UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020

 

or

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ___________

 

Commission File Number: 000-54878

 

PROPANC BIOPHARMA, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   33-0662986

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

302, 6 Butler Street

Camberwell, VIC, 3124 Australia

(Address of principal executive offices)(Zip Code)

 

61 03 9882 6723

(Registrant’s telephone number, including area code)

 

n/a

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:

 

Title of each class   Trading Symbol(s)   Name of principal U.S. market on which traded
None   None   None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
    Emerging growth company [  ]

 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

As of May 11, 2020, there were 47,086,442 shares of the registrant’s common stock, $0.001 par value per share, issued and outstanding.

 

 

 

 
 

 

PROPANC BIOPHARMA INC.

 

Table of Contents

 

    Page
PART I - FINANCIAL INFORMATION  
     
Item 1. Consolidated Financial Statements (Unaudited) F-1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 3
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. Controls and Procedures 13
     
PART II - OTHER INFORMATION  
     
Item 1. Legal Proceedings 15
Item 1A. Risk Factors 15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Mine Safety Disclosures 16
Item 5. Other Information 16
Item 6. Exhibits 17
  Signatures 18

 

2
 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

The following unaudited interim condensed consolidated financial statements of Propanc Biopharma, Inc. are included in this Quarterly Report on Form 10-Q:

 

INDEX TO FINANCIAL STATEMENTS

 

  Page
Condensed Consolidated Balance Sheets at March 31, 2020 (unaudited) and June 30, 2019 F-2
   
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended March 31, 2020 and 2019 (unaudited) F-3
   
Condensed Consolidated Statement of Changes in Stockholders’ Deficit for each of the three and nine months in the period ended March 31, 2020 and 2019 (unaudited) F-4
   
Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2020 and 2019 (unaudited) F-5
   
Notes to the condensed consolidated financial statements (unaudited) F-6

 

F-1
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS

 

    March 31, 2020     June 30, 2019  
    (Unaudited)        
             
ASSETS                
                 
CURRENT ASSETS:                
Cash   $ 26,957     $ 2,394  
GST tax receivable     4,543       5,439  
Prepaid expenses and other current assets     -       83,299  
                 
TOTAL CURRENT ASSETS     31,500       91,132  
                 
Security deposit - related party     1,831       2,103  
Operating lease right-of-use assets, net - related party     24,959       -  
Property and equipment, net     5,648       8,417  
                 
TOTAL ASSETS   $ 63,938     $ 101,652  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
CURRENT LIABILITIES:                
Accounts payable   $ 1,005,700     $ 917,337  
Accrued expenses and other payables     470,847       723,042  
Convertible notes and related accrued interest, net of discounts and premiums     2,711,173       1,657,377  
Operating lease liability - current portion - related party     7,290       -  
Embedded conversion option liabilities     318,368       698,264  
Due to former director - related parties     27,131       31,164  
Loans from directors and officer - related parties     45,155       51,867  
Employee benefit liability     305,136       323,837  
                 
TOTAL CURRENT LIABILITIES     4,890,800       4,402,888  
                 
NON-CURRENT LIABILITIES:                
Operating lease liability - long-term portion - related party     20,045       -  
                 
TOTAL NON-CURRENT LIABILITIES     20,045       -  
                 
TOTAL LIABILITIES   $ 4,910,845     $ 4,402,888  
                 
Commitments and Contingencies (See Note 7)                
                 
STOCKHOLDERS’ DEFICIT:                
Preferred stock, 1,500,005 shares authorized, $0.01 par value:                
Series A preferred stock, $0.01 par value; 500,000 shares authorized; 500,000 and 500,000 shares issued and outstanding as of March 31, 2020 and June 30, 2019, respectively   $ 5,000     $ 5,000  
Series B preferred stock, $0.01 par value; 5 shares authorized; 1 and 1 share issued and outstanding as of March 31, 2020 and June 30, 2019, respectively     -       -  
Common stock, $0.001 par value; 1,000,000,000 shares authorized; 18,481,459 and 968,042 shares issued; 18,481,410 and 967,993 outstanding as of March 31, 2020 and June 30, 2019, respectively     18,481       968  
Additional paid-in capital     48,879,086       45,713,322  
Accumulated other comprehensive income     3,282,760       1,066,998  
Accumulated deficit     (56,985,758 )     (51,041,047 )
Treasury stock (49 shares)     (46,477 )     (46,477 )
                 
TOTAL STOCKHOLDERS’ DEFICIT     (4,846,908 )     (4,301,236 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $ 63,938     $ 101,652  

 

The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-2
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)

 

    Three Months Ended March 31,     Nine Months Ended March 31,  
    2020     2019     2020     2019  
                         
REVENUE                                
Revenue   $ -     $ -     $ -     $ -  
                                 
OPERATING EXPENSES                                
Administration expenses     542,093       511,822       2,751,478       1,553,016  
Occupancy expenses     7,591       7,248       25,815       21,775  
Research and development     57,484       52,655       122,893       203,625  
TOTAL OPERATING EXPENSES     607,168       571,725       2,900,186       1,778,416  
                                 
LOSS FROM OPERATIONS     (607,168 )     (571,725 )     (2,900,186 )     (1,778,416 )
                                 
OTHER INCOME (EXPENSE)                                
Interest expense     (384,804 )     (189,809 )     (1,506,111 )     (1,309,336 )
Interest income     137       2       143       29  
Change in fair value of derivative liabilities     454,442       16,666       298,374       (1,914,980 )
Gain (loss) on debt settlements, net     -       (89 )     -       14,200  
Gain (loss) on extinguishment of debt, net     60,835       38,726       81,011       1,204,242  
Foreign currency transaction gain (loss)     (2,135,421 )     125,099       (2,053,010 )     (488,813 )
TOTAL OTHER INCOME (EXPENSE)     (2,004,811 )     (9,405 )     (3,179,593 )     (2,494,658 )
                                 
LOSS BEFORE TAXES     (2,611,979 )     (581,130 )     (6,079,779 )     (4,273,074 )
                                 
TAX (EXPENSE) BENEFIT     26,317       (726 )     135,068       116,244  
                                 
NET LOSS   $ (2,585,662 )   $ (581,856 )   $ (5,944,711 )   $ (4,156,830 )
                                 
BASIC AND DILUTED NET LOSS PER SHARE   $ (0.35 )   $ (0.89 )   $ (1.79 )   $ (9.87 )
                                 
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING     7,413,551       650,513       3,312,400       421,252  
                                 
NET LOSS   $ (2,585,662 )   $ (581,856 )   $ (5,944,711 )   $ (4,156,830 )
                                 
OTHER COMPREHENSIVE INCOME (LOSS)                                
Unrealized foreign currency translation gain (loss)     2,281,569       (115,567 )     2,215,762       518,928  
                                 
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)     2,281,569       (115,567 )     2,215,762       518,928  
                                 
TOTAL COMPREHENSIVE INCOME (LOSS)   $ (304,093 )   $ (697,423 )   $ (3,728,949 )   $ (3,637,902 )

 

The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-3
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR EACH OF THE THREE AND NINE MONTHS ENDED MARCH 31, 2020 and 2019
(Unaudited)

 

                                  Accumulated        
    Preferred Stock                             Other        
    Series A     Series B     Common Stock     Additional                 Comprehensive     Total  
    No. of Shares     Value     No. of Shares     Value     No. of Shares     Value     Paid-in
Capital
    Accumulated Deficit     Treasury Stock     Income
(Loss)
    Stockholders’ Deficit  
                                                                   
Balance at June 30, 2018     500,000     $ 5,000       1     $ -       92,859     $ 93     $ 38,214,213     $ (45,282,678 )   $ (46,477 )   $ 357,929     $ (6,751,920 )
                                                                                         
Issuance of common stock for conversion of convertible debt and accrued interest     -       -       -       -       258,285       258       1,413,060       -       -       -       1,413,318  
                                                                                         
Reclassification of premium upon debt conversion     -       -       -       -       -       -       600,209       -       -       -       600,209  
                                                                                         
Extinguishment of derivative liability associated with convertible notes     -       -       -       -       -       -       1,029,039       -       -       -       1,029,039  
                                                                                         
Exercise of warrants     -       -       -       -       24       -       30       -       -       -       30  
                                                                                         
Foreign currency translation gain     -       -       -       -       -       -       -       -       -       276,216       276,216  
                                                                                         
Net loss for the three months ended September 30, 2018     -       -       -       -       -       -       -       (2,124,936 )     -       -       (2,124,936 )
                                                                                         
Balance at September 30, 2018     500,000       5,000       1       -       351,168       351       41,256,551       (47,407,614 )     (46,477 )     634,145       (5,558,044 )
                                                                                         
Issuance of common stock for conversion of convertible debt and accrued interest     -       -       -       -       127,685       128       1,094,972       -       -       -       1,095,100  
                                                                                         
Issuance of common stock under put premium     -       -       -       -       54,000       54       574,506       -       -       -       574,560  
                                                                                         
Reclassification of put premium upon debt conversion     -       -       -       -       -       -       708,184       -       -       -       708,184  
                                                                                         
Issuance of common stock for offering costs     -       -       -       -       7,702       8       298,915       -       -       -       298,923  
                                                                                         
Issuance of common stock for services     -       -       -       -       6,000       6       68,994       -       -       -       69,000  
                                                                                         
Foreign currency translation gain     -       -       -       -       -       -       -       -       -       358,279       358,279  
                                                                                         
Net loss for the three months ended December 31, 2018     -       -       -       -       -       -       -       (1,450,038 )     -       -       (1,450,038 )
                                                                                         
Balance at December 31, 2018     500,000       5,000       1       -       546,555       547       44,002,122       (48,857,652 )     (46,477 )     992,424       (3,904,036 )
                                                                                         
Issuance of common stock for conversion of convertible debt and accrued interest     -       -       -       -       140,673       141       583,190       -       -       -       583,331  
                                                                                         
Issuance of common stock under put premium     -       -       -       -       73,200       73       457,346       -       -       -       457,419  
                                                                                         
Reclassification of put premium upon debt conversion     -       -       -       -       -       -       361,610       -       -       -       361,610  
                                                                                         
Amortization of offering cost     -       -       -       -       -       -       (313,923 )     -       -       -       (313,923 )
                                                                                         
Issuance of common stock for services     -       -       -       -       10,000       10       99,990       -       -       -       100,000  
                                                                                         
Foreign currency translation loss     -       -       -       -       -       -       -       -       -       (115,567 )     (115,567 )
                                                                                         
Net loss for the three months ended March 31, 2019     -       -       -       -       -       -       -       (581,856 )     -       -       (581,856 )
                                                                                         
Balance at March 31, 2019     500,000     $ 5,000       1     $ -       770,428     $ 771     $ 45,190,335     $ (49,439,508 )   $ (46,477 )   $ 876,857     $ (3,413,022 )
                                                                                         
Balance at June 30, 2019     500,000     $ 5,000       1     $ -       968,042     $ 968     $ 45,713,322     $ (51,041,047 )   $ (46,477 )   $ 1,066,998     $ (4,301,236 )
                                                                                         
Issuance of common stock for conversion of convertible debt and accrued interest     -       -       -       -       181,939       182       123,531       -       -       -       123,713  
                                                                                         
Reclassification of put premium upon debt conversion     -       -       -       -       -       -       73,235       -       -       -       73,235  
                                                                                         
Relative fair value of warrants issued with convertible debt     -       -       -       -       -       -       375,905       -       -       -       375,905  
                                                                                         
Issuance of common stock for services     -       -       -       -       20,000       20       39,780       -       -       -       39,800  
                                                                                         
Stock based compensation in connection with stock option grants and restricted stock unit grants     -       -       -       -       -       -       75,104       -       -       -       75,104  
                                                                                         
Foreign currency translation gain     -       -       -       -       -       -       -       -       -       563,687       563,687  
                                                                                         
Net loss for the three months ended September 30, 2019     -       -       -       -       -       -       -       (1,491,940 )     -       -       (1,491,940 )
                                                                                         
Balance at September 30, 2019     500,000       5,000       1       -       1,169,981       1,170       46,400,877       (52,532,987 )     (46,477 )     1,630,685       (4,541,732 )
                                                                                         
Issuance of common stock for conversion of convertible debt and accrued interest     -       -       -       -       1,064,920       1,065       218,401       -       -       -       219,466  
                                                                                         
Reclassification of put premium upon debt conversion     -       -       -       -       -       -       86,970       -       -       -       86,970  
                                                                                         
Stock based compensation in connection with stock option grants and restricted stock unit grants     -       -       -       -       -       -       75,104       -       -       -       75,104  
                                                                                         
Stock based compensation in connection with fair value of warrants issued for services     -       -       -       -       -       -       984,810       -       -       -       984,810  
                                                                                         
Foreign currency translation loss     -       -       -       -       -       -       -       -       -       (629,494 )     (629,494 )
                                                                                         
Net loss for the three months ended December 31, 2019     -       -       -       -       -       -       -       (1,867,109 )     -       -       (1,867,109 )
                                                                                         
Balance at December 31, 2019     500,000       5,000       1       -       2,234,901       2,235       47,766,162       (54,400,096 )     (46,477 )     1,001,191       (5,671,985 )
                                                                                         
Issuance of common stock for conversion of convertible debt and accrued interest     -       -       -       -       16,096,509       16,096       793,989       -       -       -       810,085  
                                                                                         
Reclassification of put premium upon debt conversion     -       -       -       -       -       -       222,981       -       -       -       222,981  
                                                                                         
Issuance of common stock for services     -       -       -       -       150,000       150       20,850       -       -       -       21,000  
                                                                                         
Stock based compensation in connection with stock option grants and restricted stock unit grants     -       -       -       -       -       -       75,104       -       -       -       75,104  
                                                                                         
Foreign currency translation gain     -       -       -       -       -       -       -       -       -       2,281,569       2,281,569  
                                                                                         
Net loss for the three months ended March 31, 2020     -       -       -       -       -       -       -       (2,585,662 )     -       -       (2,585,662 )
                                                                                         
Balance at March 31, 2020     500,000     $  5,000       1     $ -       18,481,410     $  18,481     $  48,879,086     $ (56,985,758 )   $ (46,477 )   $  3,282,760     $  (4,846,908 )

 

The accompanying unaudited condensed notes are an integral part of these consolidated financial statements.

 

F-4
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 

    Nine Months Ended March 31,  
    2020     2019  
             
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (5,944,711 )   $ (4,156,830 )
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:                
Issuance and amortization of common stock and warrants for services     1,045,610       197,247  
(Gain) loss on settlements, net     -       (14,200 )
Foreign currency transaction loss (gain)     2,053,010       488,813  
Depreciation expense     1,859       1,661  
Amortization of debt discounts     537,868       363,420  
Change in fair value of derivative liabilities     (298,374 )     1,914,980  
Gain on extinguishment of debt     (81,011 )     (1,296,376 )
Stock option and restricted stock expense     225,312       -  
Non-cash interest expense     3,000       -  
Accretion of put premium     836,724       767,000  
Changes in Assets and Liabilities:                
GST receivable     192       1,652  
Prepaid expenses and other assets     82,211       (130,851 )
Accounts payable     207,071       (245,642 )
Deferred rent     2,379       -  
Employee benefit liability     23,205       185,510  
Accrued expenses     (167,074 )     (16,792 )
Accrued interest     122,798       146,603  
NET CASH USED IN OPERATING ACTIVITIES     (1,349,931 )     (1,793,805 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchase of equipment     -       (2,874 )
NET CASH USED IN INVESTING ACTIVITIES     -       (2,874 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from convertible promissory notes, net of original issue discounts and issue costs     1,465,250       1,175,150  
Repayments of convertible promissory notes     -       (272,000 )
Proceeds from the issuance of common stock     -       1,031,979  
Fees associated with offering costs     -       (15,000 )
Proceeds from the exercise of warrants     -       30  
NET CASH PROVIDED BY FINANCING ACTIVITIES     1,465,250       1,920,159  
                 
Effect of exchange rate changes on cash     (90,756 )     (36,191 )
                 
NET INCREASE IN CASH     24,563       87,289  
                 
CASH AT BEGINNING OF PERIOD     2,394       19,921  
CASH AT END OF PERIOD   $ 26,957     $ 107,210  
                 
Supplemental Disclosure of Cash Flow Information                
                 
Cash paid during the year:                
Interest   $ 6,337     $ 100,719  
Income Tax   $ -     $ -  
                 
Supplemental Disclosure of Non-Cash Investing and Financing Activities                
                 
Reduction of put premium related to conversions of convertible notes   $ 383,186     $ 1,670,003  
Conversion of convertible notes and accrued interest to common stock   $ 922,754     $ 3,091,749  
Discounts related to warrants issued with convertible notes   $ 375,905     $ -  
Deferred financing costs associated with equity purchase agreement   $ -     $ 318,059  
Discounts related to derivative liability   $ 227,000     $ 50,000  
Issue and amortization of common stock and warrants for services   $ 1,024,610     $ -  
Operating lease right-of-use asset and operating lease liability recorded on adoption of ASC 842   $ 46,696     $ -  

 

The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-5
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

 

Nature of Operations

 

Propanc Biopharma, Inc. (the “Company,” “we,” “us” or “our”) was originally incorporated in Melbourne, Victoria Australia on October 15, 2007 as Propanc PTY LTD, and continues to be based in Camberwell, Victoria Australia. Since its inception, substantially all of the operations of the Company have been focused on the development of new cancer treatments targeting high-risk patients, particularly cancer survivors, who need a follow-up, non-toxic, long-term therapy designed to prevent the cancer from returning and spreading. The Company anticipates establishing global markets for its technologies. Our lead product candidate, which we refer to as PRP, is an enhanced pro-enzyme formulation designed to enhance the anti-cancer effects of multiple enzymes acting synergistically. It is currently in the preclinical phase of development.

 

On November 23, 2010, the Company was incorporated in the state of Delaware as Propanc Health Group Corporation. In January 2011, to reorganize the Company, we acquired all of the outstanding shares of Propanc PTY LTD on a one-for-one basis making it a wholly-owned subsidiary of the Company.

 

On July 22, 2016, the Company formed a wholly owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the purpose of submitting an orphan drug application to the European Medicines Agency as a small and medium-sized enterprise. As of March 31, 2020, there has been no activity within this entity.

 

Effective April 20, 2017, the Company changed its name to “Propanc Biopharma, Inc.” to better reflect the Company’s stage of operations and development.

 

The Company has filed multiple patent applications relating to its lead product, PRP. The first application was filed in October 2010 in each of the countries listed in the table below. This application has been granted and remains in force in the United States, Belgium, Czech Republic, Denmark, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein, Turkey, United Kingdom, Australia, China, Hong Kong, Japan, Indonesia, Israel, New Zealand, Singapore, Malaysia, South Africa, Mexico, Republic of Korea and India. In Brazil and Canada, the patent application remains under examination.

 

In 2016 and 2017 we filed other patent applications, as indicated below. Three applications were filed under the Patent Cooperation Treaty (the “PCT”). The PCT assists applicants in seeking patent protection by filing one international patent application under the PCT, which allows the applicants to seek protection for an invention in over 150 countries. Once national or regional applications are filed, the application is placed under the control of the national or regional patent offices, as applicable, in what is called the national or regional phase. One PCT application, filed in November 2016, entered the national phase in July 2018 in each of the countries listed in the table below. A second application filed in January 2017 entered the national phase commencing July 2018. A third application entered the national phase in October 2018.

 

No.   Title   Country   Case Status   Date Filed
1.   A pharmaceutical composition for treating cancer comprising trypsinogen and/or chymotrypsinogen and an active agent selected from a selenium compound, a vanilloid compound and a cytoplasmic reduction agent.   USA, Belgium, Czech Republic, Denmark, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein, Turkey, United Kingdom, Australia, China, Hong Kong, Japan, Indonesia, Israel, New Zealand, Malaysia, Singapore, Malaysia South Africa, Mexico, Republic of Korea and India   Granted   Oct-22-2010
                 
        Brazil and Canada  

Under Examination

Divisional applications filed and under examination in Mexico and China

   
                 
        USA   Divisional application granted    

 

F-6
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

2.   Proenzyme composition   Australia, Canada, China, Europe, Hong Kong, India, Indonesia, Israel, Japan, Malaysia, New Zealand, Singapore, South Africa and USA   Application filed and pending   Nov-11-2016
                 
3.   Cancer Treatment  

Australia

 

Canada, China, Europe, Hong Kong, Israel, Japan, Malaysia, New Zealand, Singapore and USA

 

Accepted

 

Application filed and pending

  Jan-27-2017
                 
4.   Composition of proenzymes for cancer treatment   Australia, China, Europe, Japan and USA   Application filed and pending   Apr-12-2017

 

The Company hopes to capture and protect additional patentable subject matter based on the Company’s field of technology relating to pharmaceutical compositions of proenzymes for treating cancer by filing additional patent applications as it advances its lead product candidate, PRP, through various stages of development.

 

Changes in Authorized Common Stock and Reverse Split

 

On June 24, 2019, the Company effected a one-for-five hundred (1:500) reverse stock split whereby the Company (i) decreased the number of authorized shares of common stock, $0.001 par value per share, to 100,000,000 and (ii) decreased by a ratio of one-for-five hundred (1:500) the number of retroactively issued and outstanding shares of common stock. Proportional adjustments for the reverse stock split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts have been retroactively adjusted as of the earliest period presented in the consolidated financial statements to reflect the reverse stock split.

 

On February 4, 2020 the Directors resolved to increase the Common Stock of the Company from 100,000,000 authorized shares to 1,000,000,000 authorized shares and believes that such number of authorized shares of Common Stock will be in the best interests of the Corporation and its stockholders because the Board believes that the availability of more shares of Common Stock for issuance will allow the Corporation greater flexibility in pursuing financing from investors, meeting business needs as they arise, taking advantage of favorable opportunities and responding to a changing corporate environment. The Company filed the necessary documents with the U.S. Securities and Exchange Commission on February 6, 2020 and at the date of this filing the increase in authorized shares to 1,000,000,000 has been effected on March 13, 2020.

 

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 nine months ended March 31, 2020 and 2019 and cash flows for the nine months ended March 31, 2020 and 2019 and our financial position at March 31, 2020 have been made. The Company’s results of operations for the three and nine months ended March 31, 2020 are not necessarily indicative of the operating results to be expected for the full fiscal year ending June 30, 2020.

 

Reference is frequently made herein to the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”). This is the source of authoritative US GAAP recognized by the FASB to be applied to non-governmental entities. Each ASC reference in this Quarterly Report is presented with a three-digit number, which represents its Topic. As necessary for explanation and as applicable, an ASC topic may be followed with a two-digit subtopic, a two-digit section or a two-or-three-digit paragraph.

 

Certain information and disclosures normally included in the notes to the Company’s annual audited consolidated financial statements have been condensed or omitted from the Company’s interim unaudited condensed consolidated financial statements included in this Quarterly Report. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2019. The June 30, 2019 balance sheet is derived from those statements.

 

F-7
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of Propanc Biopharma, Inc., the parent entity, and its wholly-owned subsidiary, Propanc PTY LTD. All inter-company balances and transactions have been eliminated in consolidation. Propanc (UK) Limited was an inactive subsidiary at March 31, 2020.

 

Use of Estimates

 

The preparation of financial statements in conformity with the accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates in the accompanying unaudited condensed consolidated financial statements include the estimates of useful lives for depreciation, valuation of the operating lease liability and related right-of-use asset, valuation of derivatives, valuation of beneficial conversion features on convertible debt, allowance for uncollectable receivables, valuation of equity based instruments issued for other than cash, the valuation allowance on deferred tax assets and foreign currency translation due to certain average exchange rates applied in lieu of spot rates on transaction dates.

 

Foreign Currency Translation and Other Comprehensive Income (Loss)

 

The Company’s functional currency is the Australian dollar (AUD). For financial reporting purposes, the Australian dollar has been translated into United States dollar ($) and/or (USD) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss).” Gains and losses resulting from foreign currency transactions are included in the statements of operations and comprehensive income (loss) as other comprehensive income (loss). There have been no significant fluctuations in the exchange rate for the conversion of Australian dollars to USD after the balance sheet date.

 

Other Comprehensive Income (Loss) for all periods presented includes only foreign currency translation gains (losses).

 

Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency included in the consolidated results of operations as incurred. For the nine months ended March 31, 2020, the Company recognized an exchange loss of approximately $1,959,000 on intercompany loans made by the parent to the subsidiary which have not been repaid as at March 31, 2020.

 

As of March 31, 2020 and June 30, 2019, the exchange rates used to translate amounts in Australian dollars into USD for the purposes of preparing the consolidated financial statements were as follows:

 

    March 31, 2020     June 30, 2019  
Exchange rate on balance sheet dates                
USD : AUD exchange rate     0.6102       0.7153  
                 
Average exchange rate for the period                
USD : AUD exchange rate     0.6759       0.7009  

 

The exchange rates used to translate amounts in AUD into USD for the period ended March 31, 2019 are: 0.7104 as of the balance sheet date and 0.7203 average exchange rate for that period.

 

Change in Accumulated Other Comprehensive Income (Loss) by component during the nine months ended March 31, 2020 was as follows:

 

    Foreign
Currency Items:
 
Beginning balance, June 30, 2019   $ 1,066,998  
Foreign currency translation loss     2,215,762  
Ending balance, March 31, 2020   $ 3,282,760  

 

F-8
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

Fair Value of Financial Instruments and Fair Value Measurements

 

The Company measures its financial assets and liabilities in accordance with US GAAP. For certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, the carrying amounts approximate fair value due to their short maturities. Amounts recorded for notes payable, net of discount, and loans payable also approximate fair value because current interest rates available for debt with similar terms and maturities are substantially the same.

 

The Company follows accounting guidance for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).

 

The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 

Also see Note 10 - Derivative Financial Instruments and Fair Value Measurements.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less with financial institutions, and bank overdrafts. Bank overdrafts are reflected as a current liability on the balance sheets. There were no cash equivalents as of March 31, 2020 or June 30, 2019.

 

Patents

 

Patents are stated at cost and classified as intangible assets and amortized on a straight-line basis over the estimated future periods if and once the patent has been granted by a regulatory agency. However, the Company will expense any product costs as long as we are in the startup stage. Accordingly, as the Company’s products were and are not currently approved for market, all historical patent costs incurred through March 31, 2020 were expensed immediately. This practice of expensing patent costs immediately ends when a product receives market authorization from a government regulatory agency.

 

Impairment of Long-Lived Assets

 

In accordance with ASC 360-10, “Long-lived assets,” which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.

 

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.

 

F-9
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

As of March 31, 2020 and June 30, 2019, the Company was owed $4,543 and $5,439, respectively, from the Australian Taxation Office. These amounts were fully collected subsequent to the balance sheet reporting dates.

 

Derivative Instruments

 

ASC Topic 815, Derivatives and Hedging (“ASC Topic 815”), establishes accounting and reporting standards for derivative instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings. On the date of conversion or payoff of debt, the Company records the fair value of the conversion shares, removes the fair value of the related derivative liability, removes any discounts and records a net gain or loss on debt extinguishment. On July 1, 2019 the Company adopted ASU 2017-11 under which down-round Features in Financial Instruments will no longer cause derivative treatment. The Company applies the modified prospective method of adoption. There were no cumulative effects on adoption.

 

Convertible Notes With Variable Conversion Options

 

The Company has entered into convertible notes, some of which contain variable conversion options, whereby the outstanding principal and accrued interest may be converted, by the holder, into common shares at a fixed discount to the price of the common stock at the time of conversion. The Company treats these convertible notes as stock settled debt under ASC 480, “Distinguishing Liabilities from Equity” and measures the fair value of the notes at the time of issuance, which is the result of the share price discount at the time of conversion and records the put premium as accretion to interest expense to the date of first conversion.

 

Income Taxes

 

The Company is governed by Australia and United States income tax laws, which are administered by the Australian Taxation Office and the United States Internal Revenue Service, respectively. The Company follows ASC 740 “Accounting for Income Taxes,” when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

 

The Company follows ASC 740, Sections 25 through 60, “Accounting for Uncertainty in Income Taxes.” These sections provide detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of ASC 740 and in subsequent periods.

 

On December 22, 2017, the passage of legislation commonly referred to as the Tax Cuts and Jobs Act (“TCJA”) was enacted and significantly revised the U.S. income tax law. The TCJA includes changes, which reduce the corporate income tax rate from 34% to 21% for fiscal years beginning after December 31, 2017. On December 22, 2017, the SEC Staff Accounting Bulletin No. 118 (“SAB 118”) was issued, which allows a company to recognize provisional tax amounts when it does not have the necessary information available, prepared or analyzed, including computations, in reasonable detail to complete its accounting for the change in tax law. SAB 118 provides for a measurement of up to one year from the date of enactment.

 

Research and Development Costs and Tax Credits

 

In accordance with ASC 730-10, “Research and Development-Overall,” research and development costs are expensed when incurred. Total research and development costs for the nine months ended March 31, 2020 and 2019 were $122,893 and $203,625, respectively.

 

The Company may apply for research and development tax concessions with the Australian Taxation Office on an annual basis. Although the amount is possible to estimate at year end, the Australian Taxation Office may reject or materially alter the claim amount. Accordingly, the Company does not recognize the benefit of the claim amount until cash receipt since collectability is not certain until such time. The tax concession is a refundable credit. If the Company has net income, then the Company can receive the credit which reduces its income tax liability. If the Company has net losses, then the Company may still receive a cash payment for the credit, however, the Company’s net operating loss carryforwards are reduced by the gross equivalent loss that would produce the credit amount when the income tax rate is applied to that gross amount. The concession is recognized as an income tax benefit, in operations, upon receipt.

 

F-10
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

During each of the nine months ended March 31, 2020 and 2019, the Company applied for, and received from the Australian Taxation Office, a research and development tax credit in the amount of $135,068 and $116,244, respectively, which is reflected as a tax benefit in the accompanying condensed consolidated statements of operations and comprehensive income (loss).

 

Stock Based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Stock Compensation”. ASC 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the shorter of the service period or the vesting period. The Company values employee and non-employee stock-based compensation at fair value using the Black-Scholes Option Pricing Model.

 

The Company adopted ASU 2018-07 and accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective method of adoption. There was no cumulative effect of adoption on July 1, 2019.

 

Basic and Diluted Net Loss Per Common Share

 

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period and, if dilutive, potential common shares outstanding during the period. Potentially dilutive securities consist of the incremental common shares issuable upon exercise of common stock equivalents such as stock options, warrants and convertible debt instruments. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. As a result, the basic and diluted per share amounts for all periods presented are identical. As of March 31, 2020, there were 1,975,059 warrants outstanding, 59,644 stock options and 15 convertible notes payable, which notes are convertible into approximately 104,064,000 shares of the Company’s common stock (based on the closing price on the last trading day of the quarter ended March 31, 2020). Each holder of the notes has agreed to a 4.99% beneficial ownership conversion limitation (subject to certain noteholders’ ability to increase such limitation to 9.99% upon 60 days’ notice to the Company), and each note may not be converted during the first six-month period from the date of issuance. Such securities are considered dilutive securities which were excluded from the computation since the effect is anti-dilutive.

 

Leases

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018. The Company adopted this guidance effective July 1, 2019.

 

On July 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases and; (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.

 

Operating lease ROU assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the condensed consolidated statements of operations.

 

Recent Accounting Pronouncements

 

We have reviewed the FASB issued ASU accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. We have carefully considered the new pronouncements that alter previous generally accepted accounting principles and do not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of the Company’s financial management.

 

F-11
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

NOTE 2 – GOING CONCERN

 

The accompanying condensed consolidated financial statements have been prepared in conformity with US GAAP, which contemplate continuation of the Company as a going concern. For the nine months ended March 31, 2020, the Company had no revenues, had a net loss of $5,944,711 and had net cash used in operations of $1,349,931. Additionally, as of March 31, 2020, the Company had a working capital deficit, stockholders’ deficit and accumulated deficit of $4,859,300, $4,846,908 and $56,985,758, 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 issuance date of this Quarterly Report.

 

The condensed consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.

 

Successful completion of the Company’s development program and, ultimately, the attainment of profitable operations are dependent upon future events, including obtaining adequate financing to fulfill its development activities, acceptance of the Company’s patent applications, obtaining additional sources of suitable and adequate financing and ultimately achieving a level of sales adequate to support the Company’s cost structure and business plan. The Company’s ability to continue as a going concern is also dependent on its ability to further develop and execute on its business plan. However, there can be no assurances that any or all of these endeavors will be successful.

 

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 – DUE TO FORMER DIRECTOR - RELATED PARTY

 

Due to director - related party represents unsecured advances made primarily by a former director for operating expenses on behalf of the Company such as intellectual property and formation expenses. The expenses were paid for on behalf of the Company and are due upon demand. The Company is currently not being charged interest under these advances. The total amount owed the former director at March 31, 2020 and June 30, 2019 is $27,131 and $31,164, respectively. The Company plans to repay the notes as its cash resources allow.

 

NOTE 4 – LOANS AND NOTES PAYABLE

 

Loans from Directors and Officer - Related Parties

 

Loans from the Company’s directors and officer at March 31, 2020 and June 30, 2019 were $45,155 and $51,867, respectively. The loans bear no interest and are all payable on demand. The Company did not repay any amount on these loans during the nine months ended March 31, 2020.

 

NOTE 5 – CONVERTIBLE NOTES

 

The Company’s convertible notes outstanding at March 31, 2020 were as follows:

 

Convertible notes and debenture   $ 1,853,637  
Unamortized discounts     (322,929 )
Accrued interest     113,922  
Premiums     1,066,543  
Convertible notes, net   $ 2,711,173  

 

F-12
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

Eagle Equities Financing Agreements

 

December 29, 2017 Securities Purchase Agreement

 

The Company entered into an executory contract on December 29, 2017, whereby the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities purchased a convertible promissory note (the “December 2017 Eagle Note”) from the Company in the aggregate principal amount of $532,435, with principal and the interest thereon convertible into shares of the Company’s common stock at the option of Eagle Equities at any time. The transactions closed on January 2, 2018.

 

The December 2017 Eagle Note contains an original issue discount of $25,354 such that the purchase price was $507,081. The maturity date of the December 2017 Eagle Note was December 29, 2018. The Company is currently in discussions with Eagle Equities to extend the maturity date. The December 2017 Eagle Note bears interest at a rate of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of the Company’s common stock upon receipt of a notice of conversion by the Company from Eagle Equities at any time. The Company has recorded $0 of accrued interest for the December 2017 Eagle Note and total principal outstanding as of March 31, 2020 under the December 2017 Eagle Note was $0 following conversion of $171,965 of principal and $24,751 of accrued interest during the nine months to March 31, 2020. The balance was previously reduced by conversion in the prior year.

 

Eagle Equities has the option to convert all or any amount of the principal face amount of the December 2017 Eagle Note, at any time, for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s common stock as reported on the OTCQB for the ten prior trading days, including the day upon which the Company receives a notice of conversion from Eagle Equities. The note is treated as stock settled debt under ASC 480 and accordingly the Company recorded a $354,956 put premium of which $240,313 was released to additional paid in capital following conversion of $360,470 of principal during the fiscal year to June 30, 2019, and a further $114,643 was released to additional paid in capital following conversion of $171,965 of principal during the nine months to March 31, 2020.

 

Upon an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. In April 2020, Eagle Equities agreed to waive the 24% default interest on this note.

 

July 13, 2018 Securities Purchase Agreement

 

Effective July 13, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities purchased a convertible promissory note (the “July 2018 Note”) from the Company in the aggregate principal amount of $75,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option of Eagle Equities any time after the six month anniversary of the July 2018 Eagle Note. The transaction closed on July 16, 2018 and on July 19, 2018 the Company received proceeds of $71,250 as $3,750 was paid directly to legal fees.

 

The maturity date of the July 2018 Eagle Note was July 13, 2019. The July 2018 Eagle Note bears interest at a rate of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of the Company’s common stock upon receipt of a notice of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the Note.

 

Additionally, Eagle Equities has the option to convert all or any amount of the principal face amount of the July 2018 Eagle Note, at any time, for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s common stock for the ten prior trading days, including the day upon which the Company receives a notice of conversion, subject to adjustment in certain events. Eagle Equities shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. The July 2018 Eagle Note is treated as stock settled debt under ASC 480 and accordingly, the Company recorded a $50,000 put premium of which $50,000 was released to additional paid in capital following the full conversion of the note. The Company has recorded $0 of accrued interest and the total principal outstanding under the July 2018 Eagle Note was $0 as of March 31, 2020 following conversion of $75,000 of principal and $9,300 of accrued interest during the nine months to March 31, 2020. The Company had the right to prepay the July 2018 Eagle Note with certain penalties until January 9, 2019. No prepayment was made as of such date. As a result, the July 2018 Eagle Note was convertible.

 

Upon an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. In April 2020, Eagle Equities agreed to waive the 24% default interest on this note.

 

August 29, 2018 Securities Purchase Agreement

 

Effective August 29, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities purchased a convertible promissory note (the “August 2018 Eagle Note”) from the Company in the aggregate principal amount of $105,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option of Eagle Equities any time after the six-month anniversary of the August 2018 Eagle Note. The transactions contemplated by the agreement closed on August 30, 2018.

 

F-13
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

The maturity date of the August 29, 2018 Eagle Note was August 2019. The Company is currently in discussions with Eagle Equities to extend the maturity date. The August 2018 Eagle Note bears interest at a rate of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of the Company’s common stock upon receipt of a notice of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the August 2018 Eagle Note.

 

Additionally, Eagle Equities has the option to convert all or any amount of the principal face amount of the August 2018 Eagle Note, at any time, into shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price (the “Closing Bid Price”) of the Company’s common stock as reported on the OTC Markets quotation system for the ten prior trading days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the “Conversion Price”). However, in the event that the Company’s common stock is restricted by the DTC for any reason, the Conversion Price shall be lowered to 50% of the lowest Closing Bid Price for the duration of such restriction. If the Company fails to maintain a reserve of shares of its common stock at least four times the number of shares issuable upon conversion of the August 2018 Eagle Note for at least 60 days after the issuance of the August 28, 2018 Eagle Note, the conversion discount shall be increased by 10%. Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. The August 2018 Eagle Note is treated as stock settled debt under ASC 480 and accordingly, the Company recorded a $70,000 put premium. The Company has recorded $13,371 of accrued interest and the total principal outstanding under the August 2018 Eagle Note was $105,000 as of March 31, 2020. The Company had the right to prepay the August 2018 Eagle Note with certain penalties until February 25, 2019. No prepayment was made as of such date. As a result, the August 2018 Eagle Note is now convertible.

 

Upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of 24% per annum or at the highest rate permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. In April 2020, Eagle Equities agreed to waive the 24% default interest on this note.

 

October 2, 2018 Securities Purchase Agreement

 

Effective October 2, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities purchased a convertible promissory note (the “October 2018 Eagle Note”) from the Company in the aggregate principal amount of $210,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option of Eagle Equities any time after the six-month anniversary of the October 2018 Eagle Note. The transactions contemplated by the purchase agreement closed on October 3, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted $10,000 from the principal payment due under the October 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.

 

The maturity date of the October 2018 Eagle Note was October 2, 2019. The October 2018 Eagle Note shall bear interest at a rate of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the October 2018 Eagle Note.

 

Additionally, Eagle Equities has the option to convert all or any amount of the principal amount of the October 2018 Eagle Note, at any time, for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s common stock for the ten prior trading days, including the day upon which the Company receives a notice of conversion, subject to adjustment in certain events. Eagle Equities shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. The October 2, 2018 Eagle Note is treated as stock settled debt under ASC 480 and accordingly, the Company recorded a $140,000 put premium of which $59,913 was released to additional paid in capital following conversion of $89,870 of principal during the nine months to March 31, 2020. The Company has recorded $14,271 of accrued interest and the total principal outstanding under the October 2018 Eagle Note was $120,130 as of March 31, 2020 following conversion of $89,870 of principal and $10,275 of accrued interest during the nine months to March 31, 2020. The Company had the right to prepay the October 2018 Eagle Note with certain penalties until March 31, 2019. No prepayment has been made as of such date. As a result, the October 2018 Eagle Note is now convertible.

 

Upon an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. In April 2020, Eagle Equities agreed to waive the 24% default interest on this note.

 

F-14
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

November 30, 2018 Securities Purchase Agreement

 

Effective November 30, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities purchased a convertible promissory note (the “November 2018 Eagle Note”) from the Company in the aggregate principal amount of $105,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option of Eagle Equities any time after the six-month anniversary of the November 2018 Eagle Note. The transactions contemplated by the purchase agreement closed on December 3, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted $5,000 from the principal payment due under the November 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.

 

The maturity date of the November 2018 Eagle Note was November 30, 2019. The November 2018 Eagle Note shall bear interest at a rate of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the November 2018 Eagle Note.

 

Additionally, Eagle Equities has the option to convert all or any amount of the principal amount of the November 2018 Eagle Note, at any time, for shares of the Company’s common stock at a price equal to 61% of the lowest closing bid price (the “Closing Bid Price”) of the Company’s common stock as reported on the OTC Markets Group, Inc. quotation system for the ten prior trading days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the “Conversion Price”). However, in the event that the Company’s common stock is restricted by the Depository Trust Company for any reason, the Conversion Price shall be lowered to 51% of the lowest Closing Bid Price for the duration of such restriction. If the Company fails to maintain a reserve of shares of its common stock at least two and a half times the number of shares issuable upon conversion of the November 2018 Eagle Note for at least 60 days after the issuance of the November 2018 Eagle Note, the conversion discount shall be increased by 10%. Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. The November 2018 Eagle Note is treated as stock settled debt under ASC 480 and accordingly, the Company recorded a $67,131 put premium. The Company has recorded $11,208 of accrued interest and the total principal outstanding under the November 2018 Eagle Note was $105,000 as of March 31, 2020. The November 2018 Eagle Note may be prepaid with certain penalties by the Company until May 29, 2019. No prepayment has been made as of March 31, 2020.

 

Upon an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. In April 2020, Eagle Equities agreed to waive the 24% default interest on this note.

 

December 24, 2018 Securities Purchase Agreement

 

Effective December 24, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities purchased a convertible promissory note (the “December 2018 Eagle Note”) from the Company in the aggregate principal amount of $126,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option of Eagle Equities any time after the six-month anniversary of the December 2018 Eagle Note. The transactions contemplated by the purchase agreement closed on December 24, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted $6,000 from the principal payment due under the December 2018 Eagle Note, at the time of closing, to be applied to its legal expenses. The Company used the net proceeds from the December 2018 Eagle Note to repay an outstanding convertible promissory note before such note became convertible.

 

The maturity date of the December 2018 Eagle Note was December 24, 2019. The December 2018 Eagle Note shall bear interest at a rate of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the December 2018 Eagle Note.

 

Additionally, Eagle Equities has the option to convert all or any amount of the principal amount of the December 2018 Eagle Note, at any time, for shares of the Company’s common stock at a price equal to 61% of the lowest closing bid price (the “Closing Bid Price”) of the Company’s common stock as reported on the OTC Markets Group, Inc. quotation system for the ten prior trading days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the “Conversion Price”). However, in the event that the Company’s common stock is restricted by the Depository Trust Company for any reason, the Conversion Price shall be lowered to 51% of the lowest Closing Bid Price for the duration of such restriction. If the Company fails to maintain a reserve of shares of its common stock at least two and a half times the number of shares issuable upon conversion of the December 2018 Eagle Note for at least 60 days after the issuance of the December 2018 Eagle Note, the conversion discount shall be increased by 10%. Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. The December 2018 Eagle Note is treated as stock settled debt under ASC 480 and accordingly, the Company recorded an $80,557 put premium. The Company has recorded $12,814 of accrued interest and the total principal outstanding under the November 2018 Eagle Note was $126,000 as of March 31, 2020. The December 2018 Eagle Note may be prepaid with certain penalties until June 22, 2019. No prepayment has been made as of March 31, 2020.

 

F-15
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

Upon an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. In April 2020, Eagle Equities agreed to waive the 24% default interest on this note.

 

The total principal amount outstanding under the above Eagle Equities financing agreements, specifically the December 29, 2017, the July 13, 2018, the August 29, 2018, the October 2, 2018, the November 30, 2018 and the December 24, 2018 agreements was $456,130 as of March 31, 2020 and accrued interest totaled $51,664.

 

GS Capital Financing Agreements

 

October 2, 2018 Securities Purchase Agreement

 

Effective October 2, 2018, the Company entered into a securities purchase agreement with GS Capital, pursuant to which GS Capital purchased two 8% unsecured convertible redeemable notes (the “October 2, 2018 GS Notes”) from the Company in the aggregate principal amount of $212,000, such principal and the interest thereon convertible into shares of the Company’s common stock. The purchase price of $106,000 of the first note (the “October 2018 GS Note”) was paid in cash by GS Capital on October 3, 2018. After payment of certain legal fees and expenses, net proceeds to the Company from the October 2018 GS Note totaled $100,700. The purchase price of $106,000 of the second note (the “October 2, 2018 GS Back End Note”) was initially paid for by GS Capital issuing to the Company an offsetting $106,000 collateralized secured note (the “October 2, 2018 GS Secured Note”). The terms of the October 2018 GS Back End Note require cash funding prior to any conversion thereunder, and such cash funding shall occur on or before June 2, 2019.

 

Both the October 2, 2018 GS Note and the October 2, 2018 GS Back End Note, which was funded on February 27, 2019, matured on October 2, 2019, upon which any outstanding principal and interest thereon is due and payable. The amounts cash funded plus accrued interest under both the October 2018 GS Note and the October 2018 GS Back End Note are convertibles into shares of the Company’s common stock, at any time after April 2, 2019, at a conversion price for each share of common stock equal to 61% of the lowest closing bid price of the Company’s common stock for the ten prior trading days including the day upon which a notice of conversion is received by the Company from GS Capital, subject to adjustment in certain events. GS Capital shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by GS Capital and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. The October 2018 GS Note and the October 2018 GS Back End Note are treated as stock settled debt under ASC 480 and accordingly, the Company recorded a total $67,771 put premium for each note of which $44,690 was released in respect of the October 2018 GS Note in the fiscal year ended June 30, 2019, and a further $22,901 was released in the nine months ended March 31, 2020 following full conversion of the October 2018 GS Note resulting from conversion of the remaining principal balance of $35,820 and $2,434 in accrued interest. $67,770 of the put premium was released in respect of the October 2018 GS Back-End Note during the nine months ended March 31, 2020 following conversion $106,000 of the principal balance.

 

The total principal amount outstanding under the October 2018 GS Note, was $35,820 and accrued interest thereunder totaled $7,813 as of June 30, 2019 and was fully converted in fiscal year 2020 as of March 31, 2020 with $3,601 of accrued interest remaining (see Note 6 – Stockholders’ Deficit).

 

The maturity date of the October 2, 2018 GS Back-Note was October 2019. The total principal balance under the October 2018 GS Back-End Note, was $106,000 and accrued interest thereunder totaled $5,715 as of June 30, 2019 and the principal balance was $0 and accrued interest totaled $2,658 as of March 31, 2020 (see Note 6 – Stockholders’ Deficit).

 

The October 2, 2018 GS Notes contain certain events of default, upon which principal and accrued interest will become immediately due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of 24% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.

 

January 22, 2020 GS Capital Securities Purchase Agreements

 

Effective January 22, 2020, the Company entered into a securities purchase agreement with GS Capital, pursuant to which GS Capital purchased a convertible promissory note (the “January 22, 2020 GS Note”) from the Company in the aggregate principal amount of $58,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option of GS Capital any time after the six month anniversary of the January 22, 2020 GS Capital Note. The January 22, 2020 GS Note contains an original discount of $3,500. The transactions contemplated by the GS Capital Securities Purchase Agreement closed on January 22, 2020. Pursuant to the terms of the GS Capital Securities Purchase Agreement, GS Capital deducted $2,500 from the principal payment due under the January 22, 2020 GW Note, at the time of closing, to be applied to its legal expenses and received net cash proceeds of $52,000 on January 28, 2020. The Company intends to use the net proceeds from the January 22, 2020 GW Note for general working capital purposes.

 

F-16
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

The maturity date of the January 22, 2020 GS Capital is January 22, 2021. The January 22, 2020 GS Capital Note bears interest at a rate of 10% per annum, which interest may be paid by the Company to GS Capital in shares of the Company’s common stock; but shall not be payable until the January 22, 2020 GS Capital Note becomes payable, whether at the maturity date or upon acceleration or by prepayment.

 

Additionally, GS Capital has the option to convert all or any amount of the principal face amount of the January 22, 2020 GS Capital Note at any time from the date of issuance and ending on the later of the maturity date and the date the Default Amount, which is an amount between 112% and 130% of an amount equal to the then outstanding principal amount of the January 22, 2020 GS Capital Note plus any interest accrued, is paid if an event of default occurs, for shares of the Company’s common stock at the then-applicable conversion price.

 

The conversion price for the January 22, 2020 GS Capital Note shall be equal to a 40% discount of the lowest closing bid price (“Lowest Trading Price”) of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of Conversion, including the day upon which a Notice of Conversion is received. Notwithstanding the foregoing, GS Capital shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by GS Capital and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock which may be increased up to 9.99% upon 60 days prior written notice by the GS Capital to the Company. The note is treated as stock settled debt under ASC 480 and accordingly the Company recorded a $38,667 put premium.

 

The January 22, 2020 GS Note contain certain events of default, upon which principal and accrued interest will become immediately due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of 24% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.

 

The total principal amount outstanding under the above GS Capital financing agreement, specifically the January 22, 2020 GS Note, was $58,000 and accrued interest of $1,096 as of March 31, 2020.

 

Convertible Note Issued with Consulting Agreement

 

On August 10, 2017, the Company entered into a consulting agreement, retroactive to May 16, 2017, with a certain consultant, pursuant to which the consultant agreed to provide certain consulting and business advisory services in exchange for a $310,000 junior subordinated convertible note. The maturity date of the August 10, 2017 Convertible Note is August 2019.The note accrues interest at a rate of 10% per annum and is convertible into common stock at the lesser of $750 or 65% of the three lowest trades in the ten trading days prior to the conversion. The note was fully earned upon signing the agreement and matures on August 10, 2019. The Company accrued $155,000 related to this expense at June 30, 2017 and recorded the remaining $155,000 related to this expense in fiscal year 2018. Upon an event of default, principal and accrued interest will become immediately due and payable under the note. Additionally, upon an event of default, at the election of the holder, the note would accrue interest at a default interest rate of 18% per annum or the highest rate of interest permitted by law. The consulting agreement had a three-month term and expired on August 16, 2017. An aggregate total of $578,212 of this note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value. During the year ended June 30, 2018, the consultant converted $140,000 of principal and $10,764 of interest. During the year ended June 30, 2019, the consultant converted an additional $161,000 of principal and $19,418 of interest. During the nine months ended March 31, 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 March 31, 2020 was $8,500 and $21,787, respectively.

 

Redstart Holdings Finance Agreements

 

May 23, 2019 Securities Purchase Agreement

 

Effective May 23, 2019, the Company issued a convertible promissory note (the “May 23 Redstart Holdings Note”) to Redstart Holdings Corp (“Redstart Holdings”) in the aggregate principal amount of $133,000, with principal and the interest thereon convertible into shares of the Company’s common stock at the option of Redstart Holdings any time after 180 days of issuance. At the time of closing on May 31, 2019, Redstart Holdings deducted $3,000 from the principal payment due under the May 2019 Redstart Holdings Note to be applied to its legal expenses, such that the Company received aggregate net proceeds of $130,000 at closing.

 

The maturity date of the May 2019 Redstart Holdings Note is May 23, 2020 and bears interest at a rate of 8% per annum.

 

F-17
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

Additionally, Redstart Holdings has the option to convert all or any amount of the principal face amount of the May 2019 Redstart Note, starting on November 19, 2019 at a conversion price subject to certain Market Price (as defined below) adjustment. If the Market Price is greater than or equal to $50.00, the conversion price shall be the greater of 65% of the Market Price (“Variable Conversion Price”) and $32.50. In the event Market Price is less than $50.00, the conversion price shall be the Variable Conversion Price. As defined in the May 2019 Redstart Holdings Note, the “Market Price” shall be the average of the lowest three closing bid prices during the ten day trading period prior to and including the day the Company receives a notice of conversion from Redstart Holdings on the electronic quotation system or applicable principal securities exchange or trading market or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” during the ten prior trading days, including the day upon which the Company receives a notice of conversion from Redstart Holdings. Notwithstanding the foregoing, Redstart Holdings shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Redstart Holdings and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. An aggregate total of $166,564 of this note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value (See Note 10 - Derivative Financial Instruments and Fair Value Measurements).

 

The Company had the right to prepay the May 2019 Redstart Holdings Note until November 19, 2019. If the May 2019 Redstart Holdings Note was prepaid within 90 days of the issuance date, then the prepayment premium shall be 115% of the face amount plus any accrued interest; if the May 2019 Redstart Holdings Note was prepaid after 91 days from the issuance date, but prior to 121 days from the issuance date, then the prepayment premium shall be 120% of the face amount plus any accrued interest; and if the May 2019 Redstart Holdings Note was prepaid after 121 days from the issuance date, but prior to 150 days from the issuance date, then the prepayment premium shall be 125% of the face amount plus any accrued interest; and if the May 2019 Redstart Holdings Note was prepaid after 151 days from the issuance date, but prior to 180 days from the issuance date, then the prepayment premium shall be 129% of the face amount plus any accrued interest.

 

The May 23, 2019 Redstart Holdings Note contain certain events of default, upon which principal and accrued interest will become immediately due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of 22% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.

 

The total principal amount outstanding and accrued interest under the above Redstart Holdings financing agreement, specifically the May 23, 2019 agreement at June 30, 2019 was $133,000 and $1,137 respectively and as of March 31, 2020 total principal amount outstanding and accrued interest totaled $0 and $0 respectively following conversion of $133,000 of the principal balance and $5,320 of accrued interest during the nine months ended March 31, 2020. The Company fully amortized the remaining debt discount related to the conversions during the nine months ended March 31, 2020.

 

Power Up Lending Group Financing Agreements

 

July 3, 2019 Securities Purchase Agreement

 

Effective July 3, 2019, the Company entered into a securities purchase agreement with Power Up Lending Group Ltd. (“Power Up”), pursuant to which Power Up purchased a convertible promissory note (the “July 3, 2019 Power Up Note”) from the Company in the aggregate principal amount of $78,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option of Power Up. The transaction closed on July 3, 2019 and the Company received payment on July 8, 2019 in the amount of $78,000, of which $2,500 was paid directly toward legal fees and $500 to Power Up for due diligence fees resulting in net cash proceeds of $75,000.

 

The maturity date of the July 3, 2019 Power Up Note is July 3, 2020. The July 3, 2019, Power Up Note bears interest at a rate of 8% per annum, which interest may be paid by the Company to Power Up in shares of the Company’s common stock, but shall not be payable until the July 3, 2019 Power Up Note becomes payable, whether at the maturity date or upon acceleration or by prepayment.

 

Additionally, Power Up has the option to convert all or any amount of the principal face amount of the July 3, 2019 Power Up Note, starting on December 30, 2019 and ending on the later of the maturity date or the date the Default Amount, which is an amount equal to 150% of an amount equal to the then outstanding principal amount of the July 3, 2019 Power Up Note plus any interest accrued, is paid if an event of default occurs, for shares of the Company’s common stock at the then-applicable conversion price.

 

The conversion price for the July 3, 2019 Power Up Note shall be $3.25, subject to certain Market Price (as defined below) adjustment. If the Market Price is greater than or equal to $5.00, the conversion price shall be the greater of 65% of the Market Price (“Variable Conversion Price”) and $3.25. In the event Market Price is less than $5.00, the conversion price shall be the Variable Conversion Price. As defined in the July 3, 2019 Power Up Note, the “Market Price” shall be the average of the lowest three closing bid prices during the ten day trading period prior to and including the day the Company receives a notice of conversion from Power Up on the electronic quotation system or applicable principal securities exchange or trading market or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” during the ten prior trading days, including the day upon which the Company receives a notice of conversion from Power Up. Notwithstanding the foregoing, Power Up shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Power Up and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. An aggregate total of $155,904 of this note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value (See Note 10 - Derivative Financial Instruments and Fair Value Measurements).

 

F-18
 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2020

(unaudited)

 

The July 3, 2019 Power Up Note contain certain events of default, upon which principal and accrued interest will become immediately due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of 22% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.

 

The total principal amount outstanding under the above Power Up financing agreement, specifically the July 3, 2019 Power Up Note, was $0 and accrued interest of $0 as of March 31, 2020 following conversion of $78,000 of the principal balance and $3,120 of accrued inter