NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Nature
of Operations
Propanc
Biopharma, Inc. (the “Company,” “we,” “us” or “our”) was originally incorporated
in Melbourne, Victoria Australia on October 15, 2007 as Propanc PTY LTD, and continues to be based in Camberwell, Victoria Australia.
Since its inception, substantially all of the operations of the Company have been focused on the development of new cancer treatments
targeting high-risk patients, particularly cancer survivors, who need a follow-up, non-toxic, long-term therapy designed to prevent
the cancer from returning and spreading. The Company anticipates establishing global markets for its technologies. Our lead product
candidate, which we refer to as PRP, is an enhanced pro-enzyme formulation designed to enhance the anti-cancer effects of multiple
enzymes acting synergistically. It is currently in the preclinical phase of development.
On
November 23, 2010, the Company was incorporated in the state of Delaware as Propanc Health Group Corporation. In January 2011,
to reorganize the Company, we acquired all of the outstanding shares of Propanc PTY LTD on a one-for-one basis making it a wholly-owned
subsidiary of the Company.
On
July 22, 2016, the Company formed a wholly owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the
purpose of submitting an orphan drug application to the European Medicines Agency as a small and medium-sized enterprise. As of
September 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.
Basis
of Presentation
The
Company’s interim unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (this
“Quarterly Report”) have been prepared in accordance with accounting principles generally accepted in the United States
of America (“US GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications
and non-recurring adjustments) necessary to present fairly our results of operations for the three months ended September 30,
2020 and 2019 and cash flows for the three months ended September 30, 2020 and 2019 and our financial position at September 30,
2020 have been made. The Company’s results of operations for the three months ended September 30, 2020 are not necessarily
indicative of the operating results to be expected for the full fiscal year ending June 30, 2021.
Certain
information and disclosures normally included in the notes to the Company’s annual audited consolidated financial statements
have been condensed or omitted from the Company’s interim unaudited condensed consolidated financial statements included
in this Quarterly Report. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction
with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2020.
The June 30, 2020 balance sheet is derived from those statements.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
Principles
of Consolidation
The
unaudited condensed consolidated financial statements include the accounts of Propanc Biopharma, Inc., the parent entity, and
its wholly-owned subsidiary, Propanc PTY LTD. All inter-company balances and transactions have been eliminated in consolidation.
Propanc (UK) Limited was an inactive subsidiary at September 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. Effective
fiscal year 2021, the parent company determined that these intercompany loans will not be repaid in the foreseeable future and
thus, per ASC 830-20-35-3, gains and losses from measuring the intercompany balances are recorded within cumulative translation
adjustment, a component of other comprehensive income. Accordingly, for the three months ended September 30, 2020, the
Company recognized an exchange loss of approximately $583,227 on intercompany loans made by the parent to the subsidiary which
have not been repaid as of September 30, 2020 and has been recorded within cumulative translation adjustment, a component of
other comprehensive income. Prior to July 1, 2020, the Company recorded the foreign currency transaction gains and losses
from measuring the intercompany balances as a component of other income (expenses) as reflected in the condensed consolidated
statements of operations. The Company recorded foreign currency transaction gain (loss) of $1,960 and $(535,150)
during the three months ended September 30, 2020 and 2019, respectively, as reflected in the condensed consolidated statements
of operations.
As
of September 30, 2020 and June 30, 2020, the exchange rates used to translate amounts in Australian dollars into USD for the purposes
of preparing the consolidated financial statements were as follows:
|
|
September 30, 2020
|
|
|
June 30, 2020
|
|
Exchange rate on balance sheet dates
|
|
|
|
|
|
|
|
|
USD : AUD exchange rate
|
|
|
0.7170
|
|
|
|
0.6891
|
|
|
|
|
|
|
|
|
|
|
Average exchange rate for the period
|
|
|
|
|
|
|
|
|
USD : AUD exchange rate
|
|
|
0.7151
|
|
|
|
0.6742
|
|
Change
in Accumulated Other Comprehensive Income (Loss) by component during the three months ended September 30, 2020 was as follows:
|
|
Foreign
Currency Items:
|
|
Balance,
June 30, 2020
|
|
$
|
1,267,671
|
|
Foreign
currency translation gain
|
|
|
(75,755
|
)
|
Ending
balance, September 30, 2020
|
|
$
|
1,191,916
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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 11 - Derivative Financial Instruments and Fair Value Measurements.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less
with financial institutions, and bank overdrafts. Bank overdrafts are reflected as a current liability on the balance sheets.
There were no cash equivalents as of September 30, 2020 or June 30, 2020.
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 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 September 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
Employee
Benefit/Liability
Liabilities
arising in respect of wages and salaries, accumulated annual leave, accumulated long service leave and any other employee benefits
expected to be settled within twelve months of the reporting date are measured based on the employee’s remuneration rates
applicable at the reporting date. All other employee benefit liabilities are measured at the present value of the estimated future
cash outflow to be made in respect of services provided by employees up to the reporting date. All employee liabilities are owed
within the next twelve months.
Australian
Goods and Services Tax (“GST”)
Revenues,
expenses and balance sheet items are recognized net of the amount of GST, except payable and receivable balances which are shown
inclusive of GST. The GST incurred is payable on revenues to, and recoverable on purchases from, the Australian Taxation Office.
Cash
flows are presented in the statements of cash flow on a gross basis, except for the GST component of investing and financing activities,
which are disclosed as operating cash flows.
As
of September 30, 2020 and June 30, 2020, the Company was owed $2,852 and $2,015, 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.
Research
and Development Costs and Tax Credits
In
accordance with ASC 730-10, “Research and Development-Overall,” research and development costs are expensed
when incurred. Total research and development costs for the three months ended September 30, 2020 and 2019 were $50,846 and $65,372,
respectively.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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 three months ended September 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 $0 and $108,894, respectively, which is reflected as a tax benefit
in the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss).
Stock
Based Compensation
The
Company records stock-based compensation in accordance with ASC 718, “Stock Compensation”. ASC 718 requires
the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the shorter of
the service period or the vesting period. The Company values employee and non-employee stock-based compensation at fair value
using the Black-Scholes Option Pricing Model.
The
Company adopted ASU 2018-07 and accounts for non-employee share-based awards in accordance with the measurement and recognition
criteria of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective
method of adoption. 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.
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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.
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. The securities for the period ended September 30, 2020 and 2019 were considered
dilutive securities which were excluded from the computation since the effect is anti-dilutive.
|
|
September
30, 2020
|
|
|
September
30, 2019
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
Stock
Options
|
|
|
59,644
|
|
|
|
59,644
|
|
Stock
Warrants
|
|
|
135,725,000
|
|
|
|
975,059
|
|
Restricted
stock to be issued
|
|
|
117,000
|
|
|
|
117,000
|
|
Convertible
Debt
|
|
|
510,673,916
|
|
|
|
4,089,765
|
|
Total
|
|
|
646,575,560
|
|
|
|
5,241,468
|
|
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 unaudited condensed consolidated financial statements have been prepared in conformity with US GAAP, which contemplate
continuation of the Company as a going concern. For the three months ended September 30, 2020, the Company had no revenues and
had net cash used in operations of $179,949. Additionally, as of September 30, 2020, the Company had a working capital deficit,
stockholders’ deficit and accumulated deficit of $3,258,953, $3,235,469 and $56,207,315, respectively. It is management’s
opinion that these conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period
of at least twelve months from the date of this Quarterly Report.
The
condensed consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability
and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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.
NOTE
3 – PROPERTY AND EQUIPMENT
Property
and equipment consist of the following as of September 30, 2020 and June 30, 2020.
|
|
September
30, 2020
|
|
|
June
30, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Office
equipment at cost
|
|
$
|
27,364
|
|
|
$
|
26,299
|
|
Less:
Accumulated depreciation
|
|
|
(21,823
|
)
|
|
|
(20,552
|
)
|
|
|
|
|
|
|
|
|
|
Total
property, plant, and equipment
|
|
$
|
5,541
|
|
|
$
|
5,747
|
|
Depreciation
expense for the three months ended September 30, 2020 and 2019 were $438 and $636, 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 September 30, 2020 and June 30, 2020 is $31,880 and $30,639, respectively. The Company plans to repay the advances as its cash
resources allow (see Note 9).
NOTE
5 – LOANS FROM DIRECTORS AND OFFICER – RELATED PARTY
Loans
from the Company’s directors and officer at September 30, 2020 and June 30, 2020 were $53,058 and $50,993, respectively.
The loans bear no interest and are all payable on demand. The Company did not repay any amount on these loans during the three
months ended September 30, 2020 (see Note 9).
NOTE
6 – CONVERTIBLE NOTES
The
Company’s convertible notes outstanding at September 30, 2020 and June 30, 2020 were as follows:
|
|
September
30, 2020
|
|
|
June
30, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Convertible
notes and debenture
|
|
$
|
594,561
|
|
|
$
|
1,029,496
|
|
Unamortized
discounts
|
|
|
(5,386
|
)
|
|
|
(126,667
|
)
|
Accrued
interest
|
|
|
70,627
|
|
|
|
80,101
|
|
Premium,
net
|
|
|
369,886
|
|
|
|
574,804
|
|
Convertible
notes, net
|
|
$
|
1,029,688
|
|
|
$
|
1,557,734
|
|
Eagle
Equities Financing Agreements
December
29, 2017 Securities Purchase Agreement
The
Company entered into an executory contract on December 29, 2017, whereby the Company entered into a securities purchase agreement
with Eagle Equities, pursuant to which Eagle Equities purchased a convertible promissory note (the “December 2017 Eagle
Note”) from the Company in the aggregate principal amount of $532,435, with principal and the interest thereon convertible
into shares of the Company’s common stock at the option of Eagle Equities at any time. The transactions closed on January
2, 2018.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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 $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. Accordingly, there was no outstanding balance
as of 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.
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.
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. Accordingly, there was no outstanding balance as of 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.
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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 and $53,000 were released to additional paid in capital following conversion of principal during the
fiscal year to June 30, 2020 and the three months ended September 30, 2020, respectively.
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. The Company recorded $0 of accrued interest and the total principal outstanding under the August 2018 Eagle Note was
$0 as of September 30, 2020 following conversion of $79,500 of principal and $12,035 of accrued interest during the three months
ended September 30, 2020. Accordingly, there was no outstanding balance as of September 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.
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.
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.
Accordingly, there was no outstanding balance as of June 30, 2020.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. 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. Accordingly, there was no outstanding balance as of 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.
December
24, 2018 Securities Purchase Agreement
Effective
December 24, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “December 2018 Eagle Note”) from the Company in the aggregate principal
amount of $126,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the December 2018 Eagle Note. The transactions contemplated
by the purchase agreement closed on December 24, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted
$6,000 from the principal payment due under the December 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.
The Company used the net proceeds from the December 2018 Eagle Note to repay an outstanding convertible promissory note before
such note became convertible.
The
maturity date of the December 2018 Eagle Note was December 24, 2019. The December 2018 Eagle Note shall bear interest at a rate
of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice
of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the December 2018 Eagle Note.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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 of which $25,433 was released to additional
paid in capital following conversion of principal during the three months ended September 30, 2020.
The
Company has recorded $15,327 of accrued interest and the total principal outstanding under the December 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. The Company recorded $11,598 of accrued interest and the total principal outstanding under the December
2018 Eagle Note was $86,220 as of September 30, 2020 following conversion of $39,780 of principal and $5,123 of accrued interest
during the three months ended September 30, 2020. Accordingly, there was $86,220 outstanding principal balance as of September
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, however, the note is currently past due.
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. The total principal amount
outstanding under the above Eagle Equities financing agreements, specifically the December 24, 2018 agreements was $86,220 as
of September 30, 2020 and accrued interest totaled $11,598.
GS
Capital Financing Agreements
October
2, 2018 Securities Purchase Agreement
Effective
October 2, 2018, the Company entered into a securities purchase agreement with GS Capital, pursuant to which GS Capital purchased
two 8% unsecured convertible redeemable notes (the “October 2, 2018 GS Notes”) from the Company in the aggregate principal
amount of $212,000, such principal and the interest thereon convertible into shares of the Company’s common stock. The purchase
price of $106,000 of the first note (the “October 2018 GS Note”) was paid in cash by GS Capital on October 3, 2018.
After payment of certain legal fees and expenses, net proceeds to the Company from the October 2018 GS Note totaled $100,700.
The purchase price of $106,000 of the second note (the “October 2, 2018 GS Back End Note”) was initially paid for
by GS Capital issuing to the Company an offsetting $106,000 collateralized secured note (the “October 2, 2018 GS Secured
Note”). The terms of the October 2018 GS Back End Note require cash funding prior to any conversion thereunder, and such
cash funding shall occur on or before June 2, 2019.
Both
the October 2, 2018 GS Note and the October 2, 2018 GS Back End Note, which was funded on February 27, 2019, 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
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 $0 and accrued interest totaled $2,658 as of June 30, 2020 and $0 principal balance and accrued interest of $0 as of
September 30, 2020. Accordingly, there was no outstanding principal balance as of September 30, 2020.
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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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 of which $4,408 was released
to additional paid in capital following conversion of principal during the three months ended September 30, 2020.
The
Company has recorded $2,542 of accrued interest and the total principal outstanding under the January 22, 2020 GS Note was $58,000
as of June 30, 2020. The Company recorded $3,557 of accrued interest and the total principal outstanding under the January 22,
2020 GS Note was $51,388 as of September 30, 2020 following conversion of $6,612 of principal and $330 of accrued interest during
the three months ended September 30, 2020. Accordingly, there was $51,388 outstanding principal balance as of September 30, 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 January 22, 2020 GS Note,
was $58,000 and accrued interest of $2,542 as of June 30, 2020. The remaining principal outstanding and accrued interest under
this note as of September 30, 2020 was $51,388 and $3,557, respectively.
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 8). 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. The remaining principal
outstanding and accrued interest under this note as of September 30, 2020 was $8,500 and $22,567, respectively.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
Power
Up Lending Group Financing Agreements
July
3, 2019 Securities Purchase Agreement
Effective
July 3, 2019, the Company entered into a securities purchase agreement with Power Up Lending Group Ltd. (“Power Up”),
pursuant to which Power Up purchased a convertible promissory note (the “July 3, 2019 Power Up Note”) from the Company
in the aggregate principal amount of $78,000, such principal and the interest thereon convertible into shares of the Company’s
common stock at the option of Power Up. The transaction closed on July 3, 2019 and the Company received payment on July 8, 2019
in the amount of $78,000, of which $2,500 was paid directly toward legal fees and $500 to Power Up for due diligence fees resulting
in net cash proceeds of $75,000.
The
maturity date of the July 3, 2019 Power Up Note 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.
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. Accordingly, there was no outstanding principal balance as of June 30, 2020.
November
26, 2019 Securities Purchase Agreement
Effective
November 26, 2019, the Company entered into a securities purchase agreement with Power Up Lending Group Ltd. (“Power Up”),
pursuant to which Power Up purchased a convertible promissory note (the “November 26, 2019 Power Up Note”) from the
Company in the aggregate principal amount of $43,000, such principal and the interest thereon convertible into shares of the Company’s
common stock at the option of Power Up. The transaction closed on November 22, 2019 and the Company received payment on December
3, 2019 in the amount of $40,000, net of $2,500 paid directly toward legal fees and $500 to Power Up for due diligence fees.
The
maturity date of the November 26, 2019 Power Up Note 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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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.
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. Accordingly, there was no outstanding principal balance as of June 30, 2020.
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.
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.
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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. The total principal amount outstanding under the above Power Up
financing agreement, specifically the January 7, 2020 Power Up Note, was $0 and accrued interest of $0 as of September 30, 2020
following conversion of $75,000 of the principal balance and $3,000 of accrued interest during the three months ended September
30, 2020. Accordingly, there was no outstanding principal balance as of September 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.
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. The total principal amount outstanding under the above Power Up
financing agreement, specifically the March 12, 2020 Power Up Note, was $0 and accrued interest of $0 as of September 30, 2020
following repayment in cash of $43,000 of the principal balance and $1,816 of accrued interest during the three months ended September
30, 2020. Accordingly, there was no outstanding principal balance as of September 30, 2020.
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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.
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, 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.
Accordingly, there was no outstanding principal balance as of 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.
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).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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.
Accordingly, there was no outstanding principal balance as of June 30, 2020.
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.
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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. In October 2020, Eagle Equities
agreed to waive the 24% default interest on this note.
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.
The
total principal amount outstanding under the above Auctus financing agreement, specifically the August 30, 2019 Auctus Note, was
$236,141 and accrued interest of $8,185 as of September 30, 2020 following conversion of $122,825 of the principal balance and
$3,687 of accrued interest during the three months ended September 30, 2020. Accordingly, $81,883 of the put premium was released
in respect of the August 30, 2019 Auctus Note during the three months ended September 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
The
total principal amount outstanding under the above GW Holdings financing agreement, specifically the October 1, 2019 GW Holdings
Note, was $12,600 and accrued interest of $989 as of September 30, 2020 following conversion of $17,400 of the principal balance
and $1,144 of accrued interest during the three months ended September 30, 2020. Accordingly, $11,600 of the put premium was reclassed
to additional paid in capital in respect of the October 1, 2019 GW Holdings Note during the three months ended September 30, 2020
following conversion of the principal balance.
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.
The total principal amount outstanding under
the above Crown Bridge financing agreement, specifically the October 3, 2019 Crown Bridge Note, was $55,680 and accrued interest
of $8,841 as of as of September 30, 2020 following conversion of $9,600 of the principal balance during the three months ended
September 30, 2020. These shares are considered issuable for accounting purposes. Accordingly, $6,400 of the put premium
was released in respect of the October 3, 2019 Crown Bridge Note during the three months ended September 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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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.
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.
The
total principal amount outstanding under the above Ader Alef financing agreement, specifically the Ader Alef Note, was $79,032
and accrued interest of $5,763 as of as of September 30, 2020 following conversion of $31,218 of the principal balance during
the three months ended September 30, 2020. Accordingly, $16,810 of the put premium was released in respect of the Ader Alef Note
during the three months ended September 30, 2020 following conversion of the principal balance.
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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
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.
The total principal amount outstanding under
the above LG Capital financing agreement, specifically the February 19, 2020 LG Capital Note, was $65,000 and accrued interest
of $3,214 as of as of September 30, 2020 following conversion of $10,000 of the principal balance during the three months ended
September 30, 2020. These shares are considered issuable for accounting purposes. Accordingly, $5,385 of the put premium
was released in respect of the February 19, 2020 LG Capital Note during the three months ended September 30, 2020 following conversion
of the principal balance.
Amortization
of debt discounts
The
Company recorded $0 and $534,000 of debt discounts (including warrants, derivatives, debt issue costs and original issue discounts)
related to the above note issuances during the three months ended September 30, 2020 and 2019, respectively. The Company recorded
$0 and $539,000 of put premiums related to the above note issuances during the three months ended September 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.
Amortization
of all debt discounts for the three months ended September 30, 2020 and 2019 was $121,281 and $104,406, respectively.
The
Company reclassified $204,919 and $73,235 in put premiums to additional paid in capital following conversions during the three
months ended September 30, 2020 and 2019, respectively.
NOTE
7 – STOCKHOLDERS’ DEFICIT
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 September 30, 2020 and June 30, 2020.
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 September
30, 2020 and June 30, 2020. 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 during the three months ended September 30, 2020 and
in the fiscal year 2020.
Common
Stock:
Shares
issued for conversion of convertible debt
From July 1, 2020 through September 30, 2020,
the Company issued an aggregate of 442,031,352 shares of its common stock (24,426,642 are considered issuable) 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.
The total recorded to equity was $480,575. 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. The Company
reclassified $204,919 in put premiums to additional paid in capital following conversions during the three months ended September
30, 2020.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
The
Company has 282,421,876 shares of its common stock reserved for future issuances based on lender reserve requirements pursuant
to underlying financing agreements at September 30, 2020.
Shares
issued for exercise of warrants
During
the three months ended September 30, 2020, the Company received aggregate gross proceeds of $201,044 from the exercise of 10,445,482
prefunded warrants and 5,000,000 Series B Warrants.
Warrants:
The
following table summarizes warrant activity for the three months ended September 30, 2020:
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average
|
|
|
|
Shares
|
|
|
Price Per Share
|
|
Outstanding at June 30, 2020
|
|
|
151,170,482
|
|
|
$
|
0.15
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(15,445,482
|
)
|
|
|
0.01
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at September 30, 2020
|
|
|
135,725,000
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2020
|
|
|
135,725,000
|
|
|
$
|
0.16
|
|
Outstanding and Exercisable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining contractual term
|
|
|
2.51
|
|
|
|
|
|
Aggregate intrinsic value
|
|
$
|
0
|
|
|
|
|
|
Exercise
of Warrants
During
the three months ended September 30, 2020, the Company received aggregate gross proceeds of $201,044 from the exercise of 10,445,482
prefunded warrants and 5,000,000 Series B Warrants.
Options:
A
summary of the Company’s option activity during the three months ended September 30, 2020 is presented below:
|
|
|
|
|
Weighted
|
|
|
|
Number
of
|
|
|
Average
Exercise
|
|
|
|
Shares
|
|
|
Price
Per Share
|
|
Outstanding
at June 30, 2020
|
|
|
59,644
|
|
|
$
|
76.37
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at September 30, 2020
|
|
|
59,644
|
|
|
$
|
76.37
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at September 30, 2020
|
|
|
20,644
|
|
|
$
|
212.09
|
|
Outstanding
and Exercisable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average remaining contractual term
|
|
|
8.47
|
|
|
|
|
|
Weighted
average fair value of options granted during the period
|
|
$
|
-
|
|
|
|
|
|
Aggregate
intrinsic value
|
|
$
|
-
|
|
|
|
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
During
the three months ended September 30, 2020, the Company recognized stock-based compensation of $20,718 related to vested stock
options. There was $134,669 of unvested stock options expense as of September 30, 2020 that will be recognized through May 2022
or 1.62 years.
No
stock options were granted during the three months ended September 30, 2020.
NOTE
8 – 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 defenses and counterclaims. The counterclaims shall include, without limitation, malpractice claims, arising
out of Foley Shechter’s grossly negligent mishandling of certain transactions and excessive billing related thereto. Certain
amounts related to this claim are included in accounts payable and accrued expenses in the accompanying Consolidated 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. The Company’s tax advisor is awaiting a response from
the IRS on this matter.
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 9 – 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%.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
ROU
is summarized below:
|
|
September
30, 2020
|
|
Office
lease ROU
|
|
$
|
48,662
|
|
Less
accumulated reduction
|
|
|
(32,870
|
)
|
Balance
of ROU asset as of September 30, 2020
|
|
$
|
15,792
|
|
Operating
lease liability related to the ROU asset is summarized below:
|
|
September
30, 2020
|
|
Office
lease liability
|
|
$
|
48,662
|
|
Reduction
of lease liability
|
|
|
(28,705
|
)
|
Total
|
|
$
|
19,957
|
|
Future
Minimum lease payments under non-cancelable operating lease at September 30, 2020 are as follows:
Fiscal
Year 2021
|
|
$
|
23,636
|
|
Imputed
interest
|
|
|
(3,678
|
)
|
Total
operating lease liability
|
|
$
|
19,957
|
|
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.
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 21,050 Euros ($24,660 USD) as of September
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. On October 1, 2020, the Company entered into another two-year collaboration agreement with
the University (see Note 12).
NOTE
9 – RELATED PARTY TRANSACTIONS
Since
its inception, the Company has conducted transactions with its directors and entities related to such directors. These transactions
have included the following:
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
As
of September 30, 2020 and June 30, 2020, the Company owed a current and a former director a total of $53,058 and $50,993, respectively,
for money loaned to the Company throughout the years. The total loans balance owed at September 30, 2020 and June 30, 2020 is
not interest bearing (See Note 5 – Loans from Directors and Officer – Related Party).
As
of September 30, 2020 and June 30 2020, the Company owed its former director a total of $31,880 and $30,639, 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 September 30, 2020, total payments of $27,834 AUD or $19,957 USD remain on the lease. (See Note 8 – Commitments and Contingencies)
Employment
and Services Agreements with Management
The
Company and Mr. Nathanielsz entered into an employment agreement as of February 25, 2015 (the “Nathanielsz Employment Agreement”)
setting forth the terms and conditions of Mr. Nathanielsz 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 September 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.
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 three months ended September 30, 2020, a total of $11,533 AUD ($8,247 USD)
in payments have been made with respect to Mr. Nathanielsz’s car allowance.
Pursuant
to the approval of the Company’s board of directors, on 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. A total of $40,000 AUD ($55,936 USD) in payments were made in during the three months ended September
30, 2020, with $367,380 AUD ($226,138 USD) remaining due and payable.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
Amended
and Restated Employment Agreement ― On May 14, 2019 (the “Effective Date”), the Company entered into an Amended
and Restated Employment Agreement (the “Employment Agreement”) with James Nathanielsz, the Company’s Chief Executive
Officer, Chairman, acting Chief Financial Officer and a director, for a term of three years, subject to automatic one-year renewals,
at an annual salary of $400,000 AUD. 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.
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.
Intercompany
Loans
All
Intercompany loans were made by the parent to the subsidiary, Propanc PTY LTD, which have not been repaid as of September 30,
2020. Effective fiscal year 2021, the parent company determined that intercompany loans will not be repaid in the foreseeable
future and thus, per ASC 830-20-35-3, gains and losses from measuring the intercompany balances are recorded within cumulative
translation adjustment, a component of other comprehensive income. Prior to July 1, 2020, the Company recorded the foreign currency
transaction gains and losses from measuring the intercompany balances as a component of other income (expenses) as reflected in
the condensed consolidated statements of operations.
NOTE
10 – CONCENTRATIONS AND RISKS
Concentration
of Credit Risk
The
Company maintains its cash in banks and financial institutions in Australia. Bank deposits in Australian banks are uninsured.
The Company has not experienced any losses in such accounts through September 30, 2020.
The
Company did not receive any funding from lenders during the three months ended September 30, 2020.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
The
Company primarily relies on funding from three convertible debt lenders and received proceeds during the three months ended September
30, 2019 from each of the three lenders were $75,000, $285,000, and $505,000, respectively, which represents approximately 9%,
33% and 58%, respectively of total proceeds received by the Company during the three months ended September 30, 2019.
Receivable
Concentration
As
of September 30, 2020 and June 30, 2020, the Company’s receivables were 100% related to reimbursements on GST taxes paid.
Patent
and Patent Concentration
The
Company has filed multiple patent applications relating to its lead product, PRP. The Company’s lead patent application
has been granted and remains in force in the United States, Belgium, Czech Republic, Denmark, France, Germany, Ireland, Italy,
Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein, Turkey, United Kingdom, Australia, China, Japan, Indonesia,
Israel, New Zealand, Singapore, Malaysia, South Africa, Mexico, Republic of Korea and India. In Brazil and Canada, the patent
application remains under examination.
In
2016 and early 2017, we filed other patent applications. Three applications were filed under the Patent Cooperation Treaty (the
“PCT”). The PCT assists applicants in seeking patent protection by filing one international patent application under
the PCT, applicants can simultaneously seek protection for an invention in over 150 countries. Once filed, the application is
placed under the control of the national or regional patent offices, as applicable, in what is called the national phase. One
of the PCT applications filed in November 2016, entered national phase in July 2018 and another PCT application is currently entering
national phase in August 2018. A third PCT application entered the national phase in October 2018.
Further
patent applications are expected to be filed to capture and protect additional patentable subject matter based on the Company’s
field of technology relating to pharmaceutical compositions of proenzymes for treating cancer.
Foreign
Operations
As
of September 30, 2020 and June 30, 2020, 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 September 30, 2020 and June 30, 2020, there has been no activity within this entity.
NOTE
11 - DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Derivative
Financial Instruments:
The
Company applies the provisions of ASC 815-40, Contracts in Entity’s Own Equity, under which convertible instruments
and warrants, which contain terms that protect holders from declines in the stock price (reset provisions), may not be exempt
from derivative accounting treatment. As a result, warrants and embedded conversion options in convertible debt are recorded as
a liability and are revalued at fair value at each reporting date. If the fair value of the warrants exceeds the face value of
the related debt, the excess is recorded as derivative expense in operations on the issuance date. The Company had $8,500 (1 note)
and $126,500 (3 notes) of convertible debt, which have embedded conversion options bifurcated and is treated as derivative instruments
outstanding at September 30, 2020 and June 30, 2020, 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 September 30, 2020, the last trading day of the period ended September 30,
2020, was $0.0019. Volatility, expected remaining term and risk-free interest rates used to estimate the fair value of derivative
liabilities at September 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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020
(Unaudited)
Convertible
Debt
|
|
Initial
Valuations
(on new derivative
instruments entered
into
during the three
months ended
September 30, 2020)
|
|
|
September
30, 2020
|
|
Volatility
|
|
|
-
|
|
|
|
269.61
|
%
|
Expected
Remaining Term (in years)
|
|
|
-
|
|
|
|
00.01
|
|
Risk
Free Interest Rate
|
|
|
-
|
|
|
|
0.08
|
%
|
Expected
dividend yield
|
|
|
None
|
|
|
|
None
|
|
Fair
Value Measurements:
The Company measures
and reports at fair value the liability for derivative instruments. The fair value liabilities for price adjustable warrants and
embedded conversion options have been recorded as determined utilizing the Binomial Trees model. The following tables summarize
the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2020 and
June 30, 2020:
|
|
Balance
at September 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
|
|
$
|
5,916
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,916
|
|
Total
|
|
$
|
5,916
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,916
|
|
|
|
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
|
|
The
following is a roll forward for the three months ended September 30, 2020 of the fair value liability of price adjustable derivative
instruments:
|
|
Fair
Value of
|
|
|
|
Liability
for
|
|
|
|
Derivative
|
|
|
|
Instruments
|
|
Balance
at June 30, 2020
|
|
$
|
177,009
|
|
Initial
fair value of embedded conversion option derivative liability recorded as debt discount
|
|
|
-
|
|
Initial
fair value of embedded conversion option derivative liability recorded as expense
|
|
|
-
|
|
Gain
on debt extinguishment
|
|
|
(106,141
|
)
|
Change
in fair value included in statements of operations
|
|
|
(64,952
|
)
|
Balance
at September 30, 2020
|
|
$
|
5,916
|
|
NOTE
12 – SUBSEQUENT EVENTS
Collaboration
Agreement
On
October 1, 2020, the Company entered into a two-year collaboration agreement with the University of Jaén (the “University”)
to provide certain research services to the Company. In consideration of such services, the Company agreed to pay the University
approximately 30,000 Euros ($35,145 USD) which shall be paid in four installment payment of 5,000 Euros in November 2020, 5,000
Euros ($5,858) in March 2021, 10,000 Euros ($11,715) in December 2021 and 10,000 Euros ($11,715) in September 2022. Additionally,
the University shall hire and train a doctoral student for this project and as such the Company shall pay the University 25,837
Euros ($30,268 USD). In exchange for full ownership of the intellectual property the Company agreed to pay royalties of 2% of
net revenues to the University.