “CTA”) for PRP, the Company’s
lead product candidate (“PRP”), for a First-In-Human study for PRP (the “Study”) in an applicable jurisdiction
to be selected by the Company, (ii) 7,800 of the Additional Nathanielsz RSUs shall vest upon the CTA being approved in an applicable
jurisdiction, (iii) 7,800 of the Additional RSUs shall vest upon the Company completing an equity financing in the amount of at
least $4,000,000 in gross proceeds, (iv) 7,800 of the Additional Nathanielsz RSUs shall vest upon the shares of the Company’s
Common Stock being listed on a senior stock exchange (NYSE, NYSEMKT or NASDAQ), and (v) the remaining 7,800 of the Additional
Nathanielsz RSUs shall vest upon the Company enrolling its first patient in the Study. Each vested restricted stock unit shall
be settled by delivery to Mr. Nathanielsz of one share of the Company’s common stock and/or the fair market value of one
share of common stock in cash, at the sole discretion of the Company’s board of directors and subject to the 2019 Plan,
on the first to occur of: (i) the date of a Change of Control (as defined in the Employment Agreement), (ii) the date that is
ten business days following the vesting of such restricted stock unit, (iii) the date of Mr. Nathanielsz’s death or Disability
(as defined in the Employment Agreement), and (iv) Mr. Nathanielsz’s employment being terminated either by the Company without
Cause or by Mr. Nathanielsz for Good Reason (each as defined in the Employment Agreement). In the event of a Change of Control,
any unvested portion of the Nathanielsz Options and such restricted stock units shall vest immediately prior to such event.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
The
78,000 restricted stock units were valued at the fair value of $4.25 per unit or $331,500 based on the quoted trading price on
the date of grant. The 39,000 stock options were valued using a Black-Scholes model with the following assumptions: stock price
at valuation date of $4.25 based on quoted trading price on date of grant, exercise price of $4.65, dividend yield of zero, years
to maturity of 10.00, a risk free rate of 2.42%, and expected volatility 268% for a total value of $165,747 (see Note 8 –
Stockholders’ Deficit).
Amended
and Restated Services Agreement ― On the Effective Date, the Company also entered into an Amended and Restated Services
Agreement (the “Services Agreement”) with Dr. Kenyon, the Company’s Chief Scientific Officer and a director,
for a term of three years, subject to automatic one-year renewals, at an annual salary of $54,000 AUD. In connection with the
execution of the Services Agreement, Dr. Kenyon was designated as an executive officer of the Company and assumed a more active
executive role with the Company. Pursuant to the Services Agreement, Dr. Kenyon was granted options to purchase 19,500 shares
of the Company’s common stock (the “Kenyon Options”), with an exercise price per share of $4.25 (100% of the
closing market price of the Company’s common stock on May 14, 2019, the date of approval of such grant by the Company’s
board of directors), (ii) 19,500 restricted stock units of the Company (the “Initial Kenyon RSUs”), and (iii) an additional
19,500 restricted stock units of the Company (the “Additional Kenyon RSUs”). Such options and restricted stock units
were granted pursuant to the 2019 Plan (as defined below) approved by the Company’s board of directors on the Effective
Date. The Kenyon Options have a term of 10 years from the date of grant. 1/3rd of the Kenyon Options shall vest every
successive one-year anniversary following the Effective Date, provided, that on each such vesting date Dr. Kenyon is employed
by the Company and subject to the other provisions of the Services Agreement. The Initial Kenyon RSUs shall vest on the one-year
anniversary of the Effective Date, subject to Dr. Kenyon’s continued employment with the Company through such vesting date.
The Additional Kenyon RSUs will vest as follows, subject to Dr. Kenyon’s continued employment with the Company through the
applicable vesting date: (i) 4,875 of the Additional Kenyon RSUs shall vest upon the Company submitting the CTA for PRP for the
Study in an applicable jurisdiction to be selected by the Company, (ii) 4,875 of the Additional Kenyon RSUs shall vest upon the
Company completing an equity financing in the amount of at least $4,000,000 in gross proceeds, (iii) 4,875 of the Additional Kenyon
RSUs shall vest upon the shares of the Company’s Common Stock being listed on a senior stock exchange (NYSE, NYSEMKT or
NASDAQ), and (iv) the remaining 4,875 of the Additional Kenyon RSUs shall vest upon the Company enrolling its first patient in
the Study. Each vested Kenyon RSU shall be settled by delivery to Mr. Kenyon of one share of the Company’s common stock
and/or the fair market value of one share of common stock in cash, at the sole discretion of the Company’s board of directors
and subject to the Plan, on the first to occur of: (i) the date of a Change of Control (as defined in the Services Agreement),
(ii) the date that is ten business days following the vesting of such Kenyon RSU, (iii) the date of Dr. Kenyon’s death or
Disability (as defined in the Services Agreement), and (iv) Dr. Kenyon’s employment being terminated either by the Company
without Cause or by Dr. Kenyon for Good Reason (as defined in the Services Agreement). In the event of a Change of Control (as
defined in the Services Agreement), 50% of any unvested portion of the Kenyon Options and the Kenyon RSUs shall vest immediately
prior to such event.
The
39,000 restricted stock units were valued at the fair value of $4.25 per unit or $165,750 based on the quoted trading price on
the date of grant. The 19,500 stock options were valued using a Black-Scholes model with the following assumptions: stock price
at valuation date of $4.25 based on quoted trading price on date of grant, exercise price of $4.25, dividend yield of zero, years
to maturity of 10.00, a risk free rate of 2.42%, and expected volatility 268% for a total value of $82,873 (see Note 8 –
Stockholders’ Deficit).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
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, 2019.
The
Company currently primarily relies on funding from two convertible debt lenders. Proceeds received in the year from each of the
two lenders were $1,577,018 and $951,900, respectively, which represents approximately 55% and 33%, respectively of total proceeds
received by the Company during fiscal year 2018.
The
Company currently primarily relies on funding from three convertible debt lenders. Proceeds received in the year from each of
the three lenders were $621,000, $362,000 and $200,000, respectively, which represents approximately 45%, 26% and 15%, respectively
of total proceeds received by the Company during fiscal year 2019.
Receivable
Concentration
As
of June 30, 2019 and 2018, the Company’s receivables were 100% related to reimbursements on GST taxes paid.
Patent
and Patent Concentration
The
Company has filed multiple patent applications relating to its lead product, PRP. The Company’s lead patent application
has been granted and remains in force in the United States, Belgium, Czech Republic, Denmark, France, Germany, Ireland, Italy,
Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein, Turkey, United Kingdom, Australia, China, Japan, Indonesia,
Israel, New Zealand, Singapore, Malaysia, South Africa, Mexico, Republic of Korea and India. In Brazil and Canada, the patent
application remains under examination.
In
2016 and early 2017, we filed other patent applications. Three applications were filed under the Patent Cooperation Treaty (the
“PCT”). The PCT assists applicants in seeking patent protection by filing one international patent application under
the PCT, applicants can simultaneously seek protection for an invention in over 150 countries. Once filed, the application is
placed under the control of the national or regional patent offices, as applicable, in what is called the national phase. One
of the PCT applications filed in November 2016, entered national phase in July 2018 and another PCT application is currently entering
national phase in August 2018. A third PCT application entered the national phase in October 2018.
Further
patent applications are expected to be filed to capture and protect additional patentable subject matter based on the Company’s
field of technology relating to pharmaceutical compositions of proenzymes for treating cancer.
Foreign
Operations
As
of June 30, 2019 and 2018, the Company’s operations are based in Camberwell, Australia, however the majority of research
and development is being conducted in the European Union.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
On
July 22, 2016, the Company formed a wholly owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the
purpose of submitting an orphan drug application with the European Medicines Agency as a small and medium-sized enterprise. As
of June 30, 2019, there has been no activity within this entity.
NOTE
12 - DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Derivative
Financial Instruments:
The
Company applies the provisions of ASC 815-40, Contracts in Entity’s Own Equity, under which convertible instruments
and warrants, which contain terms that protect holders from declines in the stock price (reset provisions), may not be exempt
from derivative accounting treatment. As a result, warrants and embedded conversion options in convertible debt are recorded as
a liability and are revalued at fair value at each reporting date. If the fair value of the warrants exceeds the face value of
the related debt, the excess is recorded as change in fair value in operations on the issuance date. The Company had $9,000 and
$429,000 of convertible debt, which is treated as derivative instruments outstanding at June 30, 2019 and 2018 respectively. The
Company had 0 and 12,000 warrants treated as derivatives at June 30, 2019 and 2018 respectively.
The
Company calculates the estimated fair values of the liabilities for derivative instruments using the Binomial Trees Method. The
closing price of the Company’s common stock at June 28, 2019, the last trading day of the fiscal year ended June 30, 2019,
was $6.00. Volatility, expected remaining term and risk free interest rates used to estimate the fair value of derivative liabilities
at June 30, 2019 are indicated in the table that follows. The expected term is equal to the remaining term of the warrants or
convertible instruments and the risk free rate is based upon rates for treasury securities with the same term.
Warrants
|
|
June
30, 2018
|
|
|
June
30, 2019
|
|
Volatility
|
|
|
110
|
%
|
|
|
N/A
|
|
Expected
remaining term
|
|
|
.25
|
|
|
|
N/A
|
|
Risk-free
interest rate
|
|
|
1.93
|
%
|
|
|
N/A
|
|
Expected
dividend yield
|
|
|
None
|
|
|
|
N/A
|
|
Convertible
Debt
|
|
Initial
Valuations
|
|
|
June
30, 2018
|
|
|
June
30, 2019
|
|
Volatility
|
|
320
|
%
|
|
|
191
- 221
|
%
|
|
|
355
|
%
|
Expected
remaining term
|
|
1.00
|
|
|
|
0.56
- 1.1
|
|
|
|
0.11
- 0.90
|
|
Risk-free
interest rate
|
|
2.32
|
%
|
|
|
2.11
- 2.33
|
%
|
|
|
1.92
- 2.15
|
%
|
Expected
dividend yield
|
|
None
|
|
|
|
None
|
|
|
|
None
|
|
Fair
Value Measurements:
The
Company measures and reports at fair value the liability for derivative instruments. The fair value liabilities for price adjustable
warrants and embedded conversion options have been recorded as determined utilizing the Binomial Trees model. The following tables
summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2019:
|
|
Balance
at
June 30, 2019
|
|
|
Quoted
Prices
in
Active
Markets
for
Identical
Assets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
|
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Embedded
conversion option liabilities
|
|
$
|
698,264
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
698,264
|
|
Total
|
|
$
|
698,264
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
698,264
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
The
following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as
of June 30, 2018:
|
|
Balance
at
June 30, 2018
|
|
|
Quoted
Prices
in Active
Markets for
Identical Assets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
|
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Embedded
conversion option liabilities
|
|
$
|
371,532
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
371,532
|
|
Total
|
|
$
|
371,532
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
371,532
|
|
The
following is a roll forward for the years ended June 30, 2019 and 2018 of the fair value liability of price adjustable derivative
instruments:
|
|
Fair
Value of
|
|
|
|
Liability
for
|
|
|
|
Derivative
|
|
|
|
Instruments
|
|
Balance
at June 30, 2017
|
|
$
|
881,172
|
|
Effects
of foreign currency exchange rate changes
|
|
|
38
|
|
Reductions
due to conversions
|
|
|
(861,695
|
)
|
Reductions
due to repayment of debt
|
|
|
(199,339
|
)
|
Initial
fair value of embedded conversion option derivative liability recorded as debt discount
|
|
|
543,744
|
|
Initial
fair value of embedded conversion option derivative liability recorded as change in fair value of embedded conversion option
|
|
|
313,694
|
|
Change
in fair value included in statements of operations
|
|
|
(306,082
|
)
|
Balance
at June 30, 2018
|
|
|
371,532
|
|
Reductions
due to repayment of debt
|
|
|
(936,650
|
)
|
Reduction
due to conversions
|
|
|
(1,388,764
|
)
|
Initial
fair value of embedded conversion option derivative liability recorded as debt discount
|
|
|
180,000
|
|
Initial
fair value of embedded conversion option derivative liability recorded as change in fair value of embedded conversion option
|
|
|
382,944
|
|
Change
in fair value included in statements of operations
|
|
|
2,089,202
|
|
Balance
at June 30, 2019
|
|
$
|
698,264
|
|
NOTE
13 – SUBSEQUENT EVENTS
On
July 19, 2019, pursuant to a consulting agreement 20,000 shares of common stock were issued to the contractor as compensation
for services rendered.
Note
Conversions
On
July 10, 2019, pursuant to a conversion notice, $16,500 in principal and $2,031 in interest was converted at $0.91 per
share into 20,454 shares of common stock.
On
August 8, 2019, pursuant to a conversion notice, $21,000 in principal and $2,720.67 in interest was converted at $0.798 per share
into 29,725 shares of common stock.
On
August 8, 2019, pursuant to a conversion notice, $28,000 in principal and $1,859.51 in interest was converted at $0.8113 per share
into 36,804 shares of common stock.
On
September 4, 2019, pursuant to a conversion notice, $20,000 in principal and $2,711 in interest was converted at $0.63
per share into 36,049 shares of common stock.
On
September 9, 2019, pursuant to a conversion notice, $7,820 in principal and $574 in interest was converted at $0.63 per share
into 13,360 shares of common stock.
On
September 18, 2019, pursuant to a conversion notice, $18,000 in principal and $2,496 in interest was converted at $0.45 per share
into 45,547 shares of common stock.
July
3, 2019 Securities Purchase Agreement - Power Up Lending
Effective
July 3, 2019, the Company entered into a securities purchase agreement with Power Up Lending Group Ltd. (“Power Up”),
pursuant to which Power Up purchased a convertible promissory note (the “July 2019 Power Up Note”) from the Company
in the aggregate principal amount of $78,000, such principal and the interest thereon convertible into shares of the Company’s
common stock at the option of Power Up. The transaction closed on July 3, 2019 and the Company received payment on July 8, 2019
in the amount of $78,000, of which $2,500 was paid directly toward legal fees and $500 to Power Up for due diligence fees resulting
in net cash proceeds of $75,000.
The
maturity date of the July 2019 Power Up Note is July 3, 2020. The July 2019, Power Up Note bears interest at a rate of 8% per
annum, which interest may be paid by the Company to Power Up in shares of the Company’s common stock, but shall not be payable
until the July 2019 Power Up Note becomes payable, whether at the maturity date or upon acceleration or by prepayment.
Additionally,
Power Up has the option to convert all or any amount of the principal face amount of the July 2019 Power Up Note, starting on
December 30, 2019 and ending on the later of the maturity date and the date the Default Amount, which is an amount equal to 150%
of an amount equal to the then outstanding principal amount of the July 2019 Power Up Note plus any interest accrued, is paid
if an event of default occurs, for shares of the Company’s common stock at the then-applicable conversion price.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
The
conversion price for the July 2019 Power Up Note shall be $3.25, subject to certain Market Price (as defined below) adjustment.
If the Market Price is greater than or equal to $5.00, the conversion price shall be the greater of 65% of the Market Price (“Variable
Conversion Price”) and $3.25. In the event Market Price is less than $5.00, the conversion price shall be the Variable Conversion
Price. As defined in the July 2019 Power Up Note, the “Market Price” shall be the average of the lowest three closing
bid prices during the ten day trading period prior to and including the day the Company receives a notice of conversion from Power
Up on the electronic quotation system or applicable principal securities exchange or trading market or, if no closing bid price
of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for
such security that are listed in the “pink sheets” during the ten prior trading days, including the day upon which
the Company receives a notice of conversion from Power Up. Notwithstanding the foregoing, Power Up shall be restricted from effecting
a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Power Up and
its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock.
July
30, 2019 Securities Purchase Agreement - Odyssey Capital Funding LLC
Effective
July 30, 2019, the Company entered into a securities purchase agreement with Odyssey Capital Funding LLC,. (“Odyssey”),
pursuant to which Odyssey purchased a convertible promissory note (the “July 2019 Odyssey Note”) from the Company
in the aggregate principal amount of $320,000, such principal and the interest thereon convertible into shares of the Company’s
common stock at the option of Odyssey. The July 2019 Odyssey Note contains an original discount of $25,000. The transaction closed
on July 30, 2019 and the Company received payment on August 1, 2019 in the amount of $295,000, of which $10,000 was paid directly
toward legal fees, resulting in net cash proceeds of $285,000.
The
maturity date of the July 2019 Odyssey Note is July 30, 2020. The July 2019 Odyssey Note bears interest at a rate of 10% per annum,
which interest may be paid by the Company to Odyssey in shares of the Company’s common stock, but shall not be payable until
the July 2019 Odyssey Note becomes payable, whether at the maturity date or upon acceleration or by prepayment.
Additionally,
Odyssey has the option to convert all or any amount of the principal face amount of the July 2019 Odyssey Note, starting on January
31, 2020 and ending on the later of the maturity date and the date the Default Amount, which is an amount equal to 120% of an
amount equal to the then outstanding principal amount of the July 2019 Odyssey Note plus any interest accrued from July 30, 2019
at the default interest rate of 24% per annum, is paid if an event of default occurs, for shares of the Company’s common
stock at the then-applicable conversion price.
The
conversion price for the July 2019 Odyssey Note shall be equal to 65% of the lowest closing bid price of the Common Stock as reported
on the OTC Markets on which the Company’s shares are then traded or any exchange upon which the Common Stock may be traded
in the future, for the ten prior trading days including the day upon which a Notice of Conversion is received by the Company.
Common
Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of
the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Holder to the Company).
August
30, 2019 Securities Purchase Agreement – Auctus Fund, LLC
Effective
August 30, 2019, the Company entered into a securities purchase agreement with Auctus Fund, LLC (“Auctus”), pursuant
to which Auctus purchased a convertible promissory note (the “August 2019 Auctus Note”) from the Company in the aggregate
principal amount of $550,000, such principal and the interest thereon convertible into shares of the Company’s common stock
at the option of Auctus. The transaction closed on August 30, 2019 and the Company received payment on September 4, 2019 in the
amount of $550,000, of which $5,000 was paid directly toward legal fees and $40,000 to Auctus for due diligence fees resulting
in net cash proceeds of $505,000.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
The
maturity date of the August 2019 Auctus Note is August 30, 2020. The August 2019 Auctus Note bears interest at a rate of 10% per
annum, which interest may be paid by the Company to Auctus in shares of the Company’s common stock, but shall not be payable
until the August 2019 Auctus Note becomes payable, whether at the maturity date or upon acceleration or by prepayment. The August
2019 Auctus Note may not be prepaid without the written consent of Auctus. Any amount of principal or interest which is not paid
when due shall bear interest at the rate of 24% per annum.
Additionally,
Auctus has the option to convert all or any amount of the principal face amount of the August 2019 Auctus Note, at any time following
the issue date and ending on the later of the maturity date and the date the Default Amount, which is an amount equal to 125%
of an amount equal to the then outstanding principal amount of the August 2019 Auctus Note (but not less than $15,000) plus any
interest accrued from August 30, 2019 at the default interest rate of 24% per annum, is paid if an event of default occurs, for
shares of the Company’s common stock at the then-applicable conversion price.
The
conversion price for the August 2019 Auctus Note shall be the Variable Conversion Price, being 60% of the Market Price. Notwithstanding
the foregoing, Auctus shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s
common stock beneficially owned by Auctus and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common
stock.
In
connection with the issuance of the August 2019 Auctus Note, the Company issued common stock purchase warrants to Auctus to purchase
450,000 shares of the Company’s common stock (the “First Warrant”) as a commitment fee upon the terms and subject
to the limitations and conditions set forth in such First Warrant at an “Exercise Price” of $2.25. In connection with
the issuance of the Note, the Company shall issue a common stock purchase warrant to Buyer to purchase 300,000 shares of the Company’s
common stock (the “Second Warrant”) as a commitment fee upon the terms and subject to the limitations and conditions
set forth in such Second Warrant at an “Exercise Price” of $3.33. In connection with the issuance of the Note, the
Company shall issue a common stock purchase warrant to Buyer to purchase 225,000 shares of the Company’s common stock (the
“Third Warrant”) as a commitment fee upon the terms and subject to the limitations and conditions set forth in such
Third Warrant at an “Exercise Price” of $4.50. The First Warrant, Second Warrant, and Third Warrant shall collectively
be referred as the “Warrants”. The Warrants have an “Exercise Period” of five years form the date of issuance
being August 30, 2019.
October
1, 2019 Securities Purchase Agreement – GW Holdings Group, LLC
Effective
October 1, 2019, the Company entered into a securities purchase agreement with GW Holdings Group, LLC. (“GW Holdings”),
pursuant to which GW Holdings purchased a convertible promissory note (the “October 2019 GW Holdings Note”) from the
Company in the aggregate principal amount of $131,000, such principal and the interest thereon convertible into shares of the
Company’s common stock at the option of GW Holdings. The transaction closed on October 1, 2019 and the Company received
payment on October 3, 2019 in the amount of $131,000, of which $6,000 was paid directly toward legal fees resulting in net cash
proceeds of $125,000.
The
maturity date of the October 2019 GW Holdings is October 1, 2020. The October 2019 GW Holdings Note bears interest at a rate of
8% per annum, which interest may be paid by the Company to GW Holdings in shares of the Company’s common stock, but shall
not be payable until the October 2019 GW Holdings Note becomes payable, whether at the maturity date or upon acceleration or by
prepayment.
Additionally,
GW Holdings has the option to convert all or any amount of the principal face amount of the October 2019 GW Holdings Note at any
time from the date of issuance and ending on the later of the maturity date and the date the Default Amount, which is an amount
between 110% and 150% of an amount equal to the then outstanding principal amount of the October 2019 GW Holdings Note plus any
interest accrued, is paid if an event of default occurs, for shares of the Company’s common stock at the then-applicable
conversion price.
The
conversion price for the October 2019 GW Holdings Note shall be equal to a 40% discount of the lowest closing bid price (“Lowest
Trading Price”) of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of Conversion,
including the day upon which a Notice of Conversion is received. Notwithstanding the foregoing, GW Holdings shall be restricted
from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned
by GW Holdings and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock which may be increased
up to 9.99% upon 60 days prior written notice by the GW Holdings to the Company.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2019 and 2018
October
3, 2019 Securities Purchase Agreement – Crown Bridge Partners, LLC
Effective
October 3, 2019, the Company entered into a securities purchase agreement with Crown Bridge Partners, LLC. (“Crown Bridge”),
pursuant to which Crown Bridge purchased a convertible promissory note (the “October 2019 Crown Bridge Note”) from
the Company in the aggregate principal amount of $108,000, with an original issue discount of $5,000; such principal and the interest
thereon convertible into shares of the Company’s common stock at the option of Crown Bridge. The transaction closed on October
3, 2019 and the Company received payment on October 8, 2019 in the amount of $103,000, of which $3,000 was paid directly toward
legal fees resulting in net cash proceeds of $100,000.
The
maturity date of the October 2019 Crown Bridge is October 3, 2020. The October 2019 Crown Bridge Note bears interest at a rate
of 10% per annum, which interest may be paid by the Company to Crown Bridge in shares of the Company’s common stock, but
shall not be payable until the October 2019 Crown Bridge Note becomes payable, whether at the maturity date or upon acceleration
or by prepayment.
Additionally,
Crown Bridge has the option to convert all or any amount of the principal face amount of the October 2019 Crown Bridge Note at
any time from the date of issuance and ending on the later of the maturity date and the date the Default Amount, which is an amount
of 140% of an amount equal to the then outstanding principal amount of the October 2019 Crown Bridge Note plus any interest accrued,
is paid if an event of default occurs, for shares of the Company’s common stock at the then-applicable conversion price.
The
conversion price for the October 2019 Crown Bridge Note shall be equal to a 40% discount of the lowest closing bid price (“Lowest
Trading Price”) of the Common Stock for the ten trading days immediately prior to the Conversion Date in accordance with
the Notice of Conversion. Notwithstanding the foregoing, Crown Bridge shall be restricted from effecting a conversion if such
conversion, along with other shares of the Company’s common stock beneficially owned by Crown Bridge and its affiliates,
exceeds 4.99% of the outstanding shares of the Company’s common stock which may be increased up to 9.99% upon 60 days prior
written notice by the Crown Bridge to the Company.