NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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, 2020, 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.
This patent 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. 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. A second application
filed in January 2017 entered the national phase commencing July 2018. A third application entered the national phase in October
2018.
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.
Changes
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 been effected on March 13, 2020.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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 from inception through June 30, 2020.
Use
of Estimates
The
preparation of financial statements in conformity with the accounting principles generally accepted in the United States of America
(“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates
in the accompanying consolidated financial statements include the estimates of useful lives for depreciation, valuation of the
operating lease liability and related right-of-use asset, valuation of derivatives, 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 wholly owned subsidiary’s functional currency is the Australian dollar (AUD). For financial reporting purposes,
the Australian dollar has been translated into the Company’s reporting currency which is the United States dollar ($) and/or
(USD). Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are
translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each
historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to
period are included as a component of stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss).”
Gains and losses resulting from foreign currency transactions are included in the statements of operations and comprehensive income
(loss) as 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 year ended June 30, 2020, the Company recognized an exchange loss of approximately $133,000 on intercompany loans made by
the parent to the subsidiary which have not been repaid as at June 30, 2020.
As
of June 30, 2020 and 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:
|
|
June
30, 2020
|
|
|
June
30, 2019
|
|
Exchange rate on balance
sheet dates
|
|
|
|
|
|
|
|
|
USD : AUD
exchange rate
|
|
|
0.6891
|
|
|
|
0.7153
|
|
|
|
|
|
|
|
|
|
|
Average exchange rate
for the period
|
|
|
|
|
|
|
|
|
USD : AUD exchange
rate
|
|
|
0.6742
|
|
|
|
0.7009
|
|
Change
in Accumulated Other Comprehensive Income (Loss) by component during the years ended June 30, 2020 and 2019 was as follows:
|
|
Foreign
Currency Items:
|
|
Beginning balance, June 30,
2018
|
|
$
|
357,929
|
|
Foreign
currency translation gain
|
|
|
709,069
|
|
Balance, June 30, 2019
|
|
|
1,066,998
|
|
Foreign
currency translation gain
|
|
|
200,673
|
|
Ending balance,
June 30, 2020
|
|
$
|
1,267,671
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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, 2020 or June 30, 2019.
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 patent costs as long as
we are in the startup stage. Accordingly, as the Company’s products are not currently approved for market, all patent costs
incurred from 2013 through June 30, 2020 were expensed immediately. This practice of expensing patent costs immediately ends when
a product receives market authorization from a government regulatory agency.
Impairment
of Long-Lived Assets
In
accordance with ASC 360-10, “Long-lived assets,” which include property and equipment and intangible assets,
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of
an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount
of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future
discounted cash flows or market value, if readily determinable.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
Employee
Benefit/Liability
Liabilities
arising in respect of wages and salaries, accumulated annual leave, accumulated long service leave and any other employee benefits
expected to be settled within twelve months of the reporting date are measured based on the employees remuneration rates applicable
at the reporting date. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow
to be made in respect of services provided by employees up to the reporting date. All employee liabilities are owed within the
next twelve months.
Australian
Goods and Services Tax (“GST”)
Revenues,
expenses and balance sheet items are recognized net of the amount of GST, except payable and receivable balances which are shown
inclusive of GST. The GST incurred is payable on revenues to, and recoverable on purchases from, the Australian Taxation Office.
Cash
flows are presented in the statements of cash flow on a gross basis, except for the GST component of investing and financing activities,
which are disclosed as operating cash flows.
As
of June 30, 2020 and 2019, the Company was owed $2,015 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 or around the time of conversion. The Company treats these convertible notes as stock settled debt under ASC 480, “Distinguishing
Liabilities from Equity” and measures the fair value of the notes at the time of issuance, which is the result of the
share price discount at the time of conversion and records the put premium as interest expense.
Income
Taxes
The
Company is governed by Australia and United States income tax laws, which are administered by the Australian Taxation Office and
the United States Internal Revenue Service, respectively. The Company follows ASC 740 “Accounting for Income Taxes,”
when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements
and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws
and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in deferred tax assets and liabilities.
The
Company follows ASC 740, Sections 25 through 60, “Accounting for Uncertainty in Income Taxes.” These sections
provide detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized
in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective
date to be recognized upon the adoption of ASC 740 and in subsequent periods.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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, 2020 and 2019 were $179,987 and $260,335,
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, 2020 and 2019, the Company applied for, and received from the Australian Taxation Office,
a research and development tax credit in the amount of $134,728 and $115,437, 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”. 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.
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.
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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.
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, there were
59 warrants outstanding, 59,644 stock options and 10 convertible notes payable, which notes are convertible into approximately
1,810,347 shares of the Company’s common stock. As of June 30, 2020, there were 151,170,514 warrants outstanding, 59,644
stock options and 11 convertible notes payable, which notes are convertible into approximately 439,113,281 shares of the Company’s
common stock. 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.
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 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, 2020, the Company had no revenues, had a net loss of $4,740,723
and had net cash used in operations of $1,849,589. Additionally, as of June 30, 2020, the Company had a working capital deficit,
stockholders’ deficit and accumulated deficit of $3,670,921, $3,641,425 and $55,781,770, 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.
Successful
completion of the Company’s development program and, ultimately, the attainment of profitable operations are dependent upon
future events, including obtaining adequate financing to fulfill its development activities, acceptance of the Company’s
patent applications, obtaining additional sources of suitable and adequate financing and ultimately achieving a level of sales
adequate to support the Company’s cost structure and business plan. The Company’s ability to continue as a going concern
is also dependent on its ability to further develop and execute on its business plan. However, there can be no assurances that
any or all of these endeavors will be successful.
In
March 2020, the outbreak of COVID-19 (coronavirus) caused by a novel strain of the coronavirus was recognized as a pandemic by
the World Health Organization, and the outbreak has become increasingly widespread in the United States, Europe and Australia,
including in each of the areas in which the Company operates. The COVID-19 (coronavirus) outbreak has had a notable impact on
general economic conditions, including but not limited to the temporary closures of many businesses, “shelter in place”
and other governmental regulations, reduced business and consumer spending due to both job losses, reduced investing activity
and M&A transactions, among many other effects attributable to the COVID-19 (coronavirus), and there continue to be many unknowns.
While to date the Company has not been required to stop operating, management is evaluating its use of its office space, virtual
meetings and the like. The Company continues to monitor the impact of the COVID-19 (coronavirus) outbreak closely. The extent
to which the COVID-19 (coronavirus) outbreak will impact our operations, ability to obtain financing or future financial results
is uncertain.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
NOTE
3 – PROPERTY AND EQUIPMENT
Property
and equipment consist of the following as of June 30,
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Office
equipment at cost
|
|
$
|
26,299
|
|
|
$
|
26,749
|
|
Less:
Accumulated depreciation
|
|
|
(20,552
|
)
|
|
|
(18,332
|
)
|
|
|
|
|
|
|
|
|
|
Total
property, plant, and equipment
|
|
$
|
5,747
|
|
|
$
|
8,417
|
|
Depreciation
expense for the years ended June 30, 2020 and 2019 were $2,473 and $2,306, 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, 2020 and 2019 is $30,639 and $31,164, respectively. The Company plans to repay the advances as its cash resources
allow. (see Note 10)
NOTE
5 – LOANS AND NOTES PAYABLE
Loans
from Directors and Officer - Related Parties
Loans
from the Company’s directors and officer at June 30, 2020 and 2019 were $50,993 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 years ended June 30,
2020 and 2019, respectively. (See Note 10)
NOTE
6 – CONVERTIBLE NOTES
The
Company’s convertible notes outstanding at June 30, 2020 and 2019 were as follows:
|
|
June
30, 2020
|
|
|
June
30, 2019
|
|
Convertible
notes and debenture
|
|
$
|
1,029,496
|
|
|
$
|
1,076,785
|
|
Unamortized discounts
|
|
|
(126,667
|
)
|
|
|
(131,893
|
)
|
Accrued interest
|
|
|
80,101
|
|
|
|
99,482
|
|
Premium, net
|
|
|
574,804
|
|
|
|
613,003
|
|
Convertible notes,
net
|
|
$
|
1,557,734
|
|
|
$
|
1,657,377
|
|
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 was due on December 12, 2017, unless certain conditions were 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
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 12 Note and the December 12 Eagle Back-End Note were
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 then became convertible. The December 12 Note and the December 12 Eagle
Back-End Note were 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. There was no outstanding
balance as of June 30, 2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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 was due September 27, 2017, unless certain conditions were 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 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
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 then became convertible. The January 2017 Eagle Note and the January 2017 Eagle
Back-End Note were 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. There was no outstanding balance as of June 30,
2019.
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 were 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 then became convertible. The March 2017 Eagle Note and the March 2017 Eagle Back-End Note were
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. There was no outstanding balance as of June 30, 2019.
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 was due August 8, 2018, unless certain conditions were 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 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 August 2017 Eagle Note and the August 2017 Eagle Back-End Note were 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 then became convertible. The August 2017 Eagle Note and the August 2017 Eagle Back-End Note were
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. There was no outstanding balance as of June 30, 2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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 was due June 25, 2018, unless certain conditions were
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 had 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 were 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 then became convertible. The October 2017 Eagle Note and the October 2017 Eagle
Back-End Note were 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. There was no outstanding balance as of June 30, 2019.
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 contained 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 was in discussions with Eagle Equities to extend the maturity
date. The December 2017 Eagle Note bore interest at a rate of 8% per annum, which interest were to 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 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 recorded $0 of accrued interest for the December 2017 Eagle Note and total
principal outstanding as of June 30, 2020 under the December 2017 Eagle Note was $0 following conversion of the remaining principal
$171,965 and $24,751 of accrued interest during the fiscal year to June 30, 2020. Accordingly, there was no outstanding balance
as of June 30, 2020.
Eagle
Equities had 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 was 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, and a further $114,643 was released to additional paid in capital following conversion
of the remaining principal of $171,965 during the fiscal year to June 30, 2020.
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. In April 2020, Eagle
Equities agreed to waive the 24% default interest on this note.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 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 was on 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.
Additionally,
Eagle Equities had 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 was
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.
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.
No
payments or conversions occurred in fiscal 2018.
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. There was no outstanding balance as of June 30, 2019.
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 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 had 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 was treated as stock settled debt under ASC 480
and accordingly, the Company recorded a $50,000 put premium of which $50,000 was released in fiscal 2020 to additional paid in
capital following the full conversion of the note.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
The
Company 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 recorded $0 of accrued interest and the total principal outstanding under the July 2018 Eagle Note
was $0 as of June 30, 2020 following conversion of $75,000 of principal and $9,300 of accrued interest during the fiscal year
ended June 30, 2020. 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 was 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. In April 2020, Eagle
Equities agreed to waive the 24% default interest on this note.
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 29, 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 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 then became convertible.
The August 2018 Eagle Note is treated as stock settled debt under ASC 480 and accordingly, the Company recorded a $70,000 put
premium of which $17,000 was released to additional paid in capital following conversion of principal during the fiscal year to
June 30, 2020.
The
Company 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 recorded $11,663 of accrued interest and the total principal outstanding under the August 2018
Eagle Note was $79,500 as of June 30, 2020 following conversion of $25,500 of principal and $3,788 of accrued interest during
the fiscal year ended June 30, 2020.
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. In April
2020, Eagle Equities agreed to waive the 24% default interest on this note, however, the note is currently past due.
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 bore 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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
Additionally,
Eagle Equities had 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. No prepayment was made as of such date. As a result, the October 2018
Eagle Note then became convertible. The October 2, 2018 Eagle Note was treated as stock settled debt under ASC 480 and accordingly,
the Company recorded a $140,000 put premium of which $140,000 was released to additional paid in capital following conversion
of principal during the year ended June 30, 2020.
The
Company 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 recorded $0 of accrued interest and the total principal outstanding under the October 2018 Eagle
Note was $0 as of June 30, 2020 following conversion of $210,000 of principal and $25,725 of accrued interest during the year
ended June 30, 2020. The Company had the right to prepay the October 2018 Eagle Note with certain penalties until March 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. In April 2020, Eagle
Equities agreed to waive the 24% default interest on this note.
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 bore 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.
Additionally,
Eagle Equities had 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 was treated as stock
settled debt under ASC 480 and accordingly, the Company recorded a $67,131 put premium of which $67,131 was released to additional
paid in capital following conversion of principal during the year ended June 30, 2020.
The
Company 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 Company recorded $0 of accrued interest and the total principal outstanding under the November 2018 Eagle
Note was $0 as of June 30, 2020 following conversion of $105,000 of principal and $12,832 of accrued interest during the year
ended June 30, 2020. The November 2018 Eagle Note may be prepaid with certain penalties by the Company until May 29, 2019. No
prepayment was made as of such 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. In April 2020, Eagle
Equities agreed to waive the 24% default interest on this note.
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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 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 Company has recorded $15,327 of accrued interest and the total principal outstanding under the November
2018 Eagle Note was $126,000 as of June 30, 2020. The December 2018 Eagle Note may be prepaid with certain penalties until June
22, 2019. No prepayment was made as of such 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. In April 2020, Eagle
Equities agreed to waive the 24% default interest on this note, however, the note is currently past due.
The
total principal amount outstanding under the above Eagle Equities financing agreements, specifically the December 12, 2016, the
January 27, 2017, the March 1, 2017, the October 25, 2017, the August 9, 2017, the December 29, 2017, the June 14, 2018, 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. The total principal amount outstanding under the above Eagle Equities financing
agreements, specifically the August 29, 2018 and the December 24, 2018 agreements was $205,500 as of June 30, 2020 and accrued
interest totaled $26,990.
GS
Capital Financing Agreements
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. There was no outstanding balance as of June 30,
2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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.
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. There was no outstanding balance as of June 30, 2019.
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. There was no outstanding balance as of June 30, 2019.
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, 2020 and 2019
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. There was no outstanding balance as of June 30, 2019.
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, matured 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 during the year ended June 30, 2020 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. $67,770 of
the put premium was released in respect of the October 2018 GS Back-End Note during the year ended June 30, 2020 following conversion
$106,000 of the principal balance.
The
total principal amount outstanding under the October 2018 GS Note, was $35,820 and accrued interest thereunder totaled $8,531
as of June 30, 2019 and was fully converted during the year ended June 30, 2020 with $3,601 of accrued interest remaining as of
June 30, 2020 (see Note 8 – 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 $0 and accrued
interest totaled $2,658 as of June 30, 2020 (see Note 8 – 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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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.
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 or the date the Default Amount is paid if an event
of default occurs, 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, 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 which was expensed in fiscal 2020.
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.
The
total principal amount outstanding under the above GS Capital financing agreement, specifically the July 24, 2017, the September
21, 2017, the March 23, 2018, the April 13, 2018, and the October 2, 2018 agreements was $141,820 and accrued interest totaled
$14,247 as of June 30, 2019. The total principal amount outstanding under the above GS Capital financing agreement, specifically
the January 22, 2020 GS Note, was $58,000 and accrued interest of $2,542 as of June 30, 2020.
Convertible
Note Issued with Consulting Agreement
August
10, 2017 Consulting Agreement
On
August 10, 2017, the Company entered into a consulting agreement, retroactive to May 16, 2017, with a certain consultant, pursuant
to which the consultant agreed to provide certain consulting and business advisory services in exchange for a $310,000 junior
subordinated convertible note. The maturity date of the August 10, 2017 Convertible Note was August 2019 and is currently past
due (see Note 9).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 leaving a principal balance owed of $9,000 at June 30, 2019. During the year ended
June 30, 2020, the consultant converted an additional $500 of principal and $5,248 of interest such that the remaining principal
outstanding and accrued interest under this note as of June 30, 2020 was $8,500 and $22,168, 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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
The
maturity date of the January 2018 Power Up Note was January 22, 2019. The January 2018 Power Up Note bore 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 had 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 or the date the Default Amount is paid if an event of default occurs,
which was 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 for shares of the Company’s common stock at the then-applicable conversion price.
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 was March 5, 2019. The March 2018 Power Up Note bore 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 or the date the Default Amount is paid if an event of default occurs,
which was 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 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 which was reflected in interest expense, there was no outstanding balance as of June 30, 2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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 or the date the Default Amount is paid if an event of default occurs, 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, 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 which was charged to interest expense. There was no outstanding balance as of June 30, 2019.
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 was August 28, 2019 (the “Maturity Date”). The August 2018 Power Up
Note bore 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.
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).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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 which was charged to interest expense. There was no outstanding balance as of June 30,
2019.
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 was July 3, 2020. The July 3, 2019, Power Up Note bore 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 had 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 is paid if an event of default
occurs, which was 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 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 initial total of $155,904
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
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 $0 and accrued interest of $0 as of June 30, 2020 following conversion of $78,000 of the principal balance and $3,120 of accrued
interest during the year ended June 30, 2020 (see Note 8 - Stockholders’ Deficit).
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
The
maturity date of the November 26, 2019 Power Up Note was November 26, 2020. The November 26, 2019, Power Up Note bore 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 is paid if an event of default occurs,
which was 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 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 initial total of $52,222
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
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 $0 and accrued interest of $0 as of June 30, 2020 following conversion of $43,000 of the principal balance and $1,720 of accrued
interest during the year ended June 30, 2020 (see Note 8 - Stockholders’ Deficit).
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 is paid if an event of default occurs,
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, 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 $314,406 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).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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.
The
total principal amount outstanding under the above Power Up financing agreement, specifically the January 7, 2020 Power Up Note,
was $75,000 and accrued interest of $2,869 as of June 30, 2020.
March
12, 2020 Power Up Lending Group Securities Purchase Agreement
Effective
March 12, 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 “March 12, 2020 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 March 12, 2020 and the Company received payment on March 5,
2020 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 March 12, 2020 Power Up Note is March 12, 2021. The March 12, 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 March 12, 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 March 12, 2020 Power Up Note, starting
on September 4, 2020 and ending on the later of the maturity date or the date the Default Amount is paid if an event of default
occurs, which is an amount equal to 150% of an amount equal to the then outstanding principal amount of the March 12, 2020 Power
Up Note plus any interest accrued, for shares of the Company’s common stock at the then-applicable conversion price.
The
conversion price for the March 12, 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 March 12, 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 initial total of $55,929
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
March 12, 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.
The
total principal amount outstanding under the above Power Up financing agreement, specifically the March 12, 2020 Power Up Note,
was $43,000 and accrued interest of $1,034 as of June 30, 2020 (see Note 8 - Stockholders’ Deficit).
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
The
maturity date of the June 2018 JSJ Note was June 26, 2019, unless extended for up to one year at JSJ’s discretion (the “Maturity
Date”). The June 2018 JSJ Note bore 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.
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 resulting in full repayment of the note and a full reduction of the put premium. The Company
incurred a penalty in the amount of $51,380 as a result of the pre-payment. There was no outstanding balance as of June 30, 2019.
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 was due February 29, 2019, unless certain conditions were 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 then became convertible.
The
maturity date of the July 2018 Coventry Note and the July 2018 Coventry Back-End Note was 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 were 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 were 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. There was no outstanding balance 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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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 was May 23, 2020 and bore interest at a rate of 8% per annum.
Additionally,
Redstart Holdings had 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
May 23, 2019 Redstart Holdings Note contained 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 June 30, 2020 total principal amount outstanding
and accrued interest totaled $0 and $0 respectively following conversion of $133,000 of the principal balance and $5,320 of accrued
interest during the year ended June 30, 2020.
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.
The
maturity date of the July 30, 2019 Odyssey Note was July 30, 2020. The July 2019 Odyssey Note bore 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 was treated as stock settled debt under ASC 480 and accordingly the Company recorded a $172,308 put premium.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
Additionally,
Odyssey had 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 or the date the Default Amount is paid if an event of default occurs,
which was 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 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 were 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 contained 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
$0 and accrued interest of $0 as of June 30, 2020 following conversion of $320,000 of the principal balance and $23,220 of accrued
interest during the year ended June 30, 2020 resulting in full repayment of the note and a full reduction of the put premium.
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 was August 30, 2020 and is past due as of the date of this filing. 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 or the date of payment of the Default
Amount if an event of default occurs, 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, 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 on
the date of conversion. 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 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 $375,905 using a simple binomial lattice model (see Note 8).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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
$358,965 and accrued interest of $486 as of June 30, 2020 following conversion of $191,035 of the principal balance and $43,176
of accrued interest during the year ended June 30, 2020. Accordingly, $127,356 of the put premium was released in respect of the
August 30, 2019 Auctus Note during the year ended June 30, 2020 following conversion of the principal balance.
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 or the date the Default Amount is paid if an event
of default occurs, 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, 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.
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 $30,000 and accrued interest of $1,776 as of June 30, 2020 following conversion of $101,000 of the principal balance
and $5,082 of accrued interest during the year ended June 30, 2020. Accordingly, $67,333 of the put premium was reclassed to additional
paid in capital in respect of the October 1, 2019 GW Holdings Note during the year ended June 30, 2020 following conversion of
the principal balance.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 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 or the date the Default Amount is paid if an
event of default occurs, 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, 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 $65,280 and accrued interest of $7,232 as of as of June 30, 2020 following conversion of $42,720 of the principal balance
during the year ended June 30, 2020. Accordingly, $28,480 of the put premium was released in respect of the October 3, 2019 Crown
Bridge Note during the year ended June 30, 2020 following conversion of the principal balance.
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 or the date the Default Amount is paid if an event
of default occurs, which is an amount between 120% and 150% of an amount equal to the then outstanding principal amount of the
January 13, 2020 Ader Alef Note plus any interest accrued, for shares of the Company’s common stock at the then-applicable
conversion price.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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.
The
total principal amount outstanding under the above Ader Alef financing agreement, specifically the January 13, 2020 Ader Alef
Note, was $110,250 and accrued interest of $4,073 as of June 30, 2020.
LG
Capital Securities Purchase Agreements
Effective
February 19, 2020, the Company entered into a securities purchase agreement with LG Capital Funding, LLC (“LG Capital”),
pursuant to which LG Capital purchased a convertible promissory note (the “February 19, 2020 LG Capital 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 LG Capital any time after the six month anniversary of the February 19, 2020 LG
Capital Note. The February 19, 2020 LG Capital Note contains an original discount of $3,750. The transactions contemplated by
the LG Capital Securities Purchase Agreement closed on March 4, 2020. Pursuant to the terms of the LG Capital Securities Purchase
Agreement, LG Capital deducted $2,500 from the principal payment due under the February 19, 2020 LG Capital Note at the time of
closing, to be applied to its legal expenses and the Company received net cash proceeds of $71,250 on March 25, 2020. The Company
intends to use the net proceeds from the February 19, 2020 LG Capital Note for general working capital purposes.
The
maturity date of the February 19, 2020 LG Capital Note is February 19, 2021. The February 19, 2020 LG Capital Note bears interest
at a rate of 8% per annum, which interest may be paid by the Company to LG Capital in shares of the Company’s common stock;
but shall not be payable until the February 19, 2020 LG Capital Note becomes payable, whether at the maturity date or upon acceleration
or by prepayment.
During
the first 60 to 180 days following the date of the note, the Company has the right to prepay the principal and accrued but unpaid
interest due under the February 19, 2020 LG Capital Note, together with any other amounts that the Company may owe the holder
under the terms of the note, at a premium ranging from 112% to 135% as defined in the note agreement. After this initial 180-day
period, the Company does not have a right to prepay the February 19, 2020 LG Capital Note.
The
conversion price for the February 19, 2020 LG Capital Note during the first 6 months the February 19, 2020 LG Capital Note is
in effect shall be fixed at $0.50 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, LG Capital shall be restricted
from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned
by LG Capital and its affiliates, exceeds 9.99% of the outstanding shares of the Company’s common stock. The note is treated
as stock settled debt under ASC 480 and accordingly the Company recorded a $40,385 put premium.
The
February 19, 2020 LG Capital 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 LG Capital financing agreement, specifically the February 19, 2020 LG Capital
Note, was $75,000 and accrued interest of $2,164 as of June 30, 2020.
Amortization
of debt discounts
The
Company recorded $728,904 and $243,850 of debt discounts (including warrants, derivatives, debt issue costs and original issue
discounts) related to the above note issuances during the years ended June 30, 2020 and 2019, respectively. The Company recorded
$836,724 and $767,000 of put premiums related to the above note issuances during the years ended June 30, 2020 and 2019, respectively.
The debt discounts are being amortized over the term of the debt and the put premiums are expensed on issuance of the debt with
the liability released to additional paid in capital on conversion of the principal.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
Amortization
of all debt discounts for the years ended June 30, 2020 and 2019 was $734,130 and $389,673, respectively.
The
Company reclassified $874,924 and $1,824,317 in put premiums to additional paid in capital following conversions during the years
ended June 30, 2020 and 2019, respectively.
NOTE
7 – INCOME TAXES
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, 2020.
The
reconciliation of income tax expense computed at the U.S. federal statutory rate of 21% to the income tax provision for the years
ended June 30, 2020 and 2019 is as follows:
|
|
Year
Ended
|
|
|
|
June
30, 2020
|
|
|
June
30, 2019
|
|
|
|
|
|
|
|
|
|
|
Taxes under statutory
US tax rates
|
|
$
|
(995,552
|
)
|
|
$
|
(1,209,258
|
)
|
Increase (decrease)
in valuation allowance
|
|
|
1,137,716
|
|
|
|
1,394,444
|
|
Prior period adjustment
|
|
|
(14,624
|
)
|
|
|
-
|
|
Foreign tax rate differential
|
|
|
(128,492
|
)
|
|
|
(186,286
|
)
|
Other
|
|
|
952
|
|
|
|
1,100
|
|
Income
tax (expense) benefit
|
|
$
|
-
|
|
|
$
|
-
|
|
On
March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic.
The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning
before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding
taxable years to generate a refund of previously paid income taxes. The Company is currently evaluating the impact of the CARES
Act, but due to sustained losses, the NOL carryback provision of the CARES Act would not yield a benefit to us.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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, 2020
|
|
|
June
30, 2019
|
|
Deferred
tax assets
|
|
|
|
|
|
|
|
|
Warrant
Derivative Liability
|
|
$
|
7,403
|
|
|
$
|
7,403
|
|
Accrued Expenses
|
|
|
297,086
|
|
|
|
198,193
|
|
Prepaid Investor Services
|
|
|
470,050
|
|
|
|
414,396
|
|
Non-cash interest
|
|
|
596,004
|
|
|
|
-
|
|
Intangibles (Intellectual
Property and Patent Cost)
|
|
|
240,428
|
|
|
|
212,881
|
|
Deferred Rent
|
|
|
1,969
|
|
|
|
-
|
|
Formation Expense
|
|
|
7,208
|
|
|
|
7,208
|
|
Net Operating Loss
carry forward
|
|
|
7,438,911
|
|
|
|
6,573,215
|
|
Foreign Exchange Loss
(OCI)
|
|
|
(39,379
|
)
|
|
|
(39,379
|
)
|
Revalue of derivative
liability
|
|
|
438,239
|
|
|
|
519,151
|
|
Stock
Based Compensation
|
|
|
51,481
|
|
|
|
51,481
|
|
Total
Deferred tax assets
|
|
$
|
9,509,400
|
|
|
$
|
7,944,549
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
|
|
|
|
|
|
|
R&D
|
|
$
|
(177,702
|
)
|
|
$
|
(139,833
|
)
|
Gain on extinguishment
of debt
|
|
|
(266,987
|
)
|
|
|
-
|
|
Capital
Raising Costs
|
|
|
(255,614
|
)
|
|
|
(133,335
|
)
|
Total
deferred tax liabilities
|
|
$
|
(700,303
|
)
|
|
$
|
(273,168
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
8,809,097
|
|
|
$
|
7,671,381
|
|
Valuation
allowance
|
|
|
(8,809,097
|
)
|
|
|
(7,671,381
|
)
|
Net
deferred taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
At
June 30, 2020, the Company had U.S. net operating loss carry forwards of approximately $8,977,683 that may be offset against future
taxable income, subject to limitation under IRC Section 382. At June 30, 2020, the Company had Australian net operating loss carry
forwards of approximately $20,194,901 million which can be carried forward without expiration. No tax benefit has been reported
in the June 30, 2020 and 2019 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.
Management
has determined that the realization of the net deferred tax asset is not assured and has created a valuation allowance for the
entire amount of such benefits.
The
Company follows ASC 740-10, which provides guidance for the recognition and measurement of certain tax positions in an enterprise’s
financial statements. Recognition involves a determination whether it is more likely than not that a tax position will be sustained
upon examination with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge
of all relevant information.
The
Company 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, 2020 and 2019, respectively.
The
Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes
in the consolidated statement of operations. As of June 30, 2020, the Company had no unrecognized tax benefits. There were no
changes in the Company’s unrecognized tax benefits during the years ended June 30, 2020 and 2019. The Company did not recognize
any interest or penalties during fiscal 2020 or 2019 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
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 with the amendment to the authorized shares being approved by
the State of Delaware on March 13, 2020.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
Preferred
Stock
The
total number of shares of preferred stock that the Company is authorized to issue is 1,500,005, $0.01 par value per share. These
preferred shares have no rights to dividends, profit sharing or liquidation preferences.
Of
the total preferred shares authorized, 500,000 have been designated as Series A Preferred Stock (“Series A Preferred Stock”),
pursuant to the Certificate of Designation filed with the Secretary of State of the State of Delaware on December 9, 2014. James
Nathanielsz, the Company’s Chief Executive Officer and Chief Financial Officer, beneficially owns all of the outstanding
shares of Series A Preferred Stock via North Horizon Pty Ltd., which entitles him, as a holder of Series A Preferred Stock, to
vote on all matters submitted or required to be submitted to a vote of the Company’s stockholders, except election and removal
of directors, and each share of Series A Preferred Stock entitles him to two votes per share of Series A Preferred Stock. North
Horizon Pty Ltd. is a Nathanielsz Family Trust. Mr. James Nathanielsz, the Chief Executive Officer, Chief Financial Officer and
a director of our Company, has voting and investment power over these shares. 500,000 shares of Series A Preferred Stock are issued
and outstanding as of June 30, 2020 and 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 June 30, 2020
and 2019. 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 2020 or 2019.
Common
Stock
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, 2020 and 2019
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 $.0.05.
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.
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”).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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.
April
3, 2020 Security Purchase Agreement
On
April 3, 2020, the Company closed on a transaction related to a Securities Purchase Agreement (the “Securities Purchase
Agreement”) entered into on March 30, 2020, whereby an investor (the “Investor”) purchased from the Company,
7,500,000 units (the “Units”), each consisting of (i) 1.5 shares of the Company’s common stock (the “Common
Stock”), or pre-funded warrants (the “Prefunded Warrants”) upon Investor’s election due to the 4.99% blocker
provision as discussed below and (ii) 1.5 warrants to purchase one share of Common Stock (“Series A Warrants”), along
with such purchaser’s pro-rata portion of the Series B Warrants and Series C Warrants (“the Units”). In aggregate
the Investor was issued 63,750,000 warrants to purchase one share of Common Stock (the “Series B Warrants”) and an
additional 63,750,000 warrants to purchase one share of Common Stock, subject to a vesting schedule based on the Investors exercise
of the Series B Warrants (the “Series C Warrants” and, together with the Prefunded Warrants, the Series A Warrants,
and the Series B Warrants referred to herein as, the “Warrants”). See discussion of warrant terms under “Warrants”
below.
The
aggregate purchase price for the Units, the Series A Warrants with exercise price of $0.20 per share, the Series B Warrants with
exercise price of $0.04 per share and the Series C Warrants with exercise price of $0.20 per share, of $450,000 was paid at closing
(the “Purchase Price”) or $0.06 per unit purchase price (see Warrants below). The Company received net proceeds of
$424,990, net of offering cost of $25,010.
The
Securities Purchase Agreement contains a blocker provision whereby the Investor or any of its affiliates would not beneficially
own in excess of 4.99% of the outstanding number of shares of Common Stock (“Beneficial Ownership Limitation”). As
such, the Investor may elect to purchase Prefunded Warrants equal to the same number of shares of Common Stock that the Company
would have been issued.
Due
to the Beneficial Ownership Limitation, the 11,250,000 shares of Common Stock underlying the Units issuable at closing of the
Securities Purchase Agreement are comprised of 804,518 shares of restricted Common Stock and 10,445,482 Prefunded Warrants with
exercise price of $0.0001 (but can be less than par value). The Prefunded Warrants shall be exercisable immediately and shall
expire when exercised in full.
The
Securities Purchase Agreement contains such representations, warranties and covenants as are typical for a transaction of this
nature.
Shares
issued for conversion of convertible debt
During
the year ended June 30, 2019, the Company issued 704,258 shares of its common stock at an average contractual conversion price
of $4.76, ranging from approximately $0.61 to $14.97, as a result of the conversion of principal and interest in the aggregate
amount of $3,350,783 underlying certain outstanding convertible notes converted during such period. The total recorded to equity
was $3,350,783. The Company reclassified $1,824,317 in put premiums to additional paid in capital following conversions during
the year ended June 30, 2019.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
During
the year ended June 30, 2020, the Company issued 247,619,247 shares of its common stock at an average contractual conversion price
of $0.007, ranging from $0.002 to $0.91, as a result of the conversion of principal and interest in the aggregate amount of $1,814,336
underlying certain outstanding principal amount and accrued interest of convertible notes converted during such period, including
$15,000 of conversion fees. The total recorded to equity was $2,125,174. Notes with principal amounts totaling $254,500 and accrued
interest of $15,408 contained bifurcated embedded conversion option derivatives. Accordingly, the fair market value of the shares
issued was $565,746 resulting in a loss on extinguishment at the time of conversion of $295,838 and $362,961 of derivative fair
value was recorded as a gain on extinguishment at the time of conversion. The Company reclassified $874,924 in put premiums to
additional paid in capital following conversions during the year ended June 30, 2020.
The
Company has 739,138,743 shares of its common stock reserved for future issuances based on lender reserve requirements pursuant
to underlying financing agreements at June 30, 2020.
Shares
issued for services
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.
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 year ended June
30, 2020.
Between
February 3, 2020 and June 26, 2020, the Company issued an aggregate of 8,708,574 shares of the Company’s common stock to
a consultant for services rendered pursuant to an engagement agreement dated on September 10, 2019 which agreement was later amended
in February 2020. Between February 3, 2020 and June 26, 2020, the Company issued an aggregate of 8,708,574 shares of the Company’s
common stock valued at an average price of $0.008 per share; being the closing price of the stock on the date of the agreement,
to such consultant, or $73,842. The Company recorded $73,842 of consulting expense with respect to such shares of its common stock
during the year ended June 30, 2020.
Restricted
Stock Units
Pursuant
to employment agreements dated in May 2019 (see Note 9), 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, 2020 and 2019, the Company recognized stock-based compensation of $217,543 and $31,077, respectively, related to vested restricted
stock units. There were $248,620 unrecognized restricted stock units expense as of June 30, 2020 which may be recognized upon
achievement of certain performance conditions.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
Stock
Options
On
May 14, 2019, the Company’s board of directors approved and adopted the Company’s 2019 Equity Incentive Plan (the
“2019 Plan”), which reserves a total of 234,000 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, 2020 and 2019, the Company recognized stock-based compensation of $82,873 and $10,360 related to vested
stock options. There was $155,387 of unvested stock options expense as of June 30, 2020 that will be recognized through May 2022
or 1.85 years.
A
summary of the Company’s option activity during the years ended June 30, 2020 and 2019 is presented below:
|
|
|
|
|
Weighted
|
|
|
|
Number
of
|
|
|
Average
Exercise
|
|
|
|
Shares
|
|
|
Price
Per Share
|
|
Outstanding at June 30, 2018
|
|
|
1,144
|
|
|
$
|
3,750
|
|
Issued
|
|
|
58,500
|
|
|
|
4.53
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at June 30, 2019
|
|
|
59,644
|
|
|
$
|
76.37
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at
June 30, 2020
|
|
|
59,644
|
|
|
$
|
76.37
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2020
|
|
|
20,644
|
|
|
$
|
212.09
|
|
Outstanding and Exercisable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
remaining contractual term
|
|
|
8.72
|
|
|
|
|
|
Weighted average
fair value of options granted during the period
|
|
$
|
-
|
|
|
|
|
|
Aggregate intrinsic
value
|
|
$
|
-
|
|
|
|
|
|
|
|
Options
Outstanding
|
|
|
Options
Exercisable
|
|
Range
of
Exercise
Price
|
|
Number
Outstanding
at
June
30, 2020
|
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value
|
|
|
Number
Exercisable
at
June
30, 2020
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value
|
|
|
$
|
4.25-4.68
|
|
|
|
58,500
|
|
|
|
8.88
Years
|
|
|
$
|
4.53
|
|
|
$
|
-
|
|
|
|
19,500
|
|
|
$
|
4.50
|
|
|
$
|
-
|
|
|
$
|
3,750.00
|
|
|
|
1,144
|
|
|
|
0.79
Years
|
|
|
|
3,750.00
|
|
|
|
-
|
|
|
|
1,144
|
|
|
|
3,750.00
|
|
|
|
-
|
|
|
|
|
|
|
|
59,644
|
|
|
|
8.72
Years
|
|
|
$
|
76.37
|
|
|
$
|
-
|
|
|
|
20,644
|
|
|
$
|
212.09
|
|
|
$
|
-
|
|
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
No
warrants were issued during the year ended June 30, 2019.
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 6).
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 year ended June 30, 2020.
In
connection with the issuance of shares on April 3, 2020 as discussed above, the Company closed on a transaction related to a Securities
Purchase Agreement (the “Securities Purchase Agreement”) entered into on March 30, 2020, whereby an investor purchased
from the Company, 7,500,000 units, each consisting of (i) 1.5 shares of the Company’s common stock, or pre-funded warrants
upon Investor’s election due to the 4.99% blocker provision and (ii) 1.5 warrants to purchase one share of Common Stock
(“Series A Warrants”, and collectively with the Common Stock the “Units”). In addition to the Units, the
Investor was issued 63,750,000 warrants to purchase one share of Common Stock (the “Series B Warrants”) and an additional
63,750,000 warrants to purchase one share of Common Stock, subject to a vesting schedule (the “Series C Warrants”
and, together with the Prefunded Warrants, the Series A Warrants, and the Series B Warrants, the “Warrants”).
Due
to the Beneficial Ownership Limitation, the Company granted 10,445,482 Prefunded Warrants with exercise price of $0.0001
(but can be less than par value). The Prefunded Warrants shall be exercisable immediately and shall expire when exercised in full.
On July 22, 2020, the Company received proceeds of $1,045 from the exercise of 10,445,482 Prefunded Warrants (see Note 13).
Series
A Warrants
As
discussed above, pursuant to the Securities Purchase Agreement entered into March 20, 2020, the Investor purchased Series A Warrants
to purchase up to 11,250,000 shares of Common Stock, subject to adjustment as provided therein. The Series A Warrants have a cash
exercise price of $0.20 per share and are immediately exercisable and expire in 3 years. The Series A Warrants contain a provision
for cashless exercise in the event there is no effective registration statement registering the shares underlying the Series A
Warrants calculated based on the difference between the exercise price of the Series A Warrant and the trading price of the stock
(the “Cashless Exercise”).Additionally, the Series A Warrants contain another provision for a cashless exercise at
the Holder’s option should the trading price of the Common Stock fall below $0.20 per share calculated based on the difference
between the exercise price of the Series A Warrant and 70% of the Market Price, as defined therein (the” Alternate Cashless
Exercise”).
Series
B Warrants
As
discussed above, pursuant to the Securities Purchase Agreement entered into March 20, 2020, the Investor purchased Series B Warrants
to purchase up to 63,750,000 shares of Common Stock, subject to adjustment as provided therein; provided, however, commencing
on the 90th day following the effective date, the Company may reduce the number of Warrant Shares issuable upon exercise thereof
by 37,500,000 upon 10 Trading Days’ prior written notice to the Holder provided that the Company issues to the Holder 3,750,000
shares of Common Stock (or, at the election of the Holder, an equivalent number of pre-funded warrants) and Series A Warrants
to purchase up to 3,750,000 shares of Common Stock, which shares shall be issued pursuant to a registration statement without
restrictions on resale. The Series B Warrants have a cash exercise price of $0.04 per share and expire in 3 years. The Series
B Warrants contain a provision for Cashless Exercise. On July 22, 2020, the Company received proceeds of $100,000 from the exercise
of 2,500,000 Series B Warrants (see Note 13).
Series
C Warrants
As
discussed above, pursuant to the Securities Purchase Agreement entered into March 20, 2020, the Investor purchased Series C Warrants
to purchase up to 63,750,000 shares of Common Stock, subject to adjustment as provided therein and expire in 3 years. The Series
C Warrants have a cash exercise price of $0.20 per share, subject to a vesting schedule, which is based on such Holder’s
exercise of the Series B Warrants. The Series C Warrants contain provisions for Cashless Exercise and Alternate Cashless
Exercise.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
The
following table summarizes warrant activity for the years ended June 30, 2020 and 2019:
|
|
|
|
|
Weighted
|
|
|
|
Number
of
|
|
|
Average
|
|
|
|
Shares
|
|
|
Price
Per Share
|
|
Outstanding at June 30, 2018
|
|
|
291
|
|
|
$
|
5,555
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(24
|
)
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
(208
|
)
|
|
|
-
|
|
Outstanding at June 30, 2019
|
|
|
59
|
|
|
$
|
4,765
|
|
Issued
|
|
|
151,170,482
|
|
|
|
0.15
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
(27
|
)
|
|
|
-
|
|
Outstanding at
June 30, 2020
|
|
|
151,170,514
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
Exercisable at
June 30, 2020
|
|
|
151,170,482
|
|
|
$
|
0.15
|
|
Outstanding and Exercisable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
remaining contractual term
|
|
|
2.76
|
|
|
|
|
|
Aggregate intrinsic
value
|
|
$
|
30,292
|
|
|
|
|
|
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 $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, on November 20, 2019 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. Oral argument is scheduled for November 5, 2020. Upon resolution of the motion, the Company shall file an answer, together
with affirmative defences 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.
If our motion to dismiss is granted, our potential liability would be reduced to $51,031.51 plus interest and attorney’s
fees.
Regal
Consulting, LLC (“Regal”) initiated litigation against the Company in Clark County District Court, Nevada. 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. Regal additionally claims that $106,500 remains due on a Convertible Note executed by the Company in
May of 2017 (the “2017 Note”), and asserts that it is owed in excess of $100,000 in penalties in connection with the
Company’s refusal to honor certain Conversion Notices. The Company filed an Answer and Counterclaim, denying liability and
alleging that Regal procured by fraud the Company’s execution of various consulting agreements and additionally failed to
provide the consulting services contemplated by said agreements.
The
discovery process is ongoing. In addition, the parties have agreed to mediate their dispute and are in the process of selecting
a mediator and scheduling their mediation.
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 consolidated 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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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 currently at $3,606 AUD
or $2,431 USD, inclusive of GST (See Note 10 – Related Party Transactions). The initial rental amount was $3,000 AUD subject
to a 3% yearly escalation. In adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical
expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease
classification and initial direct costs. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease
terms of 12 month or less. On July 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use assets $48,662 and
total lease liabilities of $48,662 based on an incremental borrowing rate of 6%.
ROU
is summarized below:
|
|
June
30, 2020
|
|
Office
lease ROU
|
|
$
|
48,662
|
|
Less accumulated reduction
|
|
|
(26,980
|
)
|
Balance of ROU asset as of June 30, 2020
|
|
$
|
21,682
|
|
Operating
lease liability related to the ROU asset is summarized below:
|
|
June
30, 2020
|
|
Office
lease liability
|
|
$
|
48,662
|
|
Reduction
of lease liability
|
|
|
(23,590
|
)
|
Total
|
|
$
|
25,072
|
|
Future
Minimum lease payments under non-cancelable operating lease at June 30, 2020 are as follows:
Fiscal
Year 2021
|
|
$
|
25,700
|
|
Imputed
interest
|
|
|
(628
|
)
|
Total
operating lease liability
|
|
$
|
25,072
|
|
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 $49,854 was expensed in fiscal 2019, $701,973 in fiscal
2018 and $937,319 in fiscal 2017. The MSA expired in 2019 and may be extended by mutual agreement in writing with a possible extension
currently under consideration. 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. The MSA expired in 2019 and may be extended by
mutual agreement in writing with a possible extension currently under consideration.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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, which agreement will be extended. In consideration of such services, the
Company agreed to pay the University approximately 52,000 Euros ($59,508 USD) in year one and a maximum of 40,000 Euros ($45,775
USD) in year two. The Company paid 31,754 Euros ($36,117 USD) in 2019 and has accrued 15,410 Euros ($17,331 USD) in the year ended
June 30,2020. 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, 2020 and 2019, the Company owed a current and a former director a total of $50,993 and $51,867, respectively, for
money loaned to the Company throughout the years. The total loans balance owed at June 30, 2020 and 2019 is not interest bearing
(See Note 5 – Loans and Notes Payable).
As
of June 30 2020, and 2019, the Company owed its former director a total of $30,639 and $31,164, 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 expiring May 2021 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, 2020, total payments of $37,295 AUD or $25,700 USD remain on the lease. (See Note 9 – 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 June 30, 2020 as amended May 14, 2019
(see below). The Nathanielsz Employment Agreement provides Mr. Nathanielsz with a base salary of $25,000 AUD per month ($300,000
AUD annually or $205,680 USD) and a monthly contribution to Mr. Nathanielsz’s pension equal to 9.5% of his monthly salary.
Mr. Nathanielsz has the ability to convert any accrued but unpaid salary into common stock at the end of each fiscal year at a
conversion price to be determined by Mr. Nathanielsz and the Company, which will in no event be lower than par value or higher
than the closing bid price on the date of conversion. Pursuant to the Nathanielsz Employment Agreement, Mr. Nathanielsz is entitled
to an annual discretionary bonus in an amount up to 200% of his annual base salary, which bonus shall be determined by the Company’s
board of directors based upon the performance of the Company. On March 16, 2018, the Company’s board of directors approved
an increase of Mr. Nathanielsz’s annual base salary from $300,000 AUD ($205,680 USD) to $400,000 AUD ($274,240 USD), effective
February 2018.
Mr.
Nathanielsz’s wife, Sylvia Nathanielsz, is and has been a non-executive part-time employee of the Company since October
2015. Effective February 1, 2018. Mrs. Nathanielsz receives an annual salary of $120,000 AUD ($80,904 USD) and is entitled to
customary benefits.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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 ended June 30, 2020, a total of $44,918 AUD ($30,284 USD) in payments have
been made with respect to Mr. Nathanielsz’s car allowance. For the fiscal year ended June 30, 2019, a total of $53,772 AUD
($38,463 USD) in costs have been incurred 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 2018.
A total of $80,046 AUD ($56,056 USD) in payments were made in fiscal 2018. During the year ended June 30, 2019, an additional
$219,954 AUD ($150,602 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. On July 13, 2020 the Board
approved a bonus of $240,000 AUD being equal to 60% of Mr Nathanielsz base salary which was accrued as of June 30, 2020. A total
of $202,620 AUD ($136,606 USD) in payments were made in during the year ended June 30, 2020, with $407,380 AUD ($280,726 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 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.
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).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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 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).
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, 2020.
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.
The
Company currently primarily relies on funding from three convertible debt lenders. Proceeds received in the year from each of
the three lenders were $285,000, $505,000, and $227,000, respectively, which represents approximately 18%, 32% and 14%, respectively
of total proceeds received by the Company during fiscal year 2020.
Receivable
Concentration
As
of June 30, 2020 and 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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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, 2020 and 2019, the Company’s operations are based in Camberwell, Australia, however the majority of research
and development is being conducted in the European Union.
On
July 22, 2016, the Company formed a wholly owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the
purpose of submitting an orphan drug application with the European Medicines Agency as a small and medium-sized enterprise. As
of June 30, 2020 and 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 derivative expense in operations on the issuance date. The Company had $126,500 (3
notes) and $142,000 (2 notes) of convertible debt, which have embedded conversion options bifurcated and is treated as derivative
instruments outstanding at June 30, 2020 and 2019 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 30, 2020, the last trading day of the fiscal year ended June 30, 2020,
was $0.0039. Volatility, expected remaining term and risk-free interest rates used to estimate the fair value of derivative liabilities
at June 30, 2020 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
|
|
|
June
30, 2020
|
|
|
June
30, 2019
|
|
Volatility
|
|
|
227-
279
|
%
|
|
|
264
|
%
|
|
|
355
|
%
|
Expected remaining
term
|
|
|
1.00
|
|
|
|
0.01
– 0.70
|
|
|
|
0.11
- 0.90
|
|
Risk-free interest
rate
|
|
|
1.53
– 1.59
|
%
|
|
|
0.13
– 0.18
|
%
|
|
|
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 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, 2020:
|
|
Balance
at
June
30, 2020
|
|
|
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
|
|
$
|
177,009
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
177,009
|
|
Total
|
|
$
|
177,009
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
177,009
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
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
|
|
The
following is a roll forward for the years ended June 30, 2020 and 2019 of the fair value liability of price adjustable derivative
instruments:
|
|
Fair
Value of
|
|
|
|
Liability
for
|
|
|
|
Derivative
|
|
|
|
Instruments
|
|
Balance
at June 30, 2018
|
|
$
|
371,532
|
|
Effects of foreign
currency exchange rate changes
|
|
|
-
|
|
Reductions due to conversions
|
|
|
(1,388,764
|
)
|
Reductions due to repayment
of debt
|
|
|
(936,650
|
)
|
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
|
|
Reductions due to conversions
|
|
|
(362,962
|
)
|
Initial fair value
of embedded conversion option derivative liability recorded as debt discount
|
|
|
227,000
|
|
Initial fair value
of embedded conversion option derivative liability recorded as derivative expense
|
|
|
351,461
|
|
Change
in fair value included in derivative expense (income) in the statement of operations
|
|
|
(736,754
|
)
|
Balance
at June 30, 2020
|
|
$
|
177,009
|
|
NOTE
13 – SUBSEQUENT EVENTS
Exercise
of Warrants
On
July 22, 2020, the Company received aggregate gross proceeds of $101,045 from the exercise of 10,445,482 prefunded warrants and
2,500,000 Series B Warrants (see Note 8).
Note
Conversions
From
July 1, 2020 through September 28, 2020, the Company issued an aggregate of 442,031,352 shares of its common stock at an average
contractual conversion price of $0.00096, ranging from $0.00056 to $0.0020, as a result of the conversion of principal of $391,935,
interest of $25,735 and conversion fees $6,750 underlying certain outstanding convertible notes converted during such period.
On September 18, 2020 the Company prepaid an outstanding convertible note in the amount of $57,671 comprising the note principal
of $43,000 plus $1,705 of accrued interest and a prepayment penalty of $12,966.
The
Company reclassified $204,919 in put premiums to additional paid in capital following conversions between July 2020 and September
2020.
Notes
totaling $75,000 contained bifurcated embedded conversion option derivatives. Accordingly, the fair market value of the shares
issued was $134,155 resulting in a loss on extinguishment at the time of conversion of $56,155 and $106,141 of derivative fair
value was recorded as a gain on extinguishment at the time of conversion.