NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Nature
of Operations
Propanc
Biopharma, Inc. (the “Company,” “we,” “us” or “our”) was originally incorporated in Melbourne,
Victoria Australia on October 15, 2007 as Propanc PTY LTD, and continues to be based in Camberwell, Victoria Australia. Since its inception,
substantially all of the operations of the Company have been focused on the development of new cancer treatments targeting high-risk
patients, particularly cancer survivors, who need a follow-up, non-toxic, long-term therapy designed to prevent the cancer from returning
and spreading. The Company anticipates establishing global markets for its technologies. Our lead product candidate, which we refer to
as PRP, is an enhanced pro-enzyme formulation designed to enhance the anti-cancer effects of multiple enzymes acting synergistically.
It is currently in the preclinical phase of development.
On
November 23, 2010, the Company was incorporated in the state of Delaware as Propanc Health Group Corporation. In January 2011, to reorganize
the Company, we acquired all of the outstanding shares of Propanc PTY LTD on a one-for-one basis making it a wholly-owned subsidiary
of the Company.
On
July 22, 2016, the Company formed a wholly owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the purpose
of submitting an orphan drug application to the European Medicines Agency as a small and medium-sized enterprise. As of December 31,
2021, 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.
In
July 2020, a world first patent was granted in Australia for the cancer treatment method patent family. Presently, there are 35 granted
patents and 30 patents under examination in key global jurisdictions relating to the use of proenzymes against solid tumors, covering
the lead product candidate PRP.
The
Company hopes to capture and protect additional patentable subject matter based on the Company’s field of technology relating to
pharmaceutical compositions of proenzymes for treating cancer by filing additional patent applications as it advances its lead product
candidate, PRP, through various stages of development.
On
November 17, 2020, the Company effected a one-for-one thousand (1:1,000) reverse stock split of the Company’s issued and outstanding
shares of common stock (the “Reverse Stock Split”). Proportional adjustments for the Reverse Stock Split were made to the
Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts have been retroactively
adjusted as of the earliest period presented in the consolidated financial statements to reflect the Reverse Stock Split.
Basis
of Presentation
The
Company’s interim unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (this “Quarterly
Report”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US
GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion
of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring
adjustments) necessary to present fairly our results of operations for the three and six months ended December 31, 2021 and 2020 and
cash flows for the six months ended December 31, 2021 and 2020 and our financial position at December 31, 2021 have been made. The Company’s
results of operations for the three and six months ended December 31, 2021 are not necessarily indicative of the operating results to
be expected for the full fiscal year ending June 30, 2022.
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, 2021. The June 30, 2021 balance sheet
is derived from those statements.
Principles
of Consolidation
The
unaudited condensed consolidated financial statements include the accounts of Propanc Biopharma, Inc., the parent entity, and its wholly-owned
subsidiary, Propanc PTY LTD. All inter-company balances and transactions have been eliminated in consolidation. Propanc (UK) Limited
was an inactive subsidiary at December 31, 2021.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
Use
of Estimates
The
preparation of financial statements in conformity with the accounting principles generally accepted in the United States of America (“US
GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates. Significant estimates in the accompanying consolidated
financial statements include the estimates of useful lives for depreciation, valuation of the operating lease liability and related right-of-use
asset, valuation of derivatives, 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 a component of other comprehensive
income (loss). There have been no significant fluctuations in the exchange rate for the conversion of Australian dollars to USD after
the balance sheet date.
Other
Comprehensive Income (Loss) for all periods presented includes only foreign currency translation gains (losses).
Assets
and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the
consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated
in a currency other than the functional currency included in the consolidated results of operations as incurred. Effective fiscal year
2021, the parent company determined that 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 accumulated
other comprehensive income (loss). Prior to July 1, 2020, the Company recorded the foreign currency transaction gains and losses from
measuring the intercompany balances as a component of other income (expenses) titled foreign currency transaction gain (loss). For the
three months ended December 31, 2021 and 2020, the Company recognized an exchange loss of approximately $134,000 and $328,000 respectively
and for the six months ended December 31, 2021, and 2020, the Company recognized an exchanged gain (loss) of approximately $485,000 and
($912,000) on intercompany loans made by the parent to the subsidiary which have not been repaid as of December 31, 2021.
As
of December 31, 2021 and June 30, 2021, the exchange rates used to translate amounts in Australian dollars into USD for the purposes
of preparing the consolidated financial statements were as follows:
SCHEDULE OF TRANSLATION EXCHANGE RATES
|
|
December
31, 2021
|
|
|
June
30, 2021
|
|
Exchange
rate on balance sheet dates
|
|
|
|
|
|
|
|
|
USD
: AUD exchange rate
|
|
|
0.7271
|
|
|
|
0.7500
|
|
|
|
|
|
|
|
|
|
|
Average
exchange rate for the period
|
|
|
|
|
|
|
|
|
USD
: AUD exchange rate
|
|
|
0.7317
|
|
|
|
0.7473
|
|
The
change in Accumulated Other Comprehensive Income by component during the six months ended December 31, 2021 was as follows:
SCHEDULE
OF ACCUMULATED OTHER COMPREHENSIVE INCOME LOSS
|
|
Foreign
Currency Items:
|
|
Balance,
June 30, 2021
|
|
$
|
1,085,204
|
|
Unrealized
foreign currency translation gain
|
|
|
56,496
|
|
Ending
balance, December 31, 2021
|
|
$
|
1,141,700
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(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 December 31, 2021 or June 30, 2021.
Property
and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals, and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the declining balance method. The depreciable amount is the cost less its residual value.
The
estimated useful lives are as follows:
SCHEDULE OF PROPERTY AND EQUIPMENT ESTIMATED USEFUL LIVE
Machinery
and equipment
|
-
5 years
|
Furniture
|
-
7 years
|
Patents
Patents are stated at cost and amortized on a straight-line basis over the estimated future periods if and once the patent has been granted by a regulatory agency. However, the Company will expense any patent costs as long as we are in the startup stage. Accordingly, as the Company’s products are not currently approved for market, all patent costs incurred from 2013 through December 31, 2021 were expensed immediately. This practice of expensing patent costs immediately ends when a product receives market authorization from a government regulatory agency.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
Impairment
of Long-Lived Assets
In
accordance with ASC 360-10, “Long-lived assets,” which include property and equipment and intangible assets, are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future
cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the
assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily
determinable.
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 benefit liabilities are owed within the next
twelve months.
Australian
Goods and Services Tax (“GST”)
Revenues,
expenses and balance sheet items are recognized net of the amount of GST, except payable and receivable balances which are shown inclusive
of GST. The GST incurred is payable on revenues to, and recoverable on purchases from, the Australian Taxation Office.
Cash
flows are presented in the statements of cash flow on a gross basis, except for the GST component of investing and financing activities,
which are disclosed as operating cash flows.
As
of December 31, 2021, and June 30, 2021, the Company was owed $5,625 and $4,341, respectively, from the Australian Taxation Office. These
amounts were fully collected subsequent to the balance sheet reporting dates.
Derivative
Instruments
ASC
Topic 815, Derivatives and Hedging (“ASC Topic 815”), establishes accounting and reporting standards for derivative
instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair value.
Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings. On the date of conversion or payoff
of debt, the Company records the fair value of the conversion shares, removes the fair value of the related derivative liability, removes
any discounts and records a net gain or loss on debt extinguishment. On July 1, 2019 the Company adopted ASU 2017-11 under which down-round
Features in Financial Instruments will no longer cause derivative treatment. The Company applies the modified prospective method of adoption.
There were no cumulative effects on adoption.
Convertible
Notes With Variable Conversion Options
The
Company has entered into convertible notes, some of which contain variable conversion options, whereby the outstanding principal and
accrued interest may be converted, by the holder, into common shares at a fixed discount to the price of the common stock at or around
the time of conversion. The Company treats these convertible notes as stock settled debt under ASC 480, “Distinguishing Liabilities
from Equity” and measures the fair value of the notes at the time of issuance, which is the result of the share price discount
at the time of conversion and records the put premium as interest expense.
Income
Taxes
The
Company is governed by Australia and United States income tax laws, which are administered by the Australian Taxation Office and the
United States Internal Revenue Service, respectively. The Company follows ASC 740 “Accounting for Income Taxes,” when
accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred
income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or
minus the change during the period in deferred tax assets and liabilities.
The
Company follows ASC 740, Sections 25 through 60, “Accounting for Uncertainty in Income Taxes.” These sections provide
detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial
statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized
upon the adoption of ASC 740 and in subsequent periods.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
Research
and Development Costs and Tax Credits
In
accordance with ASC 730-10, “Research and Development-Overall,” research and development costs are expensed when incurred.
Total research and development costs for the three months ended December 31, 2021 and 2020 were $50,753 and $50,165, respectively. Total
research and development costs for the six months ended December 31, 2021 and 2020 were $97,307 and $101,011, respectively.
The
Company may apply for research and development tax concessions with the Australian Taxation Office on an annual basis. Although the amount
is possible to estimate at year end, the Australian Taxation Office may reject or materially alter the claim amount. Accordingly, the
Company does not recognize the benefit of the claim amount until cash receipt since collectability is not certain until such time. The
tax concession is a refundable credit. If the Company has net income, then the Company can receive the credit which reduces its income
tax liability. If the Company has net losses, then the Company may still receive a cash payment for the credit, however, the Company’s
net operating loss carryforwards are reduced by the gross equivalent loss that would produce the credit amount when the income tax rate
is applied to that gross amount. The concession is recognized as tax benefit, in operations, upon receipt.
During
each of the six months ended December 31, 2021 and 2020, the Company applied for, and received from the Australian Taxation Office, a
research and development tax credit in the amount of $55,463 and $0, respectively, which is reflected as a tax benefit in the accompanying
unaudited condensed consolidated statements of operations and comprehensive income (loss).
Stock
Based Compensation
The
Company records stock-based compensation in accordance with ASC 718, “Stock Compensation”. ASC 718 requires the fair
value of all stock-based employee compensation awarded to employees to be recorded as an expense over the shorter of the service period
or the vesting period. The Company values employee and non-employee stock-based compensation at fair value using the Black-Scholes Option
Pricing Model.
The
Company adopted ASU 2018-07 and accounts for non-employee share-based awards in accordance with the measurement and recognition criteria
of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective method of
adoption.
Revenue
Recognition
The Company applies ASC Topic 606,
Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a single comprehensive model for entities to use in
accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard
requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional
disclosures.
Subject
to these criteria, the Company intends to recognize revenue relating to royalties on product sales in the period in which the sale occurs
and the royalty term has begun.
Legal Expenses
All
legal costs for litigation are charged to expense as incurred.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
Leases
The
Company follows ASC Topic 842, Leases (Topic 842) and applying 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. Operating lease right of use
assets (“ROU”) represents the right
to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of future
minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company 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 will be included in
general and administrative expenses.
Basic
and Diluted Net Loss Per Common Share
Basic
net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period.
Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding for
the period and, if dilutive, potential common shares outstanding during the period. Potentially dilutive securities consist of the incremental
common shares issuable upon exercise of common stock equivalents such as stock options, warrants and convertible debt instruments. Potentially
dilutive securities are excluded from the computation if their effect is anti-dilutive. As a result, the basic and diluted per share
amounts for all periods presented are identical. Each
holder of the notes has agreed to a 4.99%
beneficial ownership conversion limitation (subject to certain noteholders’ 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 December 31, 2021 and 2020 were considered dilutive securities which were excluded from the computation
since the effect is anti-dilutive.
SCHEDULE OF ANTI-DILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
|
|
December
31, 2021
|
|
|
December
31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
Stock
Options
|
|
|
59
|
|
|
|
60
|
|
Stock
Warrants
|
|
|
111,910
|
|
|
|
135,724
|
|
Unvested
restricted stock
|
|
|
59
|
|
|
|
59
|
|
Convertible
Debt
|
|
|
28,520,974
|
|
|
|
4,199,847
|
|
Total
|
|
|
28,633,002
|
|
|
|
4,335,690
|
|
Recent
Accounting Pronouncements
We
have reviewed the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)
accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods.
We have carefully considered the new pronouncements that alter previous generally accepted accounting principles and do not believe that
any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near
term. The applicability of any standard is subject to the formal review of the Company’s financial management.
In
August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models
for convertible debt instruments and convertible preferred stock. As well as amend the guidance for the derivatives scope exception for
contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves
and amends the related EPS guidance. This standard is effective for us on July 1, 2022, including interim periods within those fiscal
years. Adoption is either a modified retrospective method or a fully retrospective method of transition. The Company is currently assessing
the impact the new guidance will have on our consolidated financial statements.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
NOTE
2 – GOING CONCERN
The
accompanying unaudited condensed consolidated financial statements have been prepared in conformity with US GAAP, which contemplate continuation
of the Company as a going concern. For the six months ended December 31, 2021, the Company had no revenues, had a net loss of $1,290,635,
and had net cash used in operations of $711,093. Additionally, as of December 31, 2021, the Company had a working capital deficit, stockholders’
deficit and accumulated deficit of $2,955,492, $2,930,193, and $59,698,343, respectively. It is management’s opinion that these
conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months
from the issue date of this Quarterly Report.
The
unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability
and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.
Successful
completion of the Company’s development program and, ultimately, the attainment of profitable operations are dependent upon future
events, including obtaining adequate financing to fulfill its development activities, acceptance of the Company’s patent applications,
obtaining additional sources of suitable and adequate financing and ultimately achieving a level of sales adequate to support the Company’s
cost structure and business plan. The Company’s ability to continue as a going concern is also dependent on its ability to further
develop and execute on its business plan. However, there can be no assurances that any or all of these endeavors will be successful.
In
March 2020, the outbreak of COVID-19 (coronavirus) caused by a novel strain of the coronavirus was recognized as a pandemic by the World
Health Organization, and the outbreak has become increasingly widespread in the United States, Europe and Australia, including in each
of the areas in which the Company operates. The COVID-19 (coronavirus) outbreak has had a notable impact on general economic conditions,
including but not limited to the temporary closures of many businesses, “shelter in place” and other governmental regulations,
reduced business and consumer spending due to both job losses, reduced investing activity and M&A transactions, among many other
effects attributable to the COVID-19 (coronavirus), and there continue to be many unknowns. While to date the Company has not been required
to stop operating, management is evaluating its use of its office space, virtual meetings and the like. The Company continues to monitor
the impact of the COVID-19 (coronavirus) outbreak closely. The extent to which the COVID-19 (coronavirus) outbreak will impact 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 December 31, 2021 and June 30, 2021.
SCHEDULE OF PROPERTY PLANT AND EQUIPMENT
|
|
December
31, 2021
|
|
|
June
30, 2021
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Office
equipment at cost
|
|
$
|
27,749
|
|
|
$
|
28,623
|
|
Less:
Accumulated depreciation
|
|
|
(24,631
|
)
|
|
|
(24,368
|
)
|
|
|
|
|
|
|
|
|
|
Total
property, plant, and equipment
|
|
$
|
3,118
|
|
|
$
|
4,255
|
|
Depreciation
expense for the three months ended December 31, 2021 and 2020 were $504 and $506, respectively. Depreciation expense for the six months
ended December 31, 2021 and 2020 were $1,013, and $944, respectively.
NOTE
4 – DUE TO FORMER DIRECTOR - RELATED PARTY
Due
to former director - related party represents unsecured advances made primarily by a former director for operating expenses on behalf
of the Company such as intellectual property and formation expenses. The expenses were paid for on behalf of the Company and are due
upon demand. The Company is currently not being charged interest under these advances. The total amount owed the former director at December
31, 2021 and June 30, 2021 were $32,329 and $33,347, respectively. The Company plans to repay the advances as its cash resources allow
(see Note 9).
NOTE
5 – LOANS AND NOTES PAYABLE
Loan
from Former Director - Related Party
Loan
from the Company’s former director at December 31, 2021 and June 30, 2021 were $53,805 and $55,500, respectively. The loan bears
no interest and is payable on demand. The Company did not repay any amount on this loan during the six months ended December 31, 2021
and 2020, respectively (see Note 9).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
NOTE
6 – CONVERTIBLE NOTES
The
Company’s convertible notes outstanding at December 31, 2021 and June 30, 2021 were as follows:
SCHEDULE OF CONVERTIBLE DEBT
|
|
December
31, 2021
|
|
|
June
30, 2021
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Convertible
notes and debenture
|
|
$
|
640,280
|
|
|
$
|
400,128
|
|
Unamortized
discounts
|
|
|
(35,344
|
)
|
|
|
(6,139
|
)
|
Accrued
interest
|
|
|
52,548
|
|
|
|
34,098
|
|
Premium,
net
|
|
|
315,186
|
|
|
|
196,496
|
|
Convertible
notes, net
|
|
$
|
972,670
|
|
|
$
|
624,583
|
|
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.
On
March 15, 2021, the Company entered into a Settlement and Mutual Release Agreement (the “Settlement Agreement”) with the
consultant whereby both parties agreed to settle all claims and liabilities under the August 10, 2017 Convertible note for a total of
$100,000 in the form of a convertible note. All other terms of the August 10, 2017 Convertible Note shall remain in full force and effect.
Both parties agree that all future penalties under this note are waived unless the Company fails to authorize to distribute the requested
shares upon conversion. The Company has the right to pay off the balance of any remaining amounts dues under this note in cash at any
time more than 60 days after March 15, 2021. Prior to the Settlement Agreement, the Company recorded total liabilities $56,762 consisting
of remaining principal amount of $8,500, accrued interest of $23,262 and accrued expenses of $25,000. Accordingly, the Company recognized
loss from settlement of debt of $43,238 during the year ended June 30, 2021.
The
total principal outstanding after adjustment due to the above-mentioned March 15, 2021 settlement agreement and accrued interest under
the August 10, 2017 Convertible Note was $80,000 and $3,738, respectively, as of June 30, 2021 following conversion of $20,000 of principal
during the year ended June 30, 2021. The total principal amount outstanding under the August 10, 2017 Convertible Note was $80,000 and
accrued interest of $11,022 as of December 31, 2021.
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 was currently past due. The August 30, 2019 Auctus Note
bore interest at a rate of 10% per annum, but not payable until the August 30, 2019 Auctus Note became 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 $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 was not paid when due shall bear interest at the rate of 24% per annum.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
Additionally,
Auctus had 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 was 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 was equal to the Variable Conversion Price of 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 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 $2,250. In connection with the issuance
of the Note, the Company issued a common stock purchase warrant to Buyer to purchase 300 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 $3,330. In connection with the issuance of the Note, the Company shall issue a common stock
purchase warrant to Buyer to purchase 225 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
$4,500. The First Warrant, Second Warrant, and Third Warrant were 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.
The
Note was 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 was 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 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 accrued at a default interest rate of 24% per
annum.
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 $32,848
and accrued interest of $0 as of June 30, 2021 following conversion of $326,117 of the principal balance and $39,536 of accrued interest
during the year ended June 30, 2021. Accordingly, $217,411 of the put premium was released in respect of the August 30, 2019 Auctus Note
during the year ended June 30, 2021 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 $0 and
accrued interest of $0 as of December 31, 2021 following conversion of $32,848 of the principal balance and $716 of accrued interest
during the six months ended December 31, 2021. Accordingly, $21,899 of the put premium was released in respect of the August 30, 2019
Auctus Note during the six months ended December 31, 2021 following conversion of the principal balance. Accordingly, there was no outstanding
principal balance as of December 31, 2021.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
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 was October 3, 2020 and is currently past due. 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 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.
There
were 15,000 unissued shares which were considered issuable for accounting purposes during the 1st quarter of fiscal 2021 related
to a conversion notice dated and received on September 16, 2020. In November 2020, the Company was notified by the note holder of the
cancellation of this conversion notice as a result of the reverse stock split and as such the Company reversed the effects of this transaction
thereby increasing the principal balance by $9,600 and put premium by $6,400 and a corresponding decrease in equity of $16,000.
The
total principal amount outstanding under the above Crown Bridge financing agreement was $65,280 and accrued interest of $16,138 as of
June 30, 2021. The total principal amount outstanding under the above Crown Bridge financing agreement was $65,280 and accrued interest
of $21,074 as of December 31, 2021.
GW
Holdings Securities Purchase Agreements
December
10, 2020 Securities Purchase Agreement
Effective
December 10, 2020, the Company entered into a securities purchase agreement with GW Holdings, pursuant to which GW Holdings purchased
a convertible promissory note (the “December 10, 2020 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 anytime
from the issuance of the December 10, 2020 GW Holdings Note. The transactions contemplated by the GW Holdings Securities Purchase Agreement
closed on December 10, 2020. Pursuant to the terms of the GW Holdings Securities Purchase Agreement, the lender deducted $6,000 from
the principal payment due under the December 10, 2020 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 December 10, 2020 GW Note for general working capital purposes. The maturity date
of the December 10, 2020 GW Holdings is December 10, 2021. The December 10, 2020 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 December 10, 2020 GW Holdings 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
December
31, 2021
(Unaudited)
The
above notes issued to GW Holdings 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.
Additionally,
GW Holdings has the option to convert all or any amount of the principal face amount of the notes issued to GW Holdings 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 such notes plus any interest
accrued, for shares of the Company’s common stock at the then-applicable conversion price.
The
conversion price for the above GW Holdings notes 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.
These
notes are treated as stock settled debt under ASC 480 and accordingly the Company recorded a total of $87,333 put premium.
The
total principal amount outstanding under the above December 10, 2020 GW Holdings financing agreement, was $90,000 and accrued interest
of $4,636 as of June 30, 2021 following conversion of $41,000 of the principal balance and $1,084 of accrued interest during the year
ended June 30, 2021. Accordingly, $27,333 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, 2021 following conversion of the principal balance.
The
total principal amount outstanding under the above December 10, 2020 GW Holdings financing agreement, was $40,000 and accrued interest
of $7,364 as of December 31, 2021 following conversion of $50,000 of the principal balance and $3,817 of accrued interest during the
six months ended December 31, 2021. Accordingly, $33,333 of the put premium was reclassed to additional paid in capital in respect of
the October 1, 2019 GW Holdings Note during the six months ended December 31, 2021 following conversion of the principal balance.
Geneva
Roth Remark Securities Purchase Agreements
January
5, 2021 Securities Purchase Agreement
Effective
January 5, 2021, the Company entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc., pursuant to which Geneva
Roth purchased a convertible promissory note (the “January 5, 2021 Geneva Roth”) from the Company in the aggregate principal
amount of $68,500, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of Geneva Roth any time after the six-month anniversary of the January 5, 2021 Geneva Roth. The January 5, 2021 Geneva Roth contained
an original issue discount of $3,500. The Company intended to use the net proceeds from the January 5, 2021 Geneva Roth for general working
capital purposes. The maturity date of the January 5, 2021 Geneva Roth Note was January 5, 2022. The January 5, 2021 Geneva Roth Note
bore interest at a rate of 8% per annum, which interest may be paid by the Company to Geneva Roth in shares of the Company’s common
stock; but shall not be payable until the January 5, 2021 Geneva Roth Note becomes payable, whether at the maturity date or upon acceleration
or by prepayment.
March
16, 2021 Securities Purchase Agreement
Effective
March 16, 2021, the Company entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc., pursuant to which Geneva
Roth purchased a convertible promissory note (the “March 16, 2021 Geneva Roth”) from the Company in the aggregate principal
amount of $63,500, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of Geneva Roth any time after the six-month anniversary of the March 16, 2021 Geneva Roth. The March 16, 2021 Geneva Roth contained an
original discount of $3,500. The Company intended to use the net proceeds from the March 16, 2021 Geneva Roth for general working capital
purposes. The maturity date of the March 16, 2021 Geneva Roth Note was March 16, 2022. The March 16, 2021 Geneva Roth Note bears interest
at a rate of 8% per annum, which interest may be paid by the Company to Geneva Roth in shares of the Company’s common stock; but
shall not be payable until the March 16, 2021 Geneva Roth 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
December
31, 2021
(Unaudited)
August
19, 2021 Securities Purchase Agreement
Effective
August 19, 2021, the Company entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc., pursuant to which Geneva
Roth purchased a convertible promissory note (the “August 19, 2021 Geneva Roth”) from the Company in the aggregate principal
amount of $103,750, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of Geneva Roth any time after the six-month anniversary of the August 19, 2021 Geneva Roth. The August 19, 2021 Geneva Roth contains
an original discount of $3,750. The Company intends to use the net proceeds from the August 19, 2021 Geneva Roth for general working
capital purposes. The maturity date of the August 19, 2021 Geneva Roth Note is August 19, 2022. The August 19, 2021 Geneva Roth Note
bears interest at a rate of 8% per annum, which interest may be paid by the Company to Geneva Roth in shares of the Company’s common
stock; but shall not be payable until the August 19, 2021 Geneva Roth Note becomes payable, whether at the maturity date or upon acceleration
or by prepayment.
September
22, 2021 Securities Purchase Agreement
Additionally,
effective September 22, 2021, the Company entered into a securities purchase agreement with Geneva Roth Remark Holdings, Inc., pursuant
to which Geneva Roth purchased a convertible promissory note (the “September 22, 2021 Geneva Roth”) from the Company in the
aggregate principal amount of $63,750, such principal and the interest thereon convertible into shares of the Company’s common
stock at the option of Geneva Roth any time after the six-month anniversary of the September 22, 2021 Geneva Roth. The September 22,
2021 Geneva Roth contains an original discount of $3,750. The Company intends to use the net proceeds from the September 22, 2021 Geneva
Roth for general working capital purposes. The maturity date of the September 22, 2021 Geneva Roth Note is September 22, 2022. The September
22, 2021 Geneva Roth Note bears interest at a rate of 8% per annum, which interest may be paid by the Company to Geneva Roth in shares
of the Company’s common stock; but shall not be payable until the September 22, 2021 Geneva Roth 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 these notes, the Company has the right to prepay the principal and accrued but unpaid
interest due under the above notes issued to Geneva Roth, together with any other amounts that the Company may owe the holder under the
terms of the note, at a premium ranging from 110% to 129% as defined in the note agreement. After this initial 180-day period, the Company
does not have a right to prepay such notes.
The
conversion price for the above Geneva Roth notes shall be equal to a 35% discount of the market price based on the average of the lowest
three trading prices of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of Conversion. Notwithstanding
the foregoing, Geneva Roth shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s
common stock beneficially owned by Geneva Roth and its affiliates, exceeds 9.99% of the outstanding shares of the Company’s common
stock. These notes are treated as stock settled debt under ASC 480 and accordingly the Company recorded a total of $161,269 put premium
for the four notes with $90,192 recorded in the six months ended December 31, 2021.
The
above Geneva Roth notes contain certain events of default, upon which principal and accrued interest will become immediately due and
payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of 22%
per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. Further,
certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amounts outstanding under the above Geneva Roth financing agreements were $132,000 and accrued interest of $3,477 as
of June 30, 2021 following conversion of $78,000 of the principal balance and $3,120 accrued interest during the year ended June 30,
2021. Accordingly, $42,000 of the put premium was released in respect of the Geneva Roth financing agreements during the year ended June
30, 2021 following conversion of the principal balance.
The
total principal amounts outstanding under the above Geneva Roth financing agreements were $167,500
and accrued interest of $4,458
as of December 31, 2021 following conversion
of $132,000
of the principal balance and $5,280
accrued interest during the six months ended
December 31, 2021. Accordingly, $71,077
of the put premium was released to additional
paid in capital in respect of the Geneva Roth financing agreements during the six months ended December 31, 2021 following conversion
of the principal balance.
Sixth
Street Lending Securities Purchase Agreements
October
21, 2021 Securities Purchase Agreement
Effective
October 21, 2021, the Company entered into a securities purchase agreement with Sixth Street Lending LLC (“Sixth Street”),
pursuant to which Sixth Street purchased a convertible promissory note (the “October 21, 2021 Sixth Street”) from the Company
in the aggregate principal amount of $63,750, such principal and the interest thereon convertible into shares of the Company’s
common stock at the option of Sixth Street any time after the six-month anniversary of the October 21, 2021 Sixth Street. The October
21, 2021 Sixth Street contains an original discount of $3,750. The Company intends to use the net proceeds from the October 21, 2021
Sixth Street for general working capital purposes. The maturity date of the October 21, 2021 Sixth Street Note is October 21, 2022. The
October 21, 2021 Sixth Street Note bears interest at a rate of 8% per annum, which interest may be paid by the Company to Sixth Street
in shares of the Company’s common stock; but shall not be payable until the October 21, 2021 Sixth Street Note becomes payable,
whether at the maturity date or upon acceleration or by prepayment.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
November
26, 2021 Securities Purchase Agreement
Additionally,
effective November 26, 2021, the Company entered into a securities purchase agreement with Sixth Street Lending LLC pursuant to which
Sixth Street purchased a convertible promissory note (the “November 26, 2021 Sixth Street”) from the Company in the aggregate
principal amount of $53,750, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Sixth Street any time after the six-month anniversary of the November 26, 2021 Sixth Street. The November 26, 2021 Sixth Street
contains an original discount of $3,750. The Company intends to use the net proceeds from the November 26, 2021 Sixth Street for general
working capital purposes. The maturity date of the November 26, 2021 Sixth Street Note is November 26, 2022. The November 26, 2021 Sixth
Street Note bears interest at a rate of 8% per annum, which interest may be paid by the Company to Sixth Street in shares of the Company’s
common stock; but shall not be payable until the November 26, 2021 Sixth Street Note becomes payable, whether at the maturity date or
upon acceleration or by prepayment.
During
the first 60 to 180 days following the date of these notes, the Company has the right to prepay the principal and accrued but unpaid
interest due under the above notes issued to Sixth Street, together with any other amounts that the Company may owe the holder under
the terms of the note, at a premium ranging from 110% to 129% as defined in the note agreement. After this initial 180-day period, the
Company does not have a right to prepay such notes.
The
conversion price for the above Sixth Street notes shall be equal to a 35% discount of the market price which means the average of the
lowest three trading prices of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of Conversion.
Notwithstanding the foregoing, Sixth Street shall be restricted from effecting a conversion if such conversion, along with other shares
of the Company’s common stock beneficially owned by Sixth Street and its affiliates, exceeds 9.99% of the outstanding shares of
the Company’s common stock. These notes are treated as stock settled debt under ASC 480 and accordingly the Company recorded a
total of $63,269 put premium.
The
above Sixth Street notes contain certain events of default, upon which principal and accrued interest will become immediately due and
payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of 22%
per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. Further,
certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amount outstanding under the above Sixth Street financing agreement was $117,500 and accrued interest of $1,404 as of
December 31, 2021.
ONE44
Capital Securities Purchase Agreements
December
7, 2021 Securities Purchase Agreement
Effective
December 7, 2021, the Company entered into a securities purchase agreement with ONE44 Capital LLC (“ONE44”), pursuant to
which ONE44 purchased a convertible promissory note (the “December 7, 2021 ONE44”) from the Company in the aggregate principal
amount of $170,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of ONE44 any time after the six-month anniversary of the December 7, 2021 ONE44. The December 7, 2021 ONE44 contains an original discount
of $25,500. The Company intends to use the net proceeds from the December 7, 2021 ONE44 for general working capital purposes. The maturity
date of the December 7, 2021 ONE44 is December 7, 2022. The December 7, 2021 ONE44 bears interest at a rate of 10% per annum, which interest
may be paid by the Company to ONE44 in shares of the Company’s common stock; but shall not be payable until the December 7, 2021
ONE44 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 these notes, the Company has the right to prepay the principal and accrued but unpaid
interest due under the above notes issued to ONE44, together with any other amounts that the Company may owe the holder under the terms
of the note, at a premium ranging from 120% to 135% as defined in the note agreement. After this initial 180-day period, the Company
does not have a right to prepay such notes.
The
conversion price for the above ONE44 notes shall be equal to a 65% discount of the market price which means the average of the lowest
three trading prices of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of Conversion. Notwithstanding
the foregoing, ONE44 shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s
common stock beneficially owned by ONE44 and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock.
These notes are treated as stock settled debt under ASC 480 and accordingly the Company recorded a total of $91,538 put premium.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
The above ONE44 notes contain certain events of default, upon which
principal and accrued interest will become immediately due and payable. In addition, upon an event of default, interest on the outstanding
principal shall accrue at a default interest rate of 24% per annum, or if such rate is usurious or not permitted by current law, then
at the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
The
total principal amount outstanding under the above ONE44 financing agreement was $170,000 and accrued interest of $1,118 as of December
31, 2021.
Amortization
of debt discounts
The
Company recorded $40,500 and $9,000 of debt discounts (including warrants, derivatives, debt issue costs and original issue discounts)
related to the above note issuances during the six months ended December 31, 2021 and 2020, respectively. The Company recorded $245,000
and $129,333 of put premiums related to the above note issuances during the six months ended December 31, 2021 and 2020, respectively.
The debt discounts are being amortized over the term of the debt and the put premiums are expensed on issuance of the debt with the liability
released to additional paid in capital on conversion of the principal.
Amortization
of all debt discounts for the three months ended December 31, 2021 and 2020 was $5,221 and $5,018, respectively. Amortization of all
debt discounts for the six months ended December 31, 2021 and 2020 was $11,295 and $126,299, respectively.
The
Company reclassified $126,310 and $261,224 in put premiums to additional paid in capital following conversions during the six months
ended December 31, 2021 and 2020, respectively.
NOTE
7 – STOCKHOLDERS’ DEFICIT
Increase
in Authorized Shares of Common Stock and Reverse Stock Split
On
February 4, 2020 the Directors resolved to increase the Common Stock of the Company from 100,000,000 authorized shares to 1,000,000,000
authorized shares and believes that such number of authorized shares of Common Stock will be in the best interests of the Corporation
and its stockholders because the Board believes that the availability of more shares of Common Stock for issuance will allow the Corporation
greater flexibility in pursuing financing from investors, meeting business needs as they arise, taking advantage of favorable opportunities
and responding to a changing corporate environment. The Company filed the necessary documents with the U.S. Securities and Exchange Commission
on February 6, 2020 and with the amendment to the authorized shares being approved by the State of Delaware on March 13, 2020.
On
November 17, 2020, the Company effected a one-for-one thousand (1:1,000) reverse stock split of the Company’s issued and outstanding
shares of common stock (the “Reverse Stock Split”). Proportional adjustments for the Reverse Stock Split were made to the
Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts have been retroactively
adjusted as of the earliest period presented in the unaudited condensed consolidated financial statements to reflect the Reverse Stock
Split.
Preferred
Stock
The
total number of shares of preferred stock that the Company is authorized to issue is 1,500,005, $0.01 par value per share. These preferred
shares have no rights to dividends, profit sharing or liquidation preferences.
Of
the total preferred shares authorized, 500,000 have been designated as Series A Preferred Stock (“Series A Preferred Stock”),
pursuant to the Certificate of Designation filed with the Secretary of State of the State of Delaware on December 9, 2014. James Nathanielsz,
the Company’s Chief Executive Officer and Chief Financial Officer, beneficially owns all of the outstanding shares of Series A
Preferred Stock via North Horizon Pty Ltd., which entitles him, as a holder of Series A Preferred Stock, to vote on all matters submitted
or required to be submitted to a vote of the Company’s stockholders, except election and removal of directors, and each share of
Series A Preferred Stock entitles him to two votes per share of Series A Preferred Stock. North Horizon Pty Ltd. is a Nathanielsz Family
Trust. Mr. James Nathanielsz, the Chief Executive Officer, Chief Financial Officer and a director of our Company, has voting and investment
power over these shares. 500,000 shares of Series A Preferred Stock are issued and outstanding as of December 31, 2021 and June 30, 2021.
Of
the total preferred shares authorized, pursuant to the Certificate of Designation filed with the Secretary of State of the State of Delaware
on June 16, 2015, up to five shares have been designated as Series B Preferred Stock (“Series B Preferred Stock”). Each holder
of outstanding shares of Series B Preferred Stock is entitled to voting power equivalent to the number of votes equal to the total number
of shares of common stock outstanding as of the record date for the determination of stockholders entitled to vote at each meeting of
stockholders of the Company and entitled to vote on all matters submitted or required to be submitted to a vote of the stockholders of
the Company. One share of Series B Preferred Stock is issued and outstanding as of December 31, 2021 and June 30, 2021. Mr. Nathanielsz
directly beneficially owns such one share of Series B Preferred Stock.
No
additional shares of Series A Preferred Stock or Series B Preferred Stock were issued during the six months ended December 31, 2021 and
fiscal year 2021.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
Common
Stock:
Shares
issued for Common Stock Purchase Agreement
On
November 30, 2021, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Dutchess Capital
Growth Fund LP, a Delaware limited partnership, (“Dutchess”), providing for an equity financing facility (the “Equity
Line”). The Purchase Agreement provides that upon the terms and subject to the conditions in the Purchase Agreement, Dutchess is
committed to purchase up to Five Million Dollars ($5,000,000) of shares of the Company’s common stock (the “Common Stock”),
over the 36 month term of the Purchase Agreement (the “Total Commitment”).
Under
the terms of the Purchase Agreement, Dutchess will not be obligated to purchase shares of Common Stock unless and until certain conditions
are met, including but not limited to a Registration Statement on Form S-1 (the “Registration Statement”) becoming effective
which registers Dutchess’ resale of any Common Stock purchased by Dutchess under the Equity Line. From time to time over the 36-month
term of the Purchase Agreement, commencing on the trading day immediately following the date on which the Registration Statement becomes
effective, the Company, in our sole discretion, may provide Dutchess with a draw down notice (each, a “Draw Down Notice”),
to purchase a specified number of shares of Common Stock (each, a “Draw Down Amount Requested”), subject to the limitations
discussed below. The actual amount of proceeds the Company will receive pursuant to each Draw Down Notice (each, a “Draw Down Amount”)
is to be determined by multiplying the Draw Down Amount Requested by the applicable purchase price. The purchase price of each share
of Common Stock equals 92% of the lowest trading price of the Common Stock during the five (5) business days prior to the Closing Date.
Closing Date shall mean the five (5) business days after the Clearing Date. Clearing Date shall mean the first business day that the
Selling Shareholder holds the Draw Down Amount in its brokerage account and is eligible to trade the shares.
The
maximum number of shares of Common Stock requested to be purchased pursuant to any single Draw Down Notice cannot exceed the lesser of
(i) 300% of the average daily share volume of the Common Stock in the five (5) trading days immediately preceding the Draw Down Notice
or (ii) an aggregate value of $250,000.
The
Company agreed to pay to Dutchess a commitment fee for entering into the Purchase Agreement of 1,000,000 restricted shares of the Company’s
common stock. The 1,000,000 shares of common stock were valued at approximately $0.02 per share or $20,000, being the closing price of
the stock on November 30, 2021, the date of grant. The shares were issued on December 10, 2021. The Company recorded deferred offering
cost of $20,000 as reflected in the accompanying condensed consolidated balance sheet as of December 31, 2021.
The
Company defers these costs until such time that the associated financing is completed. Upon completion and recognition of the proceeds,
any deferred financing costs will be reported as a direct deduction from the amount of the proceeds received. If it is determined that
the contemplated financing will not be completed any amounts deferred will be expensed.
Shares
issued for conversion of convertible debt
From
July 1, 2021 through December 31, 2021, the Company issued an aggregate of 11,263,106 shares of its common stock at an average contractual
conversion price of $0.02, ranging from $0.01 to $0.04, as a result of the conversion of principal of $214,848, interest of $9,813 and
conversion fees $2,250 underlying certain outstanding convertible notes converted during such period. The total recorded to equity was
$226,912.
The
Company reclassified $126,310
from put premium liabilities
to additional paid in capital following conversions during the six months ended December 31, 2021.
The
Company has 266,478,379 shares of its common stock reserved for future issuances based on lender reserve requirements pursuant to underlying
financing agreements at December 31, 2021.
Shares
issued for services and accrued expenses
On
August 12, 2021, the Board approved the issuance of 2,800,000 shares of the Company’s common stock for bonus payable of $84,000
as of June 30, 2021 to an employee who is the wife of the CEO of the Company. The 2,800,000 shares of common stock were valued at approximately
$0.03 per share or $87,920, being the closing price of the stock on the date of grant. The shares were issued on August 17, 2021. The
Company recorded stock-based compensation of $3,920 during the six months ended December 31, 2021 and reclassified bonus payable of $84,000
to additional paid in capital upon issuance.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
On
August 12, 2021, the Board approved the issuance of 166,667 shares of the Company’s common stock for legal services rendered for
the month of August 2021. The 166,667 shares of common stock were valued at approximately $0.05 per share or $7,883, being the closing
price of the stock on August 31, 2021, the date of grant. The shares were issued on September 3, 2021. The Company recorded stock-based
compensation of $7,883 during the six months ended December 31, 2021.
In
September 2021, the Company issued 2,819,712 shares of the Company’s common stock to a consultant for services rendered from July
2021 to September 2021. The Company issued 2,819,712 shares of the Company’s common stock valued at approximately $0.04 per share
or $104,611, being the closing price of the stock on the date of grant to such consultant. The Company recorded stock-based compensation
of $104,611 during the six months ended December 31, 2021.
Nathanielsz
Cancellation Agreement
On
August 12, 2021, the Company entered into a Cancellation Agreement with James Nathanielsz (“Nathanielsz”), Chief Executive
Officer and Director of the Company, whereby Nathanielsz agreed to cancel his cash compensation bonus award for fiscal year 2021, ended
June 30, 2021, in exchange for common stock of the Company. The Company and Nathanielsz entered into an Amended and Restated Employment
Agreement dated May 14, 2019 (the “Agreement”). Pursuant to the terms of the Agreement, Nathanielsz was eligible to earn
an annual fiscal year cash performance bonus for each fiscal year of his employment period with the Company with a target performance
bonus of 200% of his average annualized base salary during the fiscal year for which the performance bonus is earned. On July 20, 2021,
Nathanielsz was awarded a “target” bonus of 78%, or $177,840 USD (the “Debt”) for the fiscal year ended June
30, 2021, by the Company’s Board of Directors (the “Board”). Pursuant to the Cancellation Agreement, Nathanielsz agreed
to cancel this Debt in exchange for 5,928,000 shares of the common stock of the Company (the “Shares”), valued at approximately
$0.03 per share or $186,139, being the closing price of the stock on the date of grant. The shares were issued on August 17, 2021. The
Company recorded stock-based compensation of $8,299 during the six months ended December 31, 2021 and reclassified bonus payable of $177,840
to additional paid in capital upon issuance.
Kenyon
Cancellation Agreement
On
August 12, 2021, the Company entered into a Cancellation Agreement with Dr. Julian Kenyon (“Kenyon”), Chief Scientific Officer
and Director of the Company, whereby Kenyon agreed to cancel of $102,600 USD of accrued salary due him as of June 30, 2021, pursuant
to that certain Amended and Restated Services Agreement by and between Kenyon and the Company, dated May 14, 2019, in exchange for 3,420,000
shares of common stock of the Company (the “Shares”), valued at approximately $0.03 per share or $107,388, being the closing
price of the stock on the date of grant. The shares were issued on August 17, 2021. The Company recorded stock-based compensation of
$4,788 during the six months ended December 31, 2021 and reclassified accrued expenses of $102,600 to additional paid in capital upon
issuance.
Zelinger
Amended and Restated Director Agreement
On
August 12, 2021, the Company entered into an Amended and Restated Director Agreement (the “Director Agreement”) with Josef
Zelinger (“Zelinger”). Pursuant to the terms of the Director Agreement, the Company shall pay Zelinger a base salary of $250.00
AUD ($184 USD) per month, payable on the first day of each month. In addition, the Company may compensate Zelinger additional consideration
for advisory services performed by the Director, either in the form of cash or common stock, at the discretion of the Board. The Company
issued 2,800,000 shares of common stock of the Company for accrued director services of $84,000 as of June 30, 2021. The 2,800,000 shares
of common stock were valued at approximately $0.03 per share $87,920, being the closing price of the stock on the date of grant. The
shares were issued on August 17, 2021. The shares were issued on August 17, 2021. The Company recorded stock-based compensation of $3,920
during the six months ended December 31, 2021 and reclassified accrued expenses of $84,000 to additional paid in capital upon issuance.
Shares
issued for exercise of warrants
From
July 9, 2021 through September 27, 2021, the Company received aggregate gross proceeds of $275,000 and subscription receivable of $100,000
from the exercise of 9,375 Series B Warrants and issued 6,875 shares of common stock and 2,500 shares of common stock issuable as of
December 31, 2021. In October 2021, the Company issued the 2,500 shares of common stock and collected the $100,000 subscription receivable.
There are no Series B Warrants exercised during the three months ended December 31, 2021.
During
the six months ended December 31, 2021, the Company issued 8,799,956
shares of common stock from the alternate cashless
exercise of 44 Series A warrants with an original exercise price of $200
and alternate cashless exercise price
of $0.001.
The ”Alternate Cashless Exercise” provision, for a cashless conversion at the holder’s option, is available should
the trading price of the Company’s common stock fall below $200 per share calculated based on the difference between the exercise
price of the Series A Warrant and 70% of the market price.
The Company recognized the value of the effect of a down round feature in such warrants when triggered. Upon the occurrence of the triggering
event that resulted in a reduction of the strike price, the Company measured the value of the effect of the feature as the difference
between the fair value of the warrants without the down round feature or before the strike price reduction and the fair value of the
warrants with a strike price corresponding to the reduced strike price upon the down round feature being triggered. Accordingly, the
Company recognized deemed dividend of $208,242
and a corresponding reduction of income available to common
stockholders upon the alternate cashless exercise of these warrants.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
Warrants:
The
following table summarizes warrant activity for the six months ended December 31, 2021:
SCHEDULE OF STOCKHOLDERS EQUITY NOTE WARRANTS OR RIGHTS
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average
|
|
|
|
Shares
|
|
|
Price Per Share
|
|
Outstanding at June 30, 2021
|
|
|
121,329
|
|
|
$
|
179.63
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(9,419
|
)
|
|
|
40.75
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2021
|
|
|
111,910
|
|
|
$
|
191.32
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2021
|
|
|
76,911
|
|
|
$
|
278.38
|
|
Outstanding and Exercisable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining contractual term
|
|
|
1.27
|
|
|
|
|
|
Aggregate intrinsic value
|
|
$
|
-
|
|
|
|
|
|
No
stock warrants were granted during the six months ended December 31, 2021 and 2020.
Options:
A
summary of the Company’s option activity during the six months ended December 31, 2021 is presented below:
SCHEDULE OF SHARE BASED COMPENSATION STOCK OPTIONS ACTIVITY
|
|
|
|
|
Weighted
|
|
|
|
Number
of
|
|
|
Average
Exercise
|
|
|
|
Shares
|
|
|
Price
Per Share
|
|
Outstanding
at June 30, 2021
|
|
|
59
|
|
|
$
|
13,730.00
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding
at December 31, 2021
|
|
|
59
|
|
|
$
|
4,533.33
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at December 31, 2021
|
|
|
39
|
|
|
$
|
4,530.93
|
|
Outstanding
and Exercisable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average remaining contractual term
|
|
|
7.37
|
|
|
|
|
|
Weighted
average fair value of options granted during the period
|
|
$
|
-
|
|
|
|
|
|
Aggregate
intrinsic value
|
|
$
|
-
|
|
|
|
|
|
During
the three months ended December 31, 2021 and 2020, the Company recognized stock-based compensation of $20,718 and $20,718, respectively
related to vested stock options. During the six months ended December 31, 2021 and 2020, the Company recognized stock-based compensation
of $41,436 and $41,436, respectively related to vested stock options. There was $86,983 of unvested stock options expense as of December
31, 2021 that will be recognized through May 2022 or 0.37 year. No stock options were granted during the six months ended December 31,
2021 and 2020.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
NOTE
8 – COMMITMENTS AND CONTINGENCIES
Legal
Matters
From
time to time, the Company may be subject to litigation and claims arising in the ordinary course of business. The Company is not currently
a party to any material legal proceedings and the Company is not aware of any pending or threatened legal proceeding against the Company
that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.
IRS
Liability
As
part of its requirement for having a foreign operating subsidiary, the Company’s parent U.S. entity is required to file an informational
Form 5471 to the Internal Revenue Service (the “IRS”), which is a form that explains the nature of the relationship between
the foreign subsidiary and the parent company. From 2012 through the 2014, the Company did not file this form in a timely manner. As
a result of the non-timely filings, the Company incurred a penalty from the IRS in the amount of $10,000 per year, or $30,000 in total,
plus accrued interest, such penalty and interest having been accrued and is included in the accrued expenses and other payable figure
in the December 31, 2021 and June 30, 2021 consolidated balance sheet. The Company recorded the penalties for all three years during
the year ended June 30, 2018. 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.
Consulting
Agreement
On
October 1, 2021, the Company entered into a consulting agreement (the “Consulting Agreement”) with a consultant who will
assist in the development of the Company’s business and financing activities. The consultant will serve initially as an independent
contractor, and upon certain mutually agreed upon conditions being met, will be appointed Vice Chairman, President and Interim CFO. The
term of the Consulting Agreement shall be for three years commencing on October 1, 2021 and can be terminated by either party upon 30
day written notice. The monthly payment per the Consulting Agreement is $7,000.
The Company will also issue shares of common stock equal to 1%
of the total issued and outstanding shares at
the end of each year of service which shall be expensed upon date of grant.
Collaboration
Agreement
On
September 13, 2018, the Company entered into a two-year collaboration agreement with the University of Jaén (the “University”)
to provide certain research services to the Company. In consideration of such services, the Company agreed to pay the University approximately
52,000 Euros ($59,508 USD) in year one and a maximum of 40,000 Euros ($45,775 USD) in year two. The Company paid 31,754 Euros ($36,117
USD) in 2019 and has accrued 28,493 Euros ($24,043 USD) as of June 30, 2021. Additionally, in exchange for full ownership of the intellectual
property the Company agreed to pay royalties of 2% of net revenues to the University. On October 1, 2020, the Company entered into another
two-year collaboration agreement with the University of Jaén 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.
NOTE
9 – RELATED PARTY TRANSACTIONS
Since
its inception, the Company has conducted transactions with its directors and entities related to such directors. These transactions have
included the following:
As
of December 31, 2021 and June 30, 2021, the Company owed its former director a total of $53,805 and $55,500, respectively, for money
loaned to the Company throughout the years. The total loans balance owed at December 31, 2021 and June 30, 2021 is not interest bearing
(See Note 5 – Loans and Notes Payable).
As
of December 31, 2021 and June 30, 2021, the Company owed its former director a total of $32,329 and $33,347, 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).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
On
May 6, 2021, 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 one-year term commencing
May 6, 2021, and the Company is currently obligated to pay $3,606 AUD or $2,431 USD (depending on exchange rate), inclusive of tax, in
rent per month. During the three months ended December 31, 2021 and 2020, rent expense amounted $6,550 USD and $7,750 USD. During the
six months ended December 31, 2021 and 2020, rent expense amounted $14,286 USD and $16,954 USD. As of December 31, 2021, total rent payable
of $93,000AUD ($67,620 USD) is included in accrued expenses in the accompanying condensed consolidated balance sheet.
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 December 31, 2021 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 six months ended December 31, 2021, a total of $7,689 AUD ($5,651 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 $221,890
AUD ($166,418 USD) in payments were made against the bonuses during the year ended June 30, 2021 resulting in a remaining balance of
$422,610 AUD ($316,957 USD) bonus payable as of June 30, 2021. On August 12, 2021, the Board approved a bonus of $177,840 USD. On August
12, 2021, pursuant to the Cancellation Agreement, Mr. Nathanielsz agreed to cancel $177,840 of the bonus payable in exchange for 5,928,000
shares of the common stock of the Company (see Note 7). A total of $99,103 AUD ($72,058 USD) in payments were made against the bonuses
during the six months ended December 31, 2021 which resulted to a remaining balance of $86,387 AUD ($62,812 USD) bonus payable as of
December 31, 2021 which is included in accrued expenses in the accompanying condensed consolidated balance sheet.
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 shares of the Company’s
common stock (the “Nathanielsz Options”), with an exercise price per share of $4,675 (110% of the closing market price of
the Company’s common stock on May 14, 2019 (or $4,250), the date of approval of such grant by the Company’s board of directors),
(ii) 39 restricted stock units of the Company (the “Initial Nathanielsz RSUs”), and (iii) an additional 39 restricted stock
units of the Company (the “Additional Nathanielsz RSUs”). Such options and restricted stock units were granted pursuant to
the 2019 Plan approved by the 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) 7.80 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) 7.80 of the Additional Nathanielsz RSUs shall vest upon the CTA being approved in an applicable jurisdiction, (iii)
7.80 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) 7.80 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 7.80 of the Additional Nathanielsz RSUs shall vest upon the
Company enrolling its first patient in the Study. Each vested restricted stock unit shall be settled by delivery to Mr. Nathanielsz of
one share of the Company’s common stock and/or the fair market value of one share of common stock in cash, at the sole discretion
of the Company’s board of directors and subject to the 2019 Plan, on the first to occur of: (i) the date of a Change of Control
(as defined in the Employment Agreement), (ii) the date that is ten business days following the vesting of such restricted stock unit,
(iii) the date of Mr. Nathanielsz’s death or Disability (as defined in the Employment Agreement), and (iv) Mr. Nathanielsz’s
employment being terminated either by the Company without Cause or by Mr. Nathanielsz for Good Reason (each as defined in the Employment
Agreement). In the event of a Change of Control, any unvested portion of the Nathanielsz Options and such restricted stock units shall
vest immediately prior to such event. The 39 vested restricted stock unit are considered issuable as of December 31, 2021.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
Amended
and Restated Services Agreement - On May 14, 2019, the Company also entered into an Amended and Restated Services Agreement (the “Services
Agreement”) with Dr. Kenyon, the Company’s Chief Scientific Officer and a director, for a term of three years, subject to
automatic one-year renewals, at an annual salary of $54,000 AUD. In connection with the execution of the Services Agreement, Dr. Kenyon
was designated as an executive officer of the Company and assumed a more active executive role with the Company. Pursuant to the Services
Agreement, Dr. Kenyon was granted options to purchase 20 shares of the Company’s common stock (the “Kenyon Options”),
with an exercise price per share of $4,250 (100% of the closing market price of the Company’s common stock on May 14, 2019, the
date of approval of such grant by the Company’s board of directors), (ii) 20 restricted stock units of the Company (the “Initial
Kenyon RSUs”), and (iii) an additional 20 restricted stock units of the Company (the “Additional Kenyon RSUs”). Such
options and restricted stock units were granted pursuant to the 2019 Plan approved by the 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) 5 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) 5 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) 5 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 5 of the Additional Kenyon RSUs shall vest upon the Company
enrolling its first patient in the Study. Each vested Kenyon RSU shall be settled by delivery to Mr. Kenyon of one share of the Company’s
common stock and/or the fair market value of one share of common stock in cash, at the sole discretion of the Company’s board of
directors and subject to the Plan, on the first to occur of: (i) the date of a Change of Control (as defined in the Services Agreement),
(ii) the date that is ten business days following the vesting of such Kenyon RSU, (iii) the date of Dr. Kenyon’s death or Disability
(as defined in the Services Agreement), and (iv) Dr. Kenyon’s employment being terminated either by the Company without Cause or
by Dr. Kenyon for Good Reason (as defined in the Services Agreement). In the event of a Change of Control (as defined in the Services
Agreement), 50% of any unvested portion of the Kenyon Options and the Kenyon RSUs shall vest immediately prior to such event. The 20
vested restricted stock unit are considered issuable as of December 31, 2021. As of June 30, 2021, total accrued salaries of $135,000
AUD ($101,250 USD) was included in accrued expenses. On August 12, 2021, pursuant to the Cancellation Agreement, Mr. Kenyon agreed to
cancel accrued salaries of $102,600 in exchange for 3,420,000 shares of the common stock of the Company (see Note 7). As of December
31, 2021, total accrued salaries of $27,000 AUD ($19,632 USD) was included in accrued expenses in the accompanying condensed consolidated
balance sheet.
Intercompany
Loans
All
Intercompany loans were made by the parent to the subsidiary, Propanc PTY LTD, which have not been repaid as of December 31, 2021. 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.
NOTE
10 – CONCENTRATIONS AND RISKS
Concentration
of Credit Risk
The
Company maintains its cash in banks and financial institutions in Australia. Bank deposits in Australian banks are uninsured. The Company
has not experienced any losses in such accounts through December 31, 2021.
The
Company primarily relied on funding from three convertible debt lenders and received proceeds after deductions of $40,500 for original
issue discounts and debt issue costs during the six months ended December 31, 2021 from the lenders of $414,500 (from each of the three
lenders of $160,000, $110,000 and $144,500, respectively, which represents approximately 39%, 26% and 35%, respectively of total proceeds
received by the Company during the six months ended December 31, 2021.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
The
Company primarily relied on funding from two convertible debt lenders and received proceeds during the six months ended December 31,
2020 from each of the two lenders of $75,000, and $125,000, respectively, which represents approximately 38% and 62%, respectively of
total proceeds received by the Company during the six months ended December 31, 2020.
Receivable
Concentration
As
of December 31, 2021 and June 30, 2021, the Company’s receivables were 100% related to reimbursements on GST taxes paid.
Patent
and Patent Concentration
The
Company has filed multiple patent applications relating to its lead product, PRP. The Company’s lead patent application has been
granted and remains in force in the United States, Belgium, Czech Republic, Denmark, France, Germany, Ireland, Italy, Netherlands, Portugal,
Spain, Sweden, Switzerland, Liechtenstein, Turkey, United Kingdom, Australia, China, Japan, Indonesia, Israel, New Zealand, Singapore,
Malaysia, South Africa, Mexico, Republic of Korea, India and Brazil. In Canada, the patent application remains under examination.
In
2016 and early 2017, 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.
In
July 2020, a world first patent was granted in Australia for the cancer treatment method patent family. Presently, there are 35 granted
patents and 30 patents under examination in key global jurisdictions relating to the use of proenzymes against solid tumors, covering
the lead product candidate PRP.
Further
patent applications are expected to be filed to capture and protect additional patentable subject matter based on the Company’s
field of technology relating to pharmaceutical compositions of proenzymes for treating cancer.
Foreign
Operations
As
of December 31, 2021 and June 30, 2021, the Company’s operations are based in Camberwell, Australia, however the majority of research
and development is being conducted in the European Union.
On
July 22, 2016, the Company formed a wholly owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the purpose
of submitting an orphan drug application with the European Medicines Agency as a small and medium-sized enterprise. As of December 31,
2021 and June 30, 2021, there has been no activity within this entity.
NOTE 11 - DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Derivative
Financial Instruments:
The
Company applies the provisions of ASC 815-40, Contracts in Entity’s Own Equity, under which convertible instruments and
warrants, which contain terms that protect holders from declines in the stock price (reset provisions), may not be exempt from derivative
accounting treatment. As a result, warrants and embedded conversion options in convertible debt are recorded as a liability and are revalued
at fair value at each reporting date. If the fair value of the warrants exceeds the face value of the related debt, the excess is recorded
as change in fair value in operations on the issuance date. The Company had $80,000 (1 note) of convertible debt, which is treated as
derivative instruments outstanding at December 31, 2021 and June 30, 2021.
The
Company calculates the estimated fair values of the liabilities for derivative instruments using the Binomial Trees Method. The closing
price of the Company’s common stock at December 31, 2021, the last trading day of the period ended December 31, 2021, was $0.044.
The Volatility, expected remaining term and risk-free interest rates used to estimate the fair value of derivative liabilities at December
31, 2021 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
December
31, 2021
(Unaudited)
Convertible
Debt
SCHEDULE OF FAIR VALUE ASSETS AND LIABILITIES MEASURED ON RECURRING AND NON RECURRING BASIS VALUATION TECHNIQUES
|
|
Initial
Valuations
(on new derivative
instruments entered
into
during the three
months ended
December 31, 2021)
|
|
|
December
31, 2021
|
|
Volatility
|
|
|
—
|
|
|
|
201.03
|
%
|
Expected
Remaining Term (in years)
|
|
|
—
|
|
|
|
0.016
|
|
Risk
Free Interest Rate
|
|
|
—
|
|
|
|
0.06
|
%
|
Expected
dividend yield
|
|
|
None
|
|
|
|
None
|
|
Fair
Value Measurements:
The
Company measures and reports at fair value the liability for derivative instruments. The fair value liabilities for price adjustable
warrants and embedded conversion options have been recorded as determined utilizing the Binomial Trees model. The following tables summarize
the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and June 30,
2021:
SCHEDULE OF FAIR VALUE ASSETS AND LIABILITIES MEASURED ON RECURRING BASIS
|
|
Balance
at
December 31, 2021
|
|
|
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
|
|
$
|
221,977
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
221,977
|
|
Total
|
|
$
|
221,977
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
221,977
|
|
|
|
Balance
at
June 30, 2021
|
|
|
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
|
|
$
|
54,220
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
54,220
|
|
Total
|
|
$
|
54,220
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
54,220
|
|
The
following is a roll forward for the six months ended December 31, 2021 of the fair value liability of price adjustable derivative instruments:
SCHEDULE OF DERIVATIVE LIABILITIES AT FAIR VALUE
|
|
Fair
Value of
|
|
|
|
Liability
for
|
|
|
|
Derivative
|
|
|
|
Instruments
|
|
Balance
at June 30, 2021
|
|
$
|
54,220
|
|
Change
in fair value included in statements of operations
|
|
|
167,757
|
|
Balance
at December 31, 2021
|
|
$
|
221,977
|
|
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2021
(Unaudited)
NOTE
12 – SUBSEQUENT EVENTS
Shares
issued for conversion of convertible debt
In
January 2022, the Company issued an aggregate of 2,613,191
shares of its common stock at a contractual conversion
price of $0.01,
as a result of the conversion of principal of $26,000
and interest of $2,222
underlying certain outstanding convertible notes
converted during such period. The Company reclassified $17,333
from put premium liabilities to additional
paid in capital following conversions.
Sixth
Street Lending Securities Purchase Agreements
January
4, 2022 Securities Purchase Agreement
Effective
January 4, 2022, the Company entered into a securities purchase agreement with Sixth Street Lending LLC, pursuant to which Sixth Street
purchased a convertible promissory note (the “January 4, 2022 Sixth Street”) from the Company in the aggregate principal
amount of $63,750, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of Sixth Street any time after the six-month anniversary of the January 4, 2022 Sixth Street. The January 4, 2022 Sixth Street contains
an original discount of $3,750. The Company intends to use the net proceeds from the January 4, 2022 Sixth Street for general working
capital purposes. The maturity date of the January 4, 2022 Sixth Street Note is January 4, 2023. The January 4, 2022 Sixth Street Note
bears interest at a rate of 8% per annum, which interest may be paid by the Company to Sixth Street in shares of the Company’s
common stock; but shall not be payable until the January 4, 2022 Sixth Street Note becomes payable, whether at the maturity date or upon
acceleration or by prepayment.
During
the first 60 to 180 days following the date of these notes, the Company has the right to prepay the principal and accrued but unpaid
interest due under the above notes issued to Sixth Street, together with any other amounts that the Company may owe the holder under
the terms of the note, at a premium ranging from 110% to 129% as defined in the note agreement. After this initial 180-day period, the
Company does not have a right to prepay such notes.
The
conversion price for the above Sixth Street notes shall be equal to a 35% discount of the market price which means the average of
the lowest three trading prices of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of
Conversion. Notwithstanding the foregoing, Sixth Street shall be restricted from effecting a conversion if such conversion, along
with other shares of the Company’s common stock beneficially owned by Sixth Street and its affiliates, exceeds 9.99% of the
outstanding shares of the Company’s common stock. These notes are treated as stock settled debt under ASC 480 and accordingly
the Company recorded a total of $34,327 put premium.
Shares
issued for exercise of warrants
In
January 2022, the Company issued 2,799,986 shares of common stock from the alternate cashless exercise of 14 Series A warrants. The Company
recognized the value of the effect of a down round feature in such warrants when triggered. Upon the occurrence of the triggering event
that resulted in a reduction of the strike price, the Company measured the value of the effect of the feature as the difference between
the fair value of the warrants without the down round feature or before the strike price reduction and the fair value of the warrants
with a strike price corresponding to the reduced strike price upon the down round feature being triggered. Accordingly, the Company recognized
deemed dividend of $208,242 and a corresponding reduction of income available to common stockholders upon the alternate cashless exercise
of these warrants.
In
January 2022, the Company received aggregate gross proceeds of $50,000 from the exercise of 1,250 Series B Warrants and issued 1,250
shares of common stock.
Shares
issued for services
On
January 20, 2022, the Board approved the issuance of 666,667 shares of the Company’s common stock for legal services rendered in
January 2022. The 666,667 shares of common stock were valued at approximately $0.03 per share or $20,000, being the average closing prices
of the stock for the month of January 2022, the date of grant. The shares were issued on January 21, 2022.
On
January 24, 2022, the Company issued 2,274,224 shares of the Company’s common stock to a consultant for services rendered from
October 2021 to December 2021. The Company issued 2,274,224 shares of the Company’s common stock valued at approximately $0.02
per share or $45,030, being the closing price of the stock on the date of grant to such consultant. The Company recorded accrued expenses
of $45,030 for the services rendered as of December 31, 2021.