10-K
1
form10-k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
[X]
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended June 30, 2020
[ ]
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
(I.R.S.
Employer
incorporation
or organization)
identification
No.)
302,
6 Butler Street, Camberwell, VIC Australia
3124
(Address
of principal executive offices)
(Zip
Code)
Registrant’s
telephone number, including area code
61
03 9882 0780
Securities
registered under Section 12(b) of the Exchange Act:
Title
of each class
Trading
Symbol(s)
Name
of each exchange on which registered
N/A
N/A
N/A
Securities
registered pursuant to section 12(g) of the Act:
Common
Stock, par value $0.001 per share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [X] No
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X]
No
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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. [X] Yes [ ] 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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). [X] Yes [ ] No
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 [X]
Smaller
reporting company [X]
Emerging
growth company [ ]
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction 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 Act). [ ] Yes [X] No
The
aggregate market value of the voting and non-voting common equity held by non-affiliates was $780,127 computed by reference to
the closing price of the registrant’s common stock as quoted on the OTCQB maintained by OTC Markets, Inc. on December, 31
2019 (which was $0.38 per share). For purposes of the above statement only, all directors, executive officers and 10% shareholders
are assumed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for any other
purpose.
As
of September 28, 2020, there were 688,670,618 shares of common stock, par value $0.001 issued and outstanding.
PROPANC
BIOPHARMA, INC.
TABLE
OF CONTENTS
Part I
Item
1.
Business
4
Item
1A.
Risk Factors
37
Item
1B.
Unresolved Staff Comments
60
Item
2.
Properties
60
Item
3.
Legal Proceedings
60
Item
4.
Mine Safety Disclosure
60
Part II
Item
5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
61
Item
6.
Selected Financial Data
66
Item
7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
66
Item
7A.
Quantitative and Qualitative Disclosures About Market Risk
73
Item
8.
Financial Statements and Supplementary Data
73
Item
9.
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
74
Item
9A.
Controls and Procedures
74
Item
9B.
Other Information
76
Part III
Item
10.
Directors, Executive Officers and Corporate Governance
77
Item
11.
Executive Compensation
82
Item
12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
87
Item
13.
Certain Relationships and Related Transactions, and Director Independence
88
Item
14.
Principal Accounting Fees and Services
89
Part IV
Item
15.
Exhibits, Financial Statement Schedules
90
Signatures
100
2
Forward-Looking
Statements
This
Annual Report on Form 10-K for the fiscal year ended June 30, 2020 (this “Annual Report”) contains certain statements
that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act
of 1995 (the “PSLRA”) and are made in reliance upon the protections provided by such act for forward-looking statements.
All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and
state securities laws, including: any projections of earnings, revenues or other financial items; any statements of the plans,
strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments;
any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions
underlying any of the foregoing. Forward-looking statements may include the words “may,” “might,” “will,”
“will likely result,” “would,” “should,” “estimate,” “intend,” “continue,”
“believe,” “expect,” “plan,” “project,” “forecast,” “anticipate,”
“seek,” “continue,” “target” or the negative of such terms or other similar expressions. The
ultimate correctness of these forward-looking statements is dependent upon a number of known and unknown risks and events and
is subject to various uncertainties and other factors that may cause our actual results, performance or achievements to be different
from any future results, performance or achievements expressed or implied by these statements.
The
following important factors, among others, could affect our future results and events, causing those results and events to differ
materially from those views expressed or implied in our forward-looking statements: our ability to continue as a going concern
absent new debt or equity financings; our ability to successfully remediate material weaknesses in our internal controls; our
ability to reach research and development milestones as planned and within proposed budgets; our ability to control costs; our
ability to successfully implement our expansion strategies; our current reliance on substantial debt financing that we currently
are unable to repay in cash; our ability to obtain adequate new financing; our ability to successfully develop PRP, our lead product
candidate; our ability to successfully develop and market our technologies; our ability to obtain and maintain patent protection;
our ability to recruit employees and directors with accounting and finance expertise; our dependence on third parties for services;
our dependence on key executives; the impact of government regulations, including U.S. Food and Drug Administration regulations;
the impact of any future litigation; the availability of capital; changes in economic, business and competitive conditions; and
other risks. Any one or more of such risks and uncertainties could have a material adverse effect on us or the value of our common
stock. For a further list and description of various risks, relevant factors and uncertainties that could cause future results
or events to differ materially from those expressed or implied in our forward-looking statements, see Item 1A. “Risk Factors”
and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections
of this Annual Report.
All
forward-looking statements included in this Form-10-K are made only as of the date of this Annual Report or as of the date indicated.
We do not undertake any obligation to, and may not, publicly update or correct any forward-looking statements to reflect events
or circumstances that subsequently occur or which we hereafter become aware of, except as required by law. New risks and uncertainties
arise from time to time and we cannot predict these events or how they may affect us. When considering these risks, uncertainties
and assumptions, you should keep in mind the cautionary statements contained in this Annual Report and any documents incorporated
herein by reference. You should read this Annual Report and the documents that we incorporate by reference into this Annual Report
completely and with the understanding that our actual future results may be materially different from what we expect. All forward-looking
statements attributable to us are expressly qualified by these cautionary statements.
3
PART
I
Item
1. Business.
General
As
used in this Annual Report, references to the “Company,” “Propanc,” “we,” “our,”
and “us” refer to Propanc Biopharma, Inc. and its consolidated subsidiary, unless otherwise indicated. In addition,
references to our “financial statements” are to our consolidated financial statements included elsewhere in this Annual
Report except as the context otherwise requires.
We
prepare our consolidated financial statements in United States dollars and in accordance with generally accepted accounting
principles as applied in the United States, (“U.S. GAAP”). In this Annual Report, references to “$” and
“dollars” are to United States dollars.
Overview
We
are a development-stage healthcare company that is currently focused on developing new cancer treatments for patients suffering
from pancreatic, ovarian and colorectal cancer. Utilizing our scientific and oncology consultants, we have developed a rational,
composite formulation of anti-cancer compounds, which together exert a number of effects designed to control or prevent tumors
from recurring and spreading through the body. Our lead product candidate, PRP, is a variation upon our novel formulation and
involves proenzymes, the inactive precursors of enzymes. As a result of positive early indications of the anti-cancer effects
of our technology, over the last year we have conducted successful pre-clinical studies on PRP and subject to us receiving adequate
financing, hope to submit a clinical trial application in the first half of 2021. We intend to develop our PRP to treat early-stage
cancer and pre-cancerous diseases and as a preventative measure for patients at risk of developing cancer based on genetic screening.
Key
Research and Development Highlights:
●
Potential
cancer treatment : We are developing PRP, an intravenous once-daily proenzyme treatment as a therapeutic option in cancer
treatment and prevention. PRP is a combination of the pancreatic proenzymes trypsinogen and chymotrypsinogen.
●
Multiple
mechanisms of action on cancerous or carcinogenic cells : PRP produces multiple effects on cancerous cells intended to
inhibit tumor growth and potentially stop a tumor from spreading through the body. This is in contrast to current cancer treatments
that lack sufficient efficacy to achieve a durable clinical response. As our research progresses, we intend to explore further
these multiple mechanisms of action in order to identify opportunities to expand our intellectual property portfolio. Furthermore,
we hope to uncover the molecular targets of the proenzymes to identify their potential for developing new compounds.
●
Encouraging
data from patient treatment : We began our development efforts by analyzing scientific research undertaken over the last
15 years, including clinical data from patients in the UK and Australia. We concluded that there is at least indirect evidence
that a formulation such as PRP may be an effective treatment against cancer and warranted further development.
4
●
Pre-Clinical
Efficacy Studies : In November 2015, we completed animal efficacy studies in mice through our contract research partner,
vivoPharm, demonstrating proof of concept in vivo . During the course of these studies, we discovered a new target therapeutic
dose range using proenzymes for treating cancer. That month, we filed a patent application in support of this discovery, as
described further herein.
●
Pre-Clinical
Toxicology Studies : In October 2016, we completed an animal study for PRP, in which we evaluated its toxicokinetic parameters
as well as its distribution and bioavailability, both before and after repeat dosages. We then initiated a second such study
in December 2016. That study escalated the dosage levels in different phases and was completed in April 2017. We observed
no major toxicological findings after PRP was administered by intravenous injection once daily throughout the study period.
●
Anticipated
Clinical Trial Application : With the successful completion of the studies described above, we believe we have accumulated
sufficient data to establish a safe and effective dosage level for PRP and advance our product development to the clinical
stage. We are currently working with our manufacturer to create the finished product that will be part of our Investigational
Medicinal Product Dossier to be submitted in connection with our anticipated first clinical trial for PRP, which we expect
will be conducted in Australia.
●
Orphan
Drug Designation : In June 2017, we received notification from the U.S. Food and Drug Administration (FDA) that PRP had
been conferred Orphan Drug Designation. This special status is granted when a rare disease or condition is implicated and
a potential treatment qualifies under the Orphan Drug Act and applicable FDA regulations. Orphan Drug status qualifies us
for various development incentives, including protocol assistance, the potential for research grants, the waiver of future
application fees, and tax credits for clinical testing if we choose to host future clinical trials in the U.S.
●
Unique
intellectual property : In addition to our pre-clinical studies, we have also focused on building a significant portfolio
of intellectual property around the use of proenzymes in the treatment of cancer, identifying new formulations, alternative
routes of administration and potential new therapeutic targets. We have filed numerous patent applications relating to PRP,
several of which have been granted while others remain pending. In the U.S., we have been issued two patents to date
(No. 9,636,359 and 10,350,239). A further application has been filed and an Examiner’s first report expected by May
31, 2022. Our patent protection extends to both PRP’s mechanism of action and the new compositions of proenzymes.
●
Research
and development expenses: During the fiscal years ended June 30, 2020 and 2019, we have spent $179,987 and $260,335, respectively,
on research and development expenses. Historically, we have assumed all of the costs associated with research and development.
In September 2018, the Company entered into a two-year collaboration agreement with the University of Jaén (the “University”)
to provide certain research services to the Company. In consideration of such services, the Company agreed to pay the University
approximately 52,000 Euros ($59,508 USD) in year one of which 31,754 Euros ($36,117 USD) was paid in fiscal 2019
and 15,410 Euros ($17,331 USD) was accrued in fiscal 2020; and a maximum of 40,000 Euros ($45,775 USD) in year two.
Additionally, in exchange for full ownership of the intellectual property the Company agreed to pay royalties of 2% of net
revenues to the University.
In August 2019, we announced that we have
developed a method to quantify the active ingredients of our lead product candidate, PRP, in preparation for the
company’s First-In-Human (“FIH”) study, planned for the second half of 2021 calendar year. The work
was conducted by Propanc’s research partner based in Berlin, Germany, who has extensive experience in the development
of functional assays for unique bio-therapeutics. This bioanalytical method development and validation plays a significant
role in evaluation and interpretation of the systemic absorption of PRP in clinical studies including its distribution, and
clinical effects throughout the body. The development of the bioanalytical assay is also an important step for the clinical
development of PRP, as Propanc evaluates sites to conduct the FIH study in advanced cancer patients, such as the Peter Mac
Center, Australia’s largest cancer hospital, which has significant experience in early stage clinical development.
Validation of the bioanalytical method will be undertaken in 2021.
5
In
November 2019, we announced today that our POP1 research and drug discovery program has made significant advancements towards
producing synthetic versions of the two proenzymes, trypsinogen and chymotrypsinogen. With the aim of producing large quantities
of trypsinogen and chymotrypsinogen for commercial use, exhibiting minimal variation between lots and without sourcing the proenzymes
from animals, the Company is undertaking a challenging research project in collaboration with the universities of Jaén
and Granada. The two active ingredients are currently naturally derived from animal sources, which combine to form our lead product
candidate, PRP. Our vision is to produce a backup product candidate to PRP which can further stabilize and enhance the effects
of the proenzymes when administered to patients. At the research laboratories at the universities of Jaén and Granada,
scientific researchers are in the process of optimizing conditions to achieve high titers of recombinant trypsinogen and chymotrypsinogen
with this expression system.
In
January 2020, we announced that a Certificate for Advance Overseas Finding was received from the Board of Innovation and Science
Australia to receive up to a 43.5% “cash back” benefit from overseas R&D expenses. The finding relates to the
planned Phase 1 clinical trial – Multiple Ascending Dose Studies of proteolytic proenzymes for the treatment of pancreatic
cancer. Overseas activities to be undertaken include the development of an analytical assay for the quantification of active pharmaceutical
ingredients in the Company’s lead product candidate, PRP, and its manufacture of the finished product for the Phase 1 clinical
trial.
Company
History
We
were originally incorporated in Melbourne, Victoria Australia on October 15, 2007 as Propanc PTY LTD and continue to be based
in Camberwell, Victoria Australia. Since our inception, substantially all of our operations 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. We anticipate establishing global markets for our products.
On
November 23, 2010, our Company was incorporated in the state of Delaware as Propanc Health Group Corporation. In January 2011,
to reorganize our Company, we acquired all of the outstanding shares of Propanc PTY LTD on a one-for-one basis and Propanc PPY
LTD became our wholly-owned subsidiary. Effective April 20, 2017, we changed our name to “Propanc Biopharma, Inc.”
to better reflect our stage of operations and development. On the same date, we also effected a 1-for-250 reverse stock split
whereby we (i) decreased the number of authorized shares of our common stock to 100,000,000 (ii) decreased the number of authorized
shares of our preferred stock to 1,500,005 and (iii) decreased, by a ratio of 1-for-250 the number of retroactively issued and
outstanding shares of our common stock.
On
January 23, 2018, we filed a Certificate of Amendment to our Certificate of Incorporation to increase the number of authorized
shares of our common stock from 100,000,000 to 400,000,000. On September 21, 2018, we filed a Certificate of Amendment to our
Certificate of Incorporation to increase the number of authorized shares of our common stock from 400,000,000 to 4,000,000,000.
On June 11, 2019, we filed a Certificate of Amendment, as amended, to our Certificate of Incorporation to decrease the number
of authorized shares of our common stock from 4,000,000,000 to 100,000,000 in connection with the 1-for-500 reverse stock split
that occurred on June 24, 2019.
On
February 4, 2020, we filed a Certificate of Amendment to our Certificate of Incorporation to increase the number of
authorized shares of our common stock from 100,000,000 to 1,000,000,000 which was effected on March 13,
2020.
Important
Milestones for Propanc
●
From
the late 1990s, work from other scientists and clinicians, including Dr. Josef Novak in the U.S., and a since retired oncologist
from the Czech Republic, Dr. Frantisek Trnka, shed new light on the therapeutic potential of Professor John Beard’s
insights. Extensive laboratory work undertaken over a number of years by Novak and Trnka was reported in the journal Anticancer
Research in 2005 in the paper entitled Proenzyme Therapy of Cancer . The conclusion of Novak and Trnka from this
work was the discovery “that proenzyme therapy mandated first by John Beard nearly one hundred years ago, shows remarkable
selective effects that result in growth inhibition of tumor cells with metastatic potential.” Today, these important
scientific observations support our view that proenzymes are selective and effective in targeting malignant tumor cells and
could become an effective tool in the fight against metastatic cancer.
6
●
In
2007, Dr. Julian Kenyon, Medical Director of the Dove Clinic in the UK, and Dr. Douglas Mitchell further developed the therapeutic
concepts of Beard and identified strategies that could improve upon the therapeutic potential of Beard’s original ground-breaking
work. A suppository formulation was developed by Mandeville Medicines in Buckinghamshire, UK, at the request of, and in consultation
with, Drs. Kenyon and Mitchell, in an effort to improve on results reported in the literature pertaining to the potential
therapeutic use of proenzymes in cancer treatment. Patients were first treated with the suppository formulation in April 2007
at The Dove Clinic in the UK, and in July 2007 at the Opal Clinic in Australia. Drs. Kenyon and Mitchell, through The Dove
Clinic and Opal Clinic respectively, treated cancer patients in the United Kingdom and Australia with a suppository formulation
of proenzymes. The treatment was undertaken under special UK and Australian regulatory provisions. In the UK it was undertaken
under the regulations of the Medicines and Healthcare Products Regulatory Agency (the “MHRA”), designed for patients
who have special clinical needs that cannot be met by licensed medicinal products, and in Australia under the Therapeutic
Goods Administration (“TGA”) Special Access Scheme, a mechanism that provides for the import and/or supply of
an unapproved therapeutic good for a single patient, on a case by case basis. In both jurisdictions, patients are permitted
to receive treatment on an individual basis for compassionate use as long it is supplied by a recognized, licensed manufacturer
who is able to meet certain guidelines for unapproved products, and individual case files are maintained for patients should
the regulatory authorities require this information. No prior approval was required by either the MHRA or TGA prior to the
commencement of treatment. No suppository formulation of the proenzymes was available and it was necessary for a novel suppository
formulation to be manufactured specifically for these patients by a suitably licensed manufacturer.
●
Forty-six
late stage cancer patients suffering from a range of malignancies in the UK and Australia received treatment with the proenzyme
suppositories over periods of time ranging from one month to in excess of 17 months. Inspired by their observations in clinical
practice, Drs. Kenyon and Mitchell resolved to develop proenzyme therapy for cancer patients worldwide.
●
In
late 2007, Drs. Kenyon and Mitchell and Mr. James Nathanielsz, our Chief Executive Officer and Chief Financial Officer, developed
a strategy to commercialize the newly developed proenzyme formulation, now designated PRP. Propanc PTY LTD. was established
in Australia as a vehicle to refine, develop and commercialize novel, patented proenzyme therapeutics for the treatment of
cancer.
●
In
2008, our Scientific Advisory Board (the “Scientific Advisory Board”) comprising Professor John Smyth (Edinburgh
University), Professor Klaus Kutz (Bonn University) and Professor Karrar Khan (De Montfort University) was established. Today,
the expertise of the Scientific Advisory Board in oncology research and development will be relied upon as we initiate patient
trials and advance our products down the requisite regulatory pathways to commercialize our proenzyme therapies.
●
In
2009, a retrospective review of the patient notes from the 46 patients treated in the UK and Australia with the proenzymes
suppositories (as described above) was undertaken by Dr. Kenyon. This report was subject to analysis by Professor Klaus Kutz
who, at the time of the review, was an independent consultant in clinical pharmacology and safety, specializing in oncology.
Professor Kutz observed that no patients were reported as living for a period less than that predicted by the treating clinician
and a number of terminally ill patients lived marginally longer than predicted, particularly those suffering from pancreatic,
colorectal, ovarian and gastro-intestinal cancers. As a result of the observations made by Dr. Kenyon and Professor Kutz,
we are targeting the development of proenzyme therapy for the treatment of colorectal and pancreatic cancers for clinical
trials, and in the future targeting other cancer types as our product candidate progresses to commercialization.
7
●
In early 2008, a research collaborative partnership
was established with Professor David Tosh at the Center for Regenerative Medicine, Department of Biology and Biochemistry
at Bath University, to investigate the molecular mechanisms by which the proenzyme formulation is acting, which resulted in
us filing two provisional patents a year later. We undertook additional scientific research with Professor Tosh, Dr. Macarena
Perán, Department of Health Sciences at Jaén University, and Dr. Juan Antonio Marchal, Biopathology and Regenerative
Medicine Institute at Granada University. Important anti-cancer effects of the proenzymes were discovered, including triggering
cell necrosis (cell death) and apoptosis (programmed cell death) and significantly, the induction of cell differentiation
(i.e. inducing cancer cells to exhibit normal cell behavior). This led to us increasing our intellectual property base and
patent new pharmaceutical compositions designed to enhance the effects of proenzymes. Subsequently, two provisional patents
were combined into one Patent Cooperation Treaty (“PCT”) Application, filed on October 22, 2010 (PCT Application),
and then a year later, we completed a 30 month national phase filing deadline for an international patent and commenced entering
the national phase in countries around the world. Thus far, we have received grant status in Australia, China, Japan, Indonesia,
Israel, New Zealand, Singapore and South Africa and our application remains under examination in Brazil, Canada, the European
Union, Malaysia, Mexico and the Republic of Korea. In the United States, two patents have been issued
to date by the United States Patent and Trademark Office (No. 9,636,359 and No. 10,350,239) while another remains pending.
We also have another 3 PCT applications for proenzyme compositions that have entered national phase in major global jurisdictions.
●
In
late 2010, we made important discoveries and scientific observations, resulting in additional composition claims, which were
included in the original PCT Application, further protecting the company’s proenzyme formulation. Collaboration with
vivoPharm Pty Ltd. (“vivoPharm”), located in Melbourne, Australia, with research facilities in Hershey, Pennsylvania,
United States, identified a highly synergistic ratio of the proenzymes when combined together, resulting in increased anti-cancer
effects in several tumor cell lines. Furthermore, although α-Amylase was previously included in the early days of enzyme
therapy and in the suppository formulation developed by Dr. Kenyon and Dr. Mitchell, after evaluating the synergistic interaction
between the two proenzymes and α-Amylase, we concluded that α-Amylase did not contribute to the anti-tumor activity
of the formulation, and so it was removed. By 2011, further work completed by vivoPharm confirmed the anti-metastatic effects
of the newly combined ratio of the proenzymes in various cell line assays, and anti-angiogenic (inhibition of blood vessel
formation) properties of the proenzyme treatment in mice.
●
At
this time, we decided to access the U.S. markets in order to raise the capital needed
to finance the Company’s proenzyme treatment for future preclinical testing and
clinical trials. We incorporated as Propanc Health Group Corporation in the state of
Delaware in November 2010 and in January 2011, we acquired all of the outstanding shares
of Propanc PTY LTD on a one-for-one basis making and Propanc PTY LTD became our wholly-owned
subsidiary. In mid-2012, our common stock began trading on the Over-the-Counter Bulletin
Board and it currently trades on OTCQB.
●
In
May 2013, it was observed that proenzymes enforce the re-entry of cancer cells back into normal cellular pathways and this
may represent a novel approach to the treatment of cancer. These findings were published in Cellular Oncology , a peer
reviewed journal of the International Society for Cellular Oncology.
●
In
2014, after conducting a detailed strategic review of our scientific and preclinical research, our development team determined
that parenteral drug administration is the preferred route for the Company’s lead product, PRP. This approach is expected
to maximize results in future patient trials, by ensuring maximum exposure of the drug to the tumor site.
●
In
mid-2015, Dr. Joseph Chalil joined our Scientific Advisory Board as an independent expert to provide advice on the Company’s
drug development programs, in particular, our lead product, PRP. Dr. Chalil is a physician and executive at Boehringer Ingelheim,
one of the world’s largest privately held pharmaceutical companies.
●
Between
July 2015 and February 2016, several scientific research findings were announced demonstrating significant anti-tumor efficacy
in several animal models, including pancreatic and ovarian cancers at higher doses when administering proenzymes by intravenous
injection, dramatic suppression of cancer stems cells in cell culture by altering several key pathways involved with invasion
and metastasis, and identification of a synergistic response in a broad range of cancer types including kidney, melanoma,
brain, prostate, liver, uterine and lung cancers.
8
●
In
2016, we added additional members from our partner universities and hospital to our Scientific Advisory Board, including Dr.
Macarena Perán, who is currently Reader in Anatomy at the University of Jaén in Spain, Professor Juan Antonio
Marchal Corrales, Professor of Anatomy and Embryology at the Faculty of Medicine at the University of Granada, and Dr. Maria
García, Head of Translational Research at the University Hospital of Granada.
●
In
August 2016, we entered into a Manufacturing Services Agreement and Quality Assurance Agreement with Amatsigroup NV, formally
known as Q-Biologicals NV, a contract manufacturing organization located in Belgium. Pursuant to the Manufacturing Services
Agreement, Amatsigroup produces for us certain drug substances and product containing certain enzymes at its facility in Belgium.
We use these substances and products for development purposes, including but not limited to future clinical trials.
●
In
October 2016, we completed an animal study for PRP, in which we evaluated its toxicokinetic parameters as well as its distribution
and bioavailability, both before and after repeat dosages. We then initiated a second such study in December 2016. That study
escalated the dosage levels in different phases and was completed in April 2017. We observed no major toxicological findings
after PRP was administered by intravenous injection once daily throughout the study period.
●
On
April 20, 2017, we changed our corporate name to “Propanc Biopharma, Inc.” to better reflect our stage of operations
and development.
●
In
June 2017, we received notification from the FDA that PRP had been granted Orphan Drug Designation, a special status that
will enable us to qualify for tax credits for our future clinical trials, among other benefits.
●
In
October 2017, we published key findings relating to a combination of two proenzymes trypsinogen and chymotrypsinogen A with
potent in vitro and in vivo anti-tumor efficacy in Scientific Reports , a peer reviewed scientific journal
covering all areas of the natural sciences. It was concluded that PRP could have relevant oncological clinical applications
for the treatment of advanced or metastatic adenocarcinoma and advanced epithelial ovarian cancer.
●
In
February 2018, we announced allowance of our key patent application from the European Patent Office (EPO) covering a pharmaceutical
composition for treating cancer comprising trypsinogen and chymotrypsinogen within the European Union. The allowed patent
application is the first approval for the Company in the EU, which protects the Company’s lead product candidate, PRP,
a solution for once-daily intravenous administration of a combination of two pancreatic proenzymes trypsinogen and chymotrypsinogen.
●
In
March 2018, we completed the successful reproduction run of the manufacturing process for the Company’s two drug substances
trypsinogen and chymotrypsinogen. The successful reproduction run demonstrated scalability of our proprietary manufacturing
process to enable routine production of the two active substances for PRP. The process was developed in collaboration with
a European Contract Manufacturing Organization (CMO) experienced in the production of biopharmaceuticals.
●
In
July 2018, we entered national phase for two of our key patent applications from our intellectual property portfolio. The
first patent application, which entered national phase in July 2018, describes a method to eradicate cancer stem cells, and
a second patent application, covering proenzyme compositions for the treatment of solid tumors, completed national phase entry
mid-July 2018. National phase is a process whereby applicants file a patent application in each individual jurisdiction or
country, according to where intellectual property protection is sought.
●
In
September 2018, we entered into a two-year collaboration agreement with the University
of Jaén to provide certain research services to us. In consideration of such services,
we agreed to pay the university approximately 52,000 Euros ($59,508 USD) in year
one and a maximum of 40,000 Euros ($45,775 USD) in year two. Additionally, in
exchange for full ownership of the intellectual property we agreed to pay royalties of
2% of net revenues to the University.
9
●
In
December 2018, we announced that our foundation patent application has been granted by the Office of the Controller General
of Patents, Design and Trademarks, India. The foundation patent, which covers our lead product candidate, PRP, pioneers the
discovery of a pharmaceutical composition for treating cancer via a combination of trypsinogen and/or chymotrypsinogen pancreatic
proenzymes. As of June 30, 2020, the foundation patent has been granted in the United States, Belgium, Czech Republic,
Denmark, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein, Turkey, United
Kingdom, Australia, China, Japan, Indonesia, Israel, New Zealand, Singapore, Malaysia, South Africa, Mexico, Republic of Korea
and India. It is presently under examination in Brazil and Canada.
●
In
January 2019, we announced that a cooperation agreement has been entered into between the University of Jaén and our
Company to commence the POP1 joint drug discovery program to be co-funded by both parties. The agreement coincides with the
appointment of research scientist, Mr. Aitor González, to lead the drug discovery and research activities over the
next 3 to 4 years. The objective of the program is to identify and develop suitable backup compounds to our lead product candidate,
PRP. As part of the agreement, Macarena Perán, Ph.D. and Julian Kenyon, M.D. have been appointed as joint supervisors,
representing the University and our Company, respectively. The program involves advancing new compounds through a drug screening
process, followed by preclinical and early stage clinical development. As the drug candidate progresses along the development
pathway, the collaboration will also involve the Universities of Granada and Jaén, as well as Granada and Almeria Hospitals,
which are members of FIBAO, a Public Health Foundation, based in Granada, Spain, committed to assisting commercial partners
with the development and commercialization of innovative technologies designed to benefit humankind.
●
In
March 2019, we announced that we received a notification of allowance from the United States Patent and Trademark Office (“USPTO”)
confirming both methods of treatment and composition of matter claims involving trypsinogen and chymotrypsinogen for our foundation
patent in the U.S. that covers PRP. The notification of allowance from the USPTO signifies that a USPTO examiner has determined
that PRP’s patent application is complete and meets all relevant statutory requirements.
●
In
March 2019, we announced that we have initiated development of a bio-analytical assay
intended to quantify the active ingredients of RPR in preparation for human trails. The
necessary work performed in connection with this development will be conducted by a specialist
Contract Research Organization with extensive knowledge in the development of functional
assays for different bio-therapeutics.
●
In
July 2019, we appointed Mr. Carlo Campiciano as Chief Financial Officer. Mr. Campiciano brings significant experience
to the Company across a broad range of financial disciplines in the healthcare sector, including taxation, finance, operations,
planning and financial strategy. Mr. Campiciano will assist with the transformational stage into a clinical development company,
along with the goal of up-listing to a U.S. national stock exchange.
●
In
November 2019, we announced that the POP1 research and drug discovery program has made significant advancements towards
producing synthetic versions of the two proenzymes, trypsinogen and chymotrypsinogen. With the aim of producing large quantities
of trypsinogen and chymotrypsinogen for commercial use, exhibiting minimal variation between lots and without sourcing the
proenzymes from animals, the Company is undertaking a challenging research project in collaboration with the universities
of Jaén and Granada. So far, the Company’s scientific researchers have developed a novel expression system. At
the research laboratories at the universities of Jaén and Granada, scientific researchers are in the process of optimizing
conditions to achieve high titers of recombinant trypsinogen and chymotrypsinogen with this expression system.
10
●
In
January 2020, we announced that a Certificate for Advance Overseas Finding was received from the Board of Innovation and Science
Australia to receive up to a 43.5% “cash back” benefit from overseas R&D expenses. The finding relates to
the planned Phase 1 clinical trial – Multiple Ascending Dose Studies of proteolytic proenzymes for the treatment of
pancreatic cancer, for 2018/19 and the two following financial years. Overseas activities to be undertaken include the development
of an analytical assay for the quantification of active pharmaceutical ingredients in the Company’s lead product candidate,
PRP, and its manufacture of the finished product for the Phase 1 clinical trial. The finding from the Board agreed there is
a significant link between the two supporting activities and the planned Phase 1 clinical trial, and the two activities cannot
be conducted solely in Australia. The Phase 1 clinical trial is planned to be conducted at the Peter Mac Center, one of the
world’s leading cancer research, education and treatment centers, globally and is Australia’s only public hospital
solely dedicated to caring for people affected by cancer.
●
Today,
after deepening our scientific knowledge of the anti-cancer effects of proenzymes through
our ongoing efforts with our research partners and strengthening our intellectual property
portfolio by filing our patents in countries around the world, we believe we are ready
to undertake human clinical trials and subject to receiving adequate financing, we hope
to submit a clinical trial application in the second quarter of 2021 calendar
year.
The
Problem
In
the early phases of tumor progression, cancer cells multiply near the site where their predecessors first began uncontrolled proliferation.
The result, usually over a long period of time, is a primary tumor mass. Tumors often need to reach a large size before they make
themselves apparent to the individual concerned, or the clinician screening for them.
Eventually,
tumors of substantial size may begin to compromise the functioning of organs in which they have arisen and begin to evoke symptoms.
In many cases, the effects on normal tissue function come from the physical pressure exerted by the expanding tumor masses. For
example, large tumors in the colon may obstruct digestion products through the lumen, or in the lungs, airways may be compromised.
As
dangerous and threatening as these primary tumors are, they are ultimately responsible for only about 10% of deaths. A far greater
threat often arises for the patient, even after a primary tumor has been identified and removed. This threat involves cancerous
growths that are discovered at sites far removed from the locations in their bodies where their primary tumors first appeared.
These cancerous growths, called metastases, are responsible for approximately 90% of patient deaths from cancer. Metastases are
formed by cancer cells that have left the primary tumor mass and traveled by the body’s blood and lymphatic vessels (a vein-like
vessel carrying lymph, or white blood cells, from the tissues) to seek new sites and form new colonies. For example, breast cancers
often spawn metastatic colonies in many tissues throughout the body including the brain, liver, bones, and lungs.
For
primary tumors that have not yet metastasized, current treatments for cancer can be effective in initially reducing tumor burden.
However, for many forms of cancer, current treatments lack sufficient efficacy to achieve a long lasting clinical response. Therefore,
a vast majority of patients who succumb to cancer are killed by tumors that have metastasized. According to the National Cancer
Institute’s SEER Cancer Statistics Review (2001 – 2007), of the patients diagnosed with late stage metastatic breast
cancer, only 23% are expected to live longer than five years. This is compared to a 98% five-year survival rate for an early stage
breast cancer patient when the cancer is confined to the primary site.
The
invasion-metastasis cascade
The
great majority of life-threatening cancers occur in epithelial tissues, yielding carcinomas. Epithelial cells generally have a
multi-sided, uniform shape. They have well defined contact points with neighboring cells and a strong attachment to the underlying
connective tissue, or stroma, which creates a framework for solid tumors in the body. Separating the two is the specialized type
of extracellular matrix, known as the basement membrane.
11
By
definition, carcinomas that originate on the epithelial side of the basement membrane are considered to be benign ; as long
as the cells forming them remain on the same side. However, many carcinomas acquire the ability to penetrate the basement membrane,
and individual cancer cells or groups of cancer cells begin to invade the stroma. This mass of cells is now reclassified as malignant .
Often, many pathologists and surgeons reserve the label “cancer” for those epithelial tumors that have acquired this
invasive ability.
Thereafter,
carcinoma cells may invade into lymphatic or blood micro vessels. The latter may then transport these cancer cells to distant
sites in the body where they may be trapped and subsequently form new metastases.
It
is important to note, that even before cells penetrate the basement membrane, they often stimulate angiogenesis (blood
vessel formation) on the stromal side of the membrane, by expressing angiogenic proteins through the porous barrier. Not only
does this enhance the ability of malignant cells to circulate into the blood, but also provides an important feedback loop for
the cancer cell to maintain its invasiveness.
Understanding
the mechanism by which benign cells change to a malignant state is therefore pivotal to developing anti-cancer treatments that
have sufficient efficacy to achieve a long lasting clinical response.
The
epithelial-mesenchymal transition and associated loss of E-cadherin expression enable carcinoma cells to become invasive.
Epithelial
cells can undergo a transformation to a different cell type, called mesenchymal cells, through a process called the epithelial-to-mesenchymal
transition (“EMT”). Mesenchymal cells have an elongated spindle shape, lack orderly contacts with neighboring cells
and can survive without contact with a surface or connective tissue. The EMT process is a series of events that normally occur
during the development of tissues and organs prior to birth, and also apply to normal wound healing processes. However, the same
EMT process can also be applied to epithelial cancer cells, or carcinomas. When epithelial carcinoma cells residing in a solid
tumor undergo the EMT process, the resulting mesenchymal cancer cells can invade through local barriers and metastasize to other
parts of the body.
In
addition to becoming invasive and motile after undergoing the EMT process, the resulting mesenchymal cells have significantly
increased resistance to current cancer treatments. For example, in Cancer Research in 2005, it was reported that lung cancer
cells expressing mesenchymal biomarkers appeared to be resistant to Tarceva and other targeted anti-cancer agents when transplanted
into mice.
12
At
the center of this critical process for transforming benign cells into carcinomas, is the protein Epithelial Cadherin (“E-Cadherin”).
In normal cells, E-cadherin is located in the membrane and involved in maintaining cell to cell contact, which is critical to
normal function and structure of epithelial tissues. The individual E-Cadherin molecules are attached to the actin (scaffolding,
or cytoskeleton structure) within the cell, anchored by β-catenin, a protein which helps form the junction between epithelial
cells. As well as forming an anchor between epithelial cells, β-catenin is also involved in gene transcription, a process
by which DNA (deoxyribose nucleic acid) is converted into RNA (ribose nucleic acid) within the nucleus of a cell for the purpose
of producing new proteins normally associated with routine cell function.
In
the case of tumors, when cells become invasive, E-Cadherin expression decreases substantially, and β-catenin becomes free
within the cell, which may then migrate to the nucleus and induce expression of the EMT program. Furthermore, once cells undergo
an EMT, they begin to produce their own cytokines (cell signaling molecules), such as Transforming Growth Factor β, (“TGF-β”).
This protein plays a critical multi-functional role in promoting angiogenesis, immunosuppression (suppressing the immune system
from recognizing and attacking cancer cells), and maintaining their mesenchymal cell structure for prolonged periods via a feedback
mechanism. Studies also suggest that TGF-β works with β-catenin to cause epithelial cancer cells to undergo an EMT.
13
A
study in the British Journal of Cancer in 2011 demonstrated that in cholangiocarcinoma (bile duct cancer) cell lines, treatment
of TGF-β increased cell migration, invasion and mesenchymal changes. Furthermore, expression of E-cadherin and N-cadherin
was measured from resected (cut out) specimens from extra-hepatic (outside the liver) cholangiocarcinoma patients. Patients with
low E-cadherin expression had a significantly lower survival rate than patients with high E-cadherin expression. They concluded
the cadherin switch via TGF-β induced EMT in extra-hepatic cholangiocarcinoma leads to cancer progression.
Conversely,
in studies of several types of carcinoma cells that had lost E-cadherin expression, re-expression of this protein strongly suppressed
the invasiveness and motility of these cancer cells.
Together,
these observations indicate that E-Cadherin levels is a key determinant of the biological behavior of epithelial cancer cells
and that the cell to cell contact constructed by E-cadherin molecules impede invasiveness and hence metastasis.
Our
Solution
Our
solution is to develop and commercialize a long-term therapy to prevent tumor recurrence and metastases, the main cause of patient
death from cancer. We believe this problem can be addressed by developing a proenzyme formulation specifically targeting malignant
carcinoma cells to create a long-lasting clinical benefit to the patient.
Propanc’s
Theory Proenzymes Regulate Cell Proliferation
More
than 100 years ago, Professor John Beard, a comparative embryologist, made an observation that the pancreas develops in most vertebrates
at the time when the placenta begins to slow its rate of growth. He hypothesized that enzymes produced by the developing pancreatic
gland curtail trophoblastic invasion (a rare condition in which abnormal cells grow inside the uterus from tissue that forms after
conception) and suggested that pancreatic extracts should have a similar inhibitory effect on invasive tumors.
Subsequently
in the late 1990s, after following Professor Beard’s recommendations, Drs. Novak and Trnka hypothesized that administration
of proenzymes, rather than the enzymes, was of crucial importance to the clinical effectiveness of the treatment approach first
developed by Professor Beard, and that the precursor nature of the active enzymes may offer protection against numerous serpins
(proteins which can inhibit proenzymes) in the blood.
As
knowledge of tumor cell and molecular cell biology has increased over the years, our scientists and research partners have made
important scientific discoveries identifying that proenzymes suppress the EMT program and induce cell differentiation, i.e., return
cancerous cells towards normal cell behavior, or a benign state.
After
more than 100 years, the initial observations made by Professor Beard may have a potential common link between embryogenesis and
cancer, by which cells are able to become motile and invasive, via the EMT program, where the administration of proenzymes may
regulate cell proliferation as a means to controlling carcinomas.
PRP
Our
lead product, PRP, is a novel, patented formulation consisting of two proenzymes, trypsinogen and chymotrypsinogen, combined at
a ratio of one-to-six (1:6), to be administered intravenously. After establishing proof of concept in vivo as described
earlier, supplemented by laboratory research at the Universities of Jaén and Granada on the mechanism of action of the
proenzyme mixture, evidence suggests PRP may be effective against a range of solid tumors.
14
Selectivity
Research
published by Novak and Trnka in Anticancer Research (2005) suggests that the proenzymes in our product, trypsinogen and chymotrypsinogen,
exhibit specificity for tumor cells and not normal cells. Once activated, they in turn activate Protease Activated Receptors Type
2 (“PAR2”), which are located on the cell membrane and involved with cancer cell proliferation. Activation of PAR2
results in a cascade of intracellular activities, including activation of a major component of the cell which controls its structure
and architecture, the actin cytoskeleton. In a cancer cell, proenzymes have the effect of converting globular actin into filamentous
actin, which causes the cell structure to collapse and induce cell death. This reduces tumor volume and is often seen in clinical
practice.
Anti-Cancer
Effects and Mechanism of Action
PRP
consists of proenzymes which are known to influence a number of pathways critical for cancer cells to invade, grow and metastasize.
Research published in collaboration with our research partners at Jaén and Granada Universities in the Journal of Cellular
Oncology in 2013 shows the clinical benefits of PRP appear to result from enhanced differentiation of tumor cells, which inhibits
proliferation and consequently reduces their ability to invade and metastasize.
Specifically,
the research showed that proenzymes:
●
induce
a dose-dependent inhibition of cell growth, triggering apoptosis and cell necrosis;
●
enhance
expression of epithelial markers, such as E-cadherin and β-catenin;
●
decrease
expression of EMT transcription factors responsible for coding specific gene sequences from DNA, associated with TGF-β
cell signaling pathways; and
●
induce
malignant cells to differentiate to benign forms.
Once
activated, proenzymes influence the micro-immune environment around the cell, altering a number of pathways critical for supporting
cancer cell growth, invasion and metastasis. This includes interacting with proteinases and cell signaling pathways in the extracellular
matrix, whilst also interacting directly with cell surface proteins that effect the internal pathways of the cancer cell, triggering
re-expression of epithelial markers, reducing important EMT markers, and inducing a series of cellular activities which alters
the cancer cell’s morphology (structure) from a malignant to a benign state. Up to four pathways related to cancer spread
and metastasis, including TGFΒ, Hippo, Wnt and Notch pathways were regulated by proenzymes.
15
Planned
Clinical Development
PRP
recently completed preclinical development. A First-In-Human (FIH), Phase Ib study in patients with advanced solid tumors, evaluating
the safety, pharmacokinetics and anti-tumor efficacy of PRP is planned to commence in the second half of 2021 calendar year in
a jurisdiction to be selected by us, subject to us receiving adequate financing, and is hoped to be completed within twelve months.
The study will be an open-label, multicenter, non-comparative study of PRP administered at increasing dose levels, with once daily
intravenous injections over a 28-day cycle, with at least 20 and up to 40 patients enrolled.
The
Phase Ib study is planned to be followed by two open Phase IIa studies evaluating the safety, pharmacokinetics and anti-tumor
efficacy of PRP administered intravenously to patients with locally advanced or metastatic pancreatic adenocarcinoma, or to patients
with advanced epithelial ovarian cancer who have failed prior anti-cancer therapy regimen. These studies are envisioned to start
in parallel, shortly after the FIH Phase IIa study, and are hoped to be finalized in 2022. Both studies will be open, multicenter
phase II studies measuring overall survival of patients having received once daily intravenous administrations of PRP.
Preclinical
Development
We
have extensive in vitro and in vivo studies demonstrating the anti-tumor efficacy of a novel proenzyme formulation consisting
of a combination of trypsinogen and chymotrypsinogen in a synergistic ratio. The preclinical work was undertaken in collaboration
with our contract research organization, vivoPharm, in both Melbourne, Australia and Hummelstown, PA, United States, together
with universities we partnered with, including the Biopathology and Regenerative Medicine Institute, Center for Biomedical Research,
at the University of Granada in Granada, Spain, and the Department of Health Sciences at the University of Jaén in Jaén,
Spain. We funded both vivoPharm and the universities to carry out this research and retained the intellectual property rights
within the field relating to any discoveries based on the mechanism of action and anti-tumor effects of the proenzymes.
The
following preclinical development activities have been undertaken to date:
●
We
tested the anti-proliferative effects of trypsinogen and chymotrypsinogen in 24 cancer cell lines and determined a synergistic
ratio of 1:6, which we used to formulate PRP;
●
We
evaluated the in vitro anti-angiogenic effects of PRP, by soft-agar formation assay, and in vivo using the AngioChamber ™
assay, which is based on the normal physiological process of wound healing, to promote fibrous capsule formation around
an implanted growth factor-releasing Teflon chamber;
●
To
analyze the anti-metastatic effects of proenzymes, we studied the effects of PRP in cell invasion, cell migration, and in
the modulation of EMT related genes in pancreatic and ovarian cancer cells; and
●
We
also performed in vivo a pharmacokinetic study and assessed the anti-tumor efficacy of PRP in murine cancer models.
To accomplish this, we treated mice that were orthotopically inoculated with A2780 human ovarian cancer cells, or with Pan02
mouse pancreatic tumor cells, with PRP.
16
Determination
of Optimal Proenzyme Ratio
In
this study, we determined first the half-maximal inhibitory concentrations (IC 50 ) trypsinogen and chymotrypsinogen
to measure their effect as single test articles in an extended panel of 24 human cancer cell lines. The IC 50 values
of trypsinogen ranged from 2.5 to 17.5 mg/ml and from 1.4 to 25.2 mg/ml for chymotrypsinogen. The IC 50 values of trypsinogen
were the basis for the calculation of concentration ratios for the combination of trypsinogen and chymotrypsinogen at 1:1, 1:2,
1:4, 1:6, 1:8, and 1:10. At these ratios, the growth inhibitory properties of the combination were evaluated in 24 cancer cell
lines. Based on the coefficient of drug interaction (CDI) values, the combination of trypsinogen and chymotrypsinogen demonstrated
greater growth inhibition at ratios of 1:4, 1:6, and 1:8, compared to the 1:1 ratio in most cell lines tested. Finally, a ratio
of trypsinogen to chymotrypsinogen of 1:6 was determined to be the optimal formulation and used for later experiments.
Determination
of the Coefficient of Drug Interaction
The
representative graphs show an optimal pro-enzyme synergistic ratio of the Trypsinogen to Chymotrypsinogen as 1:6
17
Anti-angiogenic
efficacy of pancreatic proenzyme formulation
To
determine whether PRP affects angiogenesis, we used a soft-agar tube formation assay. Dispersed human umbilical vein endothelial
cells (HUVEC) organized into clusters after three hours and began to form tube-like structures after five hours that were clearly
evident after 24 hours. In contrast, PRP treated HUVECs presented a marked reduction in the number and length of closed capillary
tubes in a concentration dependent manner, with a total disappearance of the structures after treatment with trypsinogen to chymotrypsinogen
(T/C) 0.07/0.42 mg/ml.
18
To
assess if the inhibition of the tubule-like structures formation could be due to cell death caused by PRP treatment, CellTracker
Green/CMFDA staining was used to identify viable cells. Both control and PRP treated cells showed green staining, indicating that
the inhibition of cellular cords was independent from cell viability.
Furthermore,
quantification of the number of capillary-like structures at different areas of the cell revealed a dramatic and significant difference
between the number of structures formed by non-treated cells when compared with PRP-treated cells (p <0.01 vs. Control).
The
anti-angiogenic effect of PRP was additionally investigated in vivo using the AngioChamber™ assay, a model used to
assess the efficacy of anti-angiogenic treatments by measuring fibrous capsule formation in mice. In this assay the inclusion
of basic fibroblast growth factor (bFGF) in the chamber supports the induction of blood vessels development and formation of a
fibrous capsule. AngioChamber™ were excised from all post-mortem mice on the termination day, 24 hours following final treatment
(Day 5).
The
results show that fibrous capsule formation was significantly greater in the vehicle control group with bFGF captured in the chamber
(Group 2, Induction Control) than in the vehicle control group without bFGF loaded into the chamber (Group 1, Baseline Control)
(p<0.05) indicating that bFGF adequately and significantly stimulated capsule formation. Furthermore, treatment with PRP (Group
3) resulted in a significant reduction in angiogenesis compared to the induction control (Group 2), as indicated by the difference
in capsule weight (p < 0.05) with a 57% of fibrous capsule formation inhibition. Thus, PRP inhibits fibrous capsule formation
showing significant in vivo anti-angiogenic effects.
19
Anti-invasion,
anti-migration and anti-EMT effect of PRP
To
analyze the in vitro anti-metastatic effect of the proenzyme treatment, we studied the effect of PRP in cell invasion,
cell migration and the modulation of EMT related genes in cancer cells. First, to evaluate the effect of PRP on cell migration,
a key event in carcinogenesis, we performed a wound-healing assay on human pancreatic BxPC3 and human ovarian A2780 cells. Migration
is defined as the directed movement of cells on a substrate such as plastic plates occurring on 2D surfaces.
Results
show that non-treated cells migrated faster to close the gap of a scratch in the cell monolayer than PRP treated cells. PRP significantly
reduced cell migration of pancreatic BxPC3 cells and compared with control cells even enhanced the width of the wound.
Although
the A2780 ovarian tumor cell line does not grow forming a homogeneous monolayer like BxPC3, it can be observed that PRP treatment
significantly reduces the ability of the ovarian cells to migrate. Data showed significant cell migration inhibition after 24
hours and 48 hours of treatment with PRP compared to control cells.
Secondly,
we tested the inhibitory effect of the proenzyme formulation on cell invasion of colon and pancreatic tumor cells. Invasion is
defined as cell movement through an extracellular 3D matrix. The principle of this assay is based on two medium containing chambers
separated by a porous membrane through which cells transmigrate. Here, we tested different concentrations of PRP on MIA PaCa-2
pancreatic and HCT-15 colon human cancer cell lines. PRP showed a marked and significantly dose-dependent inhibition of invasion
in both cell lines. Total inhibition of cell migration was achieved from PRP concentrations of T/C 0.015/0.093 mg/ml and so on
with the other increasing concentrations tested.
20
Finally,
to investigate whether the exposure of PRP has a potential regulation in the transcriptional machinery that drives EMT in cancer
cells, expression of EMT genes were studied in BxPC3 pancreatic and A2780 ovarian human cancer cells. EMT markers in both BxPC3
and A2780 cells were affected by PRP treatment at T/C 0.07/0.42 mg/ml. Results show that PRP treatment increased the expression
of E-Cadherin (0.4 fold) (p < 0.05), whilst reduced the expressions of N-cadherin, Slug and vimentin (0.9, 0.5 and 0.6 fold,
respectively) (p < 0.01) in BxPC3 cells.
In
addition, PRP significantly up-regulated the expression of E-Cadherin (0.9 fold) (p < 0.01) and significantly down-regulated
the expression of N-cadherin and Slug (0.4 and 0.6 fold, respectively) (p < 0.01) and induced a slight, but not significant,
decrease of vimentin expression in A2780 cells.
PRP
pharmacokinetic study
To
evaluate the pharmacokinetics and organ distribution of trypsinogen and chymotrypsinogen, non-tumor bearing female athymic Nude-Foxn1nu
mice were treated with IRDye® 800CW labeled trypsinogen (5 mg/kg) plus unlabeled trypsinogen (50 mg/kg), or IRDye® 800
CW labeled chymotrypsinogen (7 mg/kg) plus unlabeled Chymotrypsinogen (300 mg/kg). Animals were euthanized at specified time-points
post-dose and plasma along with organ homogenates was prepared, then imaged via IVIS imaging system.
21
Fluorescence
was measured in organ homogenates. Mice treated with labeled T, presented a fluorescence peak in all organs between 15 minutes
and 2 hours post-dose. While mice treated with labeled C showed the maximum fluorescent emission between 15 minutes and 6 hours
post-dose. For both highest readings were observed in the kidneys and liver. Maximum levels of both IRDye®800CW labeled trypsinogen
and chymotrypsinogen A in mouse plasma occurred at 15 minutes post dose (7.5 and 72.2 ìg/ml, respectively). Levels of both
IRDye® 800CW labeled proenzymes decreased rapidly after this time.
Anti-tumor
efficacy of PRP in orthotropic mice models
The
effect of the proenzyme formulation PRP at different doses on tumor weight in orthotopically implanted pancreatic and ovary tumors
was assessed. In the pancreatic tumor control group, there was significant (*P < 0.05) reduction in mean tumor weight in animals
treated for 26 days with trypsinogen/chymotrypsinogen at 83.3/500 mg/kg (30.2 mg; 85.9% inhibition) compared with control (PBS;
214.8 mg), but not between trypsinogen/chymotrypsinogen at 27.5/165 mg/kg (196.5 mg; 8.5% inhibition) and the control (as shown
in the figure below).
Furthermore,
ovary tumor-bearing mice (as shown in the figure below) showed a significant (p < 0.05) reduction in mean tumor weight in animals
treated for 21 days with two different doses of trypsinogen/chymotrypsinogen, 9.1/54 mg/kg and 27.5/165 mg/kg, compared with control
(PBS). The mean weight of control group tumors was 2062.2 mg while the treated groups presented a mean tumor weight of 1074.2
mg and 957.3 respectively, ranging in a 50% tumor inhibition (52% - 46%).
22
Oral
pancreatic enzymes have been administered previously in a variety of circumstances and are in current clinical use in conditions
where the pancreas is unable to produce sufficient enzymes for the digestion of food. A number of oral pancreatic enzyme products
are presently approved in the U.S. for use in patients who do not produce enough pancreatic enzymes. Approved pancreatic enzyme
products include Pancreaze™ from Johnson & Johnson, CREON® from Abbott Laboratories, and ULTRASE® from Axcan
Pharma US.
PRP
is a combination of two proenzymes, trypsinogen and chymotrypsinogen, specifically formulated within a specific ratio (1:6, as
described above) designed to synergistically enhance their anti-cancer effects based on the mechanism of action. Patent protection
for PRP has been secured in multiple jurisdictions, including the United States, and continues to be sought for similar compositions
and mechanisms of action.
Oral
enzymes have also been investigated previously for the treatment of cancer and, while generating encouraging results, their widespread
use has been hampered by the very large quantities that have been considered necessary for effective treatment – 130 or
more tablets per day. The high dose used with oral delivery is considered necessary due to the oral enzymes being broken down
in the stomach and duodenum, the first part of the small intestine and very little actually being absorbed into the general circulation.
By administering a proenzyme parenterally, and using a specific proenzyme formulation, the normal breakdown of the enzymes when
taken orally is avoided and the drug can potentially be absorbed into the general circulation intact. It is also suggested that
proenzymes are resistant to inactivation by numerous protein digesting enzymes, like serpins, which are circulating in the blood.
Together with our scientific consultants, we believe that the development of a parenteral proenzyme formulation will lead to improved
efficacy in the treatment of cancer compared with oral enzyme preparations, and will substantially reduce the dose in comparison
to that used previously for oral enzyme therapy for the treatment of cancer.
Target
Indications
The
management of cancer differs widely, with a multitude of factors impacting the choice of treatment strategy. Some of those factors
include:
●
the
type of tumor, usually defined by the tissue in the body from which it originated;
●
the
extent to which it has spread beyond its original location;
23
●
the
availability of treatments, driven by multiple factors including cost, drugs approved, local availability of suitable facilities,
etc.;
●
regional
and geographic differences;
●
whether
the primary tumor is amenable to surgery, either as a potentially curative procedure, or as a palliative one; and
●
the
balance between potential risks and potential benefits from the various treatments and, probably most importantly, the patient’s
wishes.
For
many patients with solid cancers, such as breast, ovarian, colorectal, lung and pancreatic cancer, surgery is frequently the first
treatment option, often followed by first line chemotherapy with or without radiotherapy. While hopefully such procedures are
curative, in many instances the tumor returns, and second line treatment strategies are chosen in an effort to achieve a degree
of control over the tumor. In most instances, the benefit is temporary, and eventually the point is reached where the patient’s
tumor either fails to adequately respond to treatment, or the treatment has unacceptable toxicity which severely limits its usefulness.
Should
the planned Phase I, II and III clinical trials confirm the efficacy of PRP, along with the favorable safety and tolerability
profile suggested by pre-clinical studies conducted to date, we believe our product will have utility in a number of clinical
situations including:
●
in
the early stage management of solid tumors, most likely as part of a multi-pronged treatment strategy in combination with
existing therapeutic interventions;
●
as
a product that can be administered long term for patients following standard treatment approaches, such as surgery, or chemotherapy,
in order to prevent or delay recurrence; and
●
as
a preventative measure for patients at risk of developing cancer based on genetic screening.
In
the near term as part of our planned Phase I, II and III clinical trials, we plan to target patients with solid tumors, most likely
ovarian and pancreatic, for whom other treatment options have been exhausted. This is a common approach by which most new drugs
for cancer are initially tested. Once efficacy and safety has been demonstrated in this patient population, exploration of the
potential utility of the drug in earlier stage disease can be undertaken, together with investigation of the drug’s utility
in other types of cancers, such as gastro-esophageal tumors, colon or rectal carcinoma might be conducted. A Phase II study in
a back-up indication, such as advanced therapy refractant prostate cancer will also be considered. This indication is based on
positive preclinical pharmacology studies.
Development
Strategy
Our
goal is to undertake early stage clinical development of PRP through to a significant value inflection point, where the commercial
attractiveness of a drug in development, together with a greater likelihood of achieving market authorization, may attract potential
interest from licensees seeking to acquire new products. Such value inflection points in the context of cancer drugs are typically
at the point where formal, controlled clinical trials have demonstrated either ‘efficacy’ or ‘proof of concept’
– typically meaning that there is controlled clinical trial evidence that the drug is effective in the proposed target patient
population, has an acceptable safety profile, and is suitable for further development. From a ‘big picture’ perspective,
it is our intention to progress the development of our technology through the completion of our planned Phase IIa clinical trials
and then to seek a licensee for further development beyond that point.
As
part of that commercial strategy, we will:
●
continue
research and development to build our existing intellectual property portfolio, and to seek new, patentable discoveries;
24
●
seek
to ensure all product development is undertaken in a manner that makes its products approvable in the major pharmaceutical
markets, including the U.S., Europe, the UK, Australia and Japan;
●
aggressively
pursue the protection of our technology through all means possible, including patents in all major jurisdictions, and potentially
trade secrets; and
●
make
strategic acquisitions to acquire new companies that have products or services that complement our future goals.
Development
Plan and Milestones
PRP
We
plan to progress PRP down a conventional early stage clinical development pathway for:
●
regulatory
and/or ethics approval to conduct a Phase Ib study, and submit it with the applicable government agency for approval; and
●
Phase
IIa multiple escalating dose studies to investigate the safety, tolerability, and pharmacokinetics of PRP administered intravenously
to patients.
We
are currently evaluating Australia, UK and Europe as the potential destination where we may commence the Phase Ib trial. In particular,
we are closely evaluating Australia because of its research and development tax incentives, as well as a simplified regulatory
environment. As part of such incentives, eligible companies conducting clinical trials in Australia receive up to 43.5% “cash-back”
benefit in the form of a refund of their qualified research and development costs and expenses. The Company received a refund
of $199,834 AUD ($134,728 USD) and $161,383 AUD ($115,437 USD) in the years ended June 30, 2020 and 2019 respectively. We
are continuing to evaluate all options to conduct our planned clinical trials in the most cost-efficient manner, while
striving to minimize dilution to our stockholders.
We
anticipate reaching the Phase IIa proof of concept milestone in approximately three to four years, subject to regulatory approval
in Europe, and the results from our research and development and licensing activities.
Our
overhead and expenses are likely to increase from its current level as PRP progresses down the development pathway. This increase
will be driven by the need to increase our internal resources in order to effectively manage our research and development activities.
Anticipated
timelines
Below
is the timeline and a detailed discussion of our anticipated milestones and steps that we plan to take in preparation for our
planned Phase Ib clinical trial.
25
In
first quarter of 2021 calendar year, we anticipate the submission of the Clinical Trial Application for PRP in a jurisdiction
to be determined by us that would suit the best interests of the trial and our Company. We anticipate receiving approval of such
application in the first half of 2021. Following the clinical trial application, we plan to commence our Study Preparation, including
CRO Selection and Contracts, Analytical Lab Selection Contracts and Trial Sites Selection and Contracts. In connection with the
Clinical Trial Application, this product will be part of our Investigation Medicinal Product Dossier, Study Protocol and Investigator’s
Brochure. In the first half of 2021 calendar year, we hope to complete the Study Preparation with the Preparation of Logistics
and Trial Sites Initiation Visits and complete our clinical trial application review.
Commencing
in the second half of 2021 calendar year, we intend to initiate a Phase Ib study in advanced cancer patients with solid tumors
and the anticipated costs will be approximately $6.5 million. We will need to raise additional financing to fund our planned Phase
I, II and III clinical trials and for working capital.
Financial
Objectives
Multiple
factors, many of which are outside of our control, can impact our ability to achieve our target objectives within the planned
time and budgetary constraints. Subject to these caveats, our objective is to complete our planned Phase IIa study for PRP within
the proposed budget.
26
Corporate
Strategy
We
primarily outsource services, skills and expertise to third parties as required to achieve our scientific and corporate objectives.
As the business grows and gains more personnel, outsourcing will continue to be the preferred model, where fixed and variable
costs are carefully managed on a project-by-project basis. This means our research and development activities are carried out
by third parties. Additional third parties with specific expertise in research, compound screening and manufacturing (including
raw material suppliers) have been contracted as required.
Our
initial focus is to organize, coordinate and finance the various parts of our drug development pipeline. New personnel will be
carefully introduced into our Company over a period of time as our research and development activities expand. They will have
specific expertise in product development, manufacture and formulation, regulatory affairs, toxicology, clinical operations and
business development (including intellectual property management, licensing and other corporate activities).
In
the first instance, additional clinical management and development expertise is likely to be required for our lead product. Therefore,
we anticipate an increase in employees in order to effectively manage our contractors as the projects progress down the development
pathway.
This
outsourcing strategy is common in the biotechnology sector, and is an efficient way to obtain access to the necessary skills required
to progress a project, in particular as the required skills change as the project progresses from discovery, through manufacturing
and non-clinical development and into clinical trials. We anticipate that we will continue to use this model, thereby retaining
the flexibility to contract in the appropriate resource as and when required.
We
intend to seek and identify potential licensing partners for our product candidates as they progress through the various development
stages, reaching certain milestones and value inflection points. If a suitable licensee is identified, a potential licensing deal
could consist of payments for certain milestones, plus royalties from future sales if the product is able to receive approval
from the relevant regulatory authorities where future product sales are targeted. We intend to seek and identify potential licensees
based on the initial efficacy data from Phase II clinical trials. To accomplish this objective, we have commenced discussions
with potential partners in our current preclinical phase of development.
As
part of our overall expansion strategy, from time to time, we investigate potential intellectual property acquisition opportunities
to expand our product portfolio. While our initial focus is on the development of PRP as the lead product candidate, potential
product candidates may also be considered for future preclinical and clinical development. These potential opportunities have
arisen from other research and development organizations, which either own existing intellectual property or are currently developing
new intellectual property, which may be of interest to us. These opportunities are possible new cancer treatments that are potentially
less toxic than existing treatment approaches and are able to fill an existing gap in the treatment process, such as a systemic
de-bulking method which could reduce the size and threat of metastases to a more manageable level for late stage cancer patients.
We believe these potential treatment approaches will be complementary to existing treatment regimens and our existing product
candidate, PRP. No formal approaches have been made at this stage and it is unknown whether we will engage in this discussion
in the near future. However, we remain hopeful that as PRP progresses further down the development pathway, future opportunities
may arise to use the expertise of our management and scientific personnel for future prospective research and development projects.
Current
Operations
We
are at a pre-revenue stage. We do not know when, if ever, we will be able to commercialize our products and begin generating revenue.
We are focusing our efforts on organizing, coordinating and financing the various aspects of the drug research and development
program outlined earlier in this document. In order to commercialize our products, we must complete preclinical development, Phase
Ib, IIa and IIb clinical trials in Europe, the U.S., United Kingdom, Australia or elsewhere, and satisfy the applicable regulatory
authority that PRP is safe and effective. If the results from the Phase II trials are convincing, we will seek conditional approval
from the regulatory authorities sooner. Therefore, from the time we commence clinical trials, we estimate that this will take
approximately three to four years if we seek conditional approval upon completion of Phase II trials, or up to seven years if
we determine that Phase III trials are needed. As described previously, when we advance our development projects sufficiently
down the development pathway and achieve a major increase in value, such as obtaining interim efficacy data from Phase II clinical
trials, we will seek a suitable licensing partner to complete the remaining development activities, obtain regulatory approval
and market the product.
27
Current
Therapies
We
are developing a therapeutic solution for the treatment of patients with advanced stages of cancer targeting solid tumors, which
is cancer that originates in organs or tissues other than bone marrow or the lymph system. Common cancer types classified as solid
tumors include lung, colorectal, ovarian cancer, pancreatic cancer and liver cancers. In each of these indications, there is a
large market opportunity to capitalize on the limitations of current therapies.
Current
therapeutic options for the treatment of cancer offer, at most, a few months of extra life or tumor stabilization. Some experts
believe that drugs that kill most tumor cells do not affect cancer stem cells, which can regenerate the tumor (e.g. chemotherapy).
Studies are revealing the genetic changes in cells that cause cancer and spur its growth. This research is providing scientific
researchers with many potential targets for drugs. Tumor cells, however, can develop resistance to drugs.
Limitations
of Current Therapies
PRP
was developed because of the limitation of current cancer therapies. While surgery is often safe and effective for early stage
cancer, many standard therapies for late stage cancer urgently need improvement; current treatments generally provide modest benefits,
and frequently cause significant adverse effects. Our focus is to provide oncologists and their patients with therapies for metastatic
cancer which are more effective than current therapies, and which have a substantially reduced side effect profile.
While
progress has been made within the oncology sector in developing new treatments, the overall cancer death rate has only improved
by 7% over the last 30 years. Most of these new treatments have some limitations, such as:
●
significant
toxic effects;
●
expense;
and
●
limited
survival benefits.
We
believe that our treatment will provide a competitive advantage over the following treatments:
●
Chemotherapeutics :
Side effects from chemotherapy can include pain, diarrhea, constipation, mouth sores, hair loss, nausea and vomiting, as well
as blood-related side effects, which may include a low cell count of infection fighting white blood cells (neutropenia), low
red blood cell count (anemia), and low platelet count (thrombocytopenia). Our goal is to demonstrate that our treatment will
be more effective than chemotherapeutic and hormonal therapies with fewer side effects.
●
Targeted
therapies : The most common type is multi-targeted kinase inhibitors (molecules which inhibit a specific class of enzymes
called kinases). Common side effects include fatigue, rash, hand–foot reaction, diarrhea, hypertension and dyspnoea
(shortness of breath). Furthermore, tyrosine kinases inhibited by these drugs appear to develop resistance to inhibitors.
While the clinical findings with PRP are early and subject to confirmation in future clinical trials, no evidence has yet
been observed of the development of resistance by the cancer to PRP.
●
Monoclonal
antibodies : Development of monoclonal antibodies is often difficult due to safety concerns. Side effects that are most
common include skin and gastro-intestinal toxicities. For example, several serious side effects from Avastin, an anti-angiogenic
cancer drug, include gastrointestinal perforation and dehiscence (e.g. rupture of the bowel), severe hypertension (often requiring
emergency treatment) and nephrotic syndrome (protein leakage into the urine). Antibody therapy can be applied to various cancer
types, but can also be limited to certain genetic sub populations in many instances.
●
Immunotherapy :
There is a long history of attempts to develop therapeutic cancer vaccines to stimulate the body’s own immune system
to attack cancer cells. While these products generally do not have the poor safety profile of standard therapeutic approaches,
only a relatively small number of them are FDA-approved and available as compared to the number of patients diagnosed with
cancer. Furthermore, only a relatively small number of the patient population is eligible to receive and subsequently respond
to treatment, as defined by preventing tumor growth.
28
License
Agreements
We
previously sponsored a collaborative research project at Bath University to investigate the cellular and molecular mechanisms
underlying the potential clinical approach of our proprietary proenzyme formulation. As a result of this undertaking, we entered
into a Commercialization Agreement with University of Bath (UK), dated November 12, 2009 (the “Commercialization Agreement”),
where, initially, we held an exclusive license with Bath University, and where we and Bath University co-owned the intellectual
property relating to our proenzyme formulations. The Commercialization Agreement originally provided for Bath University to assign
the Patents (as defined therein) to Propanc in certain specified circumstances, such as successful completion of a clinical trial
and commencement of a Phase II (Proof of Concept) clinical trial.
On
June 14, 2012, Propanc and Bath University agreed to an earlier assignment to us of the patents pursuant to an Assignment and
Amendment Deed, on the proviso that Bath University retains certain rights arising from the Commercialization Agreement, as follows:
●
Bath
University reserves for itself (and its employees and students and permitted academic sub-licensees with respect to research
use) the non-exclusive, irrevocable, worldwide, royalty free right to use the patents for research use;
●
The
publication rights of Bath University specified in the contract relating to the original research made between the parties
with an effective date of July 18, 2008 shall continue in force;
●
Propanc
shall pay to Bath University a royalty of two percent of any and all net revenues;
●
Propanc
shall use all reasonable endeavors to develop and commercially exploit the patents for the mutual benefit of Bath University
and Propanc to the maximum extent throughout the covered territory and in any additional territory and to obtain, maintain
and/or renew any licenses or authorizations that are necessary to enable such development and commercial exploitation. Without
prejudice to the generality of the foregoing, Propanc shall comply with all relevant regulatory requirements in respect of
its sponsoring and/or performing clinical trials in humans involving the administration of a product or materials within a
claim of the patents; and
●
Propanc
shall take out with a reputable insurance company and maintain liability insurance coverage prior to the first human trials.
In
consideration of such assignment, we agreed to pay royalties of 2% of net revenues to Bath University. Additionally, we agreed
to pay 5% of each and every license agreement subscribed for. The contract is cancellable at any time by either party. To date,
no amounts are owed under the agreement.
We
continue to learn the properties of proenzymes with the long-term aim of screening new compounds for development. We anticipate
engaging in future discussions with several technology companies who are progressing new developments in the oncology field as
potential additions to our product line. Initially targeting the oncology sector, our focus is to identify and develop novel treatments
that are highly effective targeted therapies, with few side effects as a result of toxicity to healthy cells.
Intellectual
Property
We
have filed multiple patent applications relating to our lead product, PRP. The first application was filed in October 2010 in
each of the countries listed in the table below. This patent has been granted and remains in force in the United States,
Belgium, Czech Republic, Denmark, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein,
Turkey, United Kingdom, Australia, China, 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.
29
In
2016 and 2017 we filed other patent applications, as indicated below. Three applications were filed under 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
filed in April 2017 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, 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
USA
Two
divisional applications granted and also under examination in Mexico and China
2.
Proenzyme
composition
Australia
Granted
Nov-11-2016
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
Accepted
Jan-27-2017
Canada,
China, Europe, Hong Kong, Israel, Japan, Malaysia, New Zealand, Singapore and USA
Application
filed and pending
Jan-27-2017
4.
Composition
of proenzymes for cancer treatment
Australia,
China, Europe, Japan, and USA
Application
filed and pending
Apr-12-2017
Further
patent applications are expected to be filed to capture and protect additional patentable subject matter based on our field of
technology relating to pharmaceutical compositions of proenzymes for treating cancer.
30
The
basis of our intellectual property protection will be built around the following elements:
●
Method
of use : Understanding the mechanism of action of the PRP proenzyme formulations, enabling the identification of new molecular
targets, potential new therapeutic compounds and identification of new formulations that are adapted to enhance activity.
●
Formulation :
We have developed an enhanced formulation containing the proenzyme trypsinogen in combination with at least one of two types
of identified compounds considered effective for providing synergistic enhancement of the proenzyme-based formulations. A
patentability assessment, based on an international prior art search, has indicated that strong potential exists for successfully
obtaining patent claims covering the formulation.
●
Composition
of Matter : Synthetic recombinant proteins designed to improve the quality, safety and performance of proenzymes used in
the proposed formulations form part of the research and development program.
Regulatory
Matters
United
States
Government
oversight of the pharmaceutical industry is usually classified into pre-approval and post-approval categories. Most of the therapeutically
significant innovative products marketed today are the subject of New Drug Applications (“NDA”). Preapproval activities,
based on these detailed applications, are used to assure the product is safe and effective before marketing. In the United States,
The Center for Drug Evaluation and Research (“CDER”), is the FDA organization responsible for over-the-counter and
prescription drugs, including most biological therapeutics, and generic drugs.
Before
approval, the FDA may inspect and audit the development facilities, planned production facilities, clinical trials, institutional
review boards and laboratory facilities in which the product was tested in animals. After the product is approved and marketed,
the FDA uses different mechanisms for assuring that firms adhere to the terms and conditions of approval described in the application
and that the product is manufactured in a consistent and controlled manner. This is done by periodic unannounced inspections of
production and quality control facilities by FDA’s field investigators and analysts.
Federal
Food, Drug and Cosmetic Act and Public Health Service Act
Prescription
drug and biologic products are subject to extensive pre- and post-market regulation by the FDA, including regulations that govern
the testing, manufacturing, safety, efficacy, labelling, storage, record keeping, advertising and promotion of such products under
the Federal Food, Drug and Cosmetic Act, the Public Health Service Act, and their implementing regulations. The process of obtaining
FDA approval and achieving and maintaining compliance with applicable laws and regulations requires the expenditure of substantial
time and financial resources. Failure to comply with applicable FDA or other requirements may result in refusal to approve pending
applications, a clinical hold, warning letters, civil or criminal penalties, recall or seizure of products, partial or total suspension
of production or withdrawal of the product from the market. FDA approval is required before any new drug or biologic, including
a new use of a previously approved drug, can be marketed in the United States. All applications for FDA approval must contain,
among other things, information relating to safety and efficacy, stability, manufacturing, processing, packaging, labelling and
quality control.
New
Drug Applications (“NDAs”)
The
FDA’s NDA approval process generally involves:
●
Completion
of preclinical laboratory and animal testing in compliance with the FDA’s good laboratory practice, or GLP, regulations;
●
Submission
to the FDA of an investigational new drug (“IND”) application for human clinical testing, which must become effective
before human clinical trials may begin in the United States;
●
Performance
of adequate and well-controlled human clinical trials to establish the safety, purity and potency of the proposed product
for each intended use;
31
●
Satisfactory
completion of an FDA pre-approval inspection of the facility or facilities at which the product is manufactured to assess
compliance with the FDA’s “current good manufacturing practice” (“CGMP”) regulations; and
●
Submission
to and approval by the FDA of a NDA.
The
preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot
guarantee that any approvals for our product candidates will be granted on a timely basis, if at all. Preclinical tests include
laboratory evaluation of toxicity and immunogenicity in animals. The results of preclinical tests, together with manufacturing
information and analytical data, are submitted as part of an IND application to the FDA. The IND automatically becomes effective
30 days after receipt by the FDA, unless the FDA raises concerns or questions about the conduct of the clinical trial, including
concerns that human research subjects will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA
must resolve any outstanding concerns before clinical trials can begin. Our submission of an IND may not result in FDA authorization
to commence clinical trials. A separate submission to an existing IND must also be made for each successive clinical trial conducted
during product development. Further, an independent institutional review board (“IRB”) covering each medical center
proposing to conduct clinical trials must review and approve the plan for any clinical trial before it commences at that center
and it must monitor the study until completed. The FDA, the IRB or the sponsor may suspend a clinical trial at any time on various
grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Clinical testing
also must satisfy extensive “good clinical practice” (“GCP”) regulations, which include requirements that
all research subjects provide informed consent and that all clinical studies be conducted under the supervision of one or more
qualified investigators.
For
purposes of an NDA submission and approval, human clinical trials are typically conducted in the following sequential phases,
which may overlap:
●
Phase
I: Initially conducted in a limited population to test the product candidate for safety and dose tolerance;
●
Phase
II: Generally conducted in a limited patient population to identify possible adverse effects and safety risks, to determine
the initial efficacy of the product for specific targeted indications and to determine optimal dosage. A Phase IIa trial is
a non-pivotal, exploratory study that assesses biological activity as its primary endpoint. A Phase IIb trial is designed
as a definite dose finding study with efficacy as the primary endpoint. Multiple Phase II clinical trials may be conducted
by the sponsor to obtain information prior to beginning larger and more extensive Phase III clinical trials;
●
Phase
III: Commonly referred to as pivotal studies. When Phase II evaluations demonstrate that a dose range of the product is effective
and has an acceptable safety profile, Phase III clinical trials are undertaken in large patient populations to further evaluate
dosage, to provide substantial evidence of clinical efficacy and to further test for safety in an expanded and diverse patient
population at multiple, geographically-dispersed clinical trial sites. Generally, replicate evidence of safety and effectiveness
needs to be demonstrated in two adequate and well-controlled Phase III clinical trials of a product candidate for a specific
indication. These studies are intended to establish the overall risk/benefit ratio of the product and provide adequate basis
for product labelling; and
●
Phase
IV: In some cases, the FDA may condition approval of a NDA on the sponsor’s agreement to conduct additional clinical
trials to further assess the product’s safety, purity and potency after NDA approval. Such post-approval trials are
typically referred to as Phase IV clinical trials.
Progress
reports detailing the results of the clinical studies must be submitted at least annually to the FDA and safety reports must be
submitted to the FDA and the investigators for serious and unexpected adverse events. Concurrent with clinical studies, sponsors
usually complete additional animal studies and must also develop additional information about the product and finalize a process
for manufacturing the product in commercial quantities in accordance with CGMP requirements. The manufacturing process must be
capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop
methods for testing the identity, strength, quality and purity of the final product. Moreover, appropriate packaging must be selected
and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration
over its shelf life.
32
The
results of product development, preclinical studies and clinical trials, along with the aforementioned manufacturing information,
are submitted to the FDA as part of a NDA. NDA’s must also contain extensive manufacturing information. Under the Prescription
Drug User Fee Act (“PDUFA”), the FDA agrees to specific goals for NDA review time through a two-tiered classification
system, Standard Review and Priority Review. Standard Review is applied to products that offer at most, only minor improvement
over existing marketed therapies. Standard Review NDAs have a goal of being completed within a ten-month timeframe, although a
review can take significantly longer. A Priority Review designation is given to products that offer major advances in treatment,
or provide a treatment where no adequate therapy exists. A Priority Review takes the FDA six months to review a NDA. It is likely
that our product candidates will be granted Standard Reviews. The review process is often significantly extended by FDA requests
for additional information or clarification. The FDA may refer the application to an advisory committee for review, evaluation
and recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory
committee, but it generally follows such recommendations.
The
FDA may deny approval of a NDA if the applicable regulatory criteria are not satisfied, or it may require additional clinical
data or additional pivotal Phase III clinical trials. Even if such data is submitted, the FDA may ultimately decide that the NDA
does not satisfy the criteria for approval. Data from clinical trials is not always conclusive and the FDA may interpret data
differently than Propanc. Once issued, product approval may be withdrawn by the FDA if ongoing regulatory requirements are not
met or if safety problems occur after the product reaches the market. In addition, the FDA may require testing, including Phase
IV clinical trials, Risk Evaluation and Mitigation Strategies (“REMS”), and surveillance programs to monitor the effect
of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product
based on the results of these post-marketing programs. Products may be marketed only for the approved indications and in accordance
with the provisions of the approved label. Further, if there are any modifications to the drug, including changes in indications,
labelling or manufacturing processes or facilities, approval of a new or supplemental NDA may be required, which may involve conducting
additional preclinical studies and clinical trials.
Other
U.S. Regulatory Requirements
After
approval, products are subject to extensive continuing regulation by the FDA, which include company obligations to manufacture
products in accordance with GMP, maintain and provide to the FDA updated safety and efficacy information, report adverse experiences
with the product, keep certain records, submit periodic reports, obtain FDA approval of certain manufacturing or labeling changes
and comply with FDA promotion and advertising requirements and restrictions. Failure to meet these obligations can result in various
adverse consequences, both voluntary and FDA-imposed, including product recalls, withdrawal of approval, restrictions on marketing
and the imposition of civil fines and criminal penalties. In addition, later discovery of previously unknown safety or efficacy
issues may result in restrictions on the product, manufacturer or NDA holder.
Propanc,
and any manufacturers of our products, are required to comply with applicable FDA manufacturing requirements contained in the
FDA’s GMP regulations. GMP regulations require, among other things, quality control and quality assurance as well as the
corresponding maintenance of records and documentation. The manufacturing facilities for our products must meet GMP requirements
to the satisfaction of the FDA pursuant to a pre-approval inspection before Propanc can use them to manufacture products. Propanc
and any third-party manufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including
procedures and operations used in the testing and manufacture of our products to assess our compliance with applicable regulations.
With
respect to post-market product advertising and promotion, the FDA imposes complex regulations on entities that advertise and promote
pharmaceuticals, which include, among others, standards for direct-to-consumer advertising, promoting products for uses or in
patient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored
scientific and educational activities and promotional activities involving the Internet. Failure to comply with FDA requirements
can have negative consequences, including adverse publicity, enforcement letters from the FDA, mandated corrective advertising
or communications with doctors and civil or criminal penalties. Although physicians may prescribe legally available drugs for
off-label uses, manufacturers may not market or promote such off-label uses.
Changes
to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing
processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented.
A NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA
uses the same procedures and actions in reviewing NDA supplements as it does in reviewing a NDA.
Adverse
event reporting and submission of periodic reports is required following FDA approval of a NDA. The FDA also may require post-marketing
testing, known as Phase IV testing, risk mitigation strategies and surveillance to monitor the effects of an approved product
or to place conditions on an approval that could restrict the distribution or use of the product.
33
Orphan
Drug Designation
In
June 2017, we were notified by the FDA that PRP had been granted orphan drug designation for the treatment of pancreatic cancer.
Orphan drug designation may be granted by the FDA when a rare disease or condition is implicated and a potential treatment qualifies
under the Orphan Drug Act and applicable FDA regulations. This qualifies us for various developmental incentives, including protocol
assistance, the potential for research grants, the waiver of future application fees, and tax credits for clinical testing if
we choose to host future clinical trials in the United States.
In
October 2017, we submitted a request for a second orphan drug designation for PRP, this time for ovarian cancer.
On
November 2, 2017, we were notified by the FDA that our request was not granted. The Office of Orphan Products Development (“OOPD”)
stated that complete prevalence is used as a measure of disease in ovarian cancer, as this reflects the number of women who have
been diagnosed with disease and may be eligible for treatment with the proposed therapy. Therefore, on the date of the submission
of our application, the OOPD estimated that the prevalence of ovarian cancer was 228,110 cases. Since the prevalence exceeds the
threshold of 200,000 to qualify for orphan drug designation, they could not grant our request. We may consider resubmitting our
application if we can identify a suitable sub population in ovarian cancer, which may meet the target threshold.
European
Union
In
addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials,
commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain approval
of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or market our
product in those countries. The approval process varies from country to country and the time may differ than that required for
FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly
from country to country. Despite these differences, the clinical trials will be conducted according to international standards
such as Good Clinical Practice (GCP), Good Manufacturing Practice (GMP) and Good Laboratory Practice (GLP), which is recognized
by each foreign country under the International Conference of Harmonization (ICH) Guidelines. We will conduct our trials in each
foreign jurisdiction according to these standards, undertaking a First-In-Human (FIH) Phase I study in patients with advanced
solid tumors, evaluating the safety, pharmacokinetics, and anti-tumor efficacy of PRP. This will be followed by two Phase II studies
evaluating the efficacy and safety of PRP. To ensure harmonization between the jurisdictions, we intend to conduct regulatory
meetings in the country where trials are conducted, as well as the FDA and European Medicines Agency. A pre-IND (Investigational
New Drug) meeting will be held with the FDA once initial patient data has been collected from the FIH study to ensure acceptability
of future planned Phase II trials.
Under
European Union regulatory systems, we must submit and obtain authorization for a clinical trial application in each member state
in which we intend to conduct a clinical trial. After we have completed clinical trials, we must obtain marketing authorization
before it can market its product. We must submit applications for marketing authorizations for oncology products under a centralized
procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid for all European
Union member states. The European Medicines Agency (the “EMA”) is the agency responsible for the scientific evaluation
of medicines that are to be assessed via the centralized procedure.
34
UK
On June 23, 2016, the
UK government held a referendum to gauge voters’ support to remain or leave the European Union. The referendum resulted
in 51.9% of UK voters in favor of leaving the European Union, commonly referred to as “Brexit.” On March 29, 2017,
the UK invoked Article 50 of Lisbon Treaty to initiate complete withdrawal from the European Union, which was effected on January
31, 2020. The center for the EMA was based in London but the European Union has relocated the center
to The Netherlands.
The
impact of Brexit on the drug approval process in the UK is uncertain, which could significantly impact Propanc as we may elect
to conduct our clinical trials for PRP in the UK. Companies based in the UK and operating in the drug industry are urging the
European Union and the UK to reach an agreement to harmonize the regulatory process once the UK officially exits the European
Union. We hope to commence our Phase IIa trials in 2021, and we are hopeful that there will be greater clarity on the regulatory
process for drug approvals in UK in the near future.
Australia
In
Australia, the relevant regulatory body responsible for the pharmaceutical industry is the Therapeutics Goods Administration (the
“TGA”). Prescription medicines are regulated under the Therapeutic Goods Act 1989. Under the Therapeutic Goods Act,
the Therapeutic Goods Administration evaluates new products for quality, safety and efficacy before being approved for market
authorization, according to similar standards employed by the FDA and EMA in the United States and European Union, respectively.
However, receiving market authorization in one or two regions does not guarantee approval in another.
Third-Party
Payor Coverage and Reimbursement
Although
none of our product candidates have been commercialized for any indication, if they are approved for marketing, commercial success
of our product candidates will depend, in part, upon the availability of coverage and reimbursement from third-party payors at
the federal, state and private levels. In addition, in many countries outside the United States, a drug must be approved for reimbursement
before it can be approved for sale in that country.
Eligibility
for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research,
development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient
to cover costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting
in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing
payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare
programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where
they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment
limitations in setting their own reimbursement policies.
In
many countries outside the United States, a drug must be approved for reimbursement before it can be approved for sale in that
country. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval
by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA.
The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain
foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and may not receive
necessary approvals to commercialize our products in any foreign market.
35
Marketing
Approvals, Pricing and Reimbursement Regulations
The
regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to country.
In the United States, recently passed legislation may significantly change the approval requirements in ways that could involve
additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it
can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted.
In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial
approval is granted.
Government
authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications
they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment.
Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement
for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined
discounts from list prices and are challenging the prices charged for medical products.
Other
Regulations
We
are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing
practices, environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances. We may
incur significant costs to comply with such laws and regulations now or in the future.
Competition
The
biotechnology and pharmaceutical industries are characterized by continuing technological advancement and significant competition.
While we believe that our technology platforms, product candidates, know-how, experience and scientific resources provide us with
competitive advantages, we face competition from major pharmaceutical and biotechnology companies, academic institutions, governmental
agencies and public and private research institutions, among others. Any product candidates that we successfully develop and commercialize
will compete with existing therapies and new therapies that may become available in the future. Key product features that would
affect our ability to effectively compete with other therapeutics include the efficacy, safety and convenience of our products.
The level of generic competition and the availability of reimbursement from government and other third-party payers will also
significantly impact the pricing and competitiveness of our products. Our competitors also may obtain FDA or other regulatory
approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing
a strong market position before we are able to enter the market.
Many
of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical
testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Smaller or early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established
companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and
establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary
to, or necessary for, our programs.
Employees
As
of September 14, 2020, we have one full-time employee and two part-time employees. In addition to our employees, we engage
key consultants and utilize the services of independent contractors to perform various services on our behalf. Some of our executive
officers and directors are engaged in outside business activities that we do not believe conflict with our business. Over time,
we may be required to hire additional employees or engage independent contractors to execute various projects that are necessary
to grow and develop our business. These decisions will be made by our officers and directors, if and when appropriate.
Our
Corporate Information
Our
principal executive office is located at 302, 6 Butler Street, Camberwell, VIC, 3124 Australia.
Available
Information
Copies
of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other documents that we will
file with or furnish to the SEC will be available free of charge by sending a written request to our Corporate Secretary at our
corporate headquarters. Additionally, the documents we file with the SEC are or will be available free of charge at the SEC’s
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Other information on the operation of the Public Reference
Room may be obtained by calling the SEC at (800) SEC-0330. The SEC maintains a website that contains reports, proxy and information
statements and other information regarding registrants that file electronically with the SEC. The SEC’s website is www.sec.gov .
36
We
maintain a corporate website at www.propanc.com . You will be able to access our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, proxy statements and other information to be
filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as
reasonably practicable after such material will be electronically filed with, or furnished to, the SEC. The information contained
in, or that can be accessed through, our website is not part of this Annual Report.
Item
1A. Risk Factors.
You
should carefully consider the risks described below, together with all of the other information included in this Annual Report,
before deciding whether to invest in our common stock. The occurrence of any of the risks described below could have a material
adverse effect on our business, financial condition, results of operations and future growth prospects. In these circumstances,
the market price of our common stock could decline, and you may lose all or part of your investment.
RISKS
RELATED TO OUR FINANCIAL CONDITION AND OUR NEED FOR ADDITIONAL CAPITAL
Our
ability to continue as a going concern is in substantial doubt absent obtaining adequate new debt or equity financings.
We have concerns about
our ability to continue as a going concern based on the absence of revenues, recurring losses from operations and our need for
additional financing to fund all of our operations. Working capital limitations continue to impinge on our day-to-day operations,
thus contributing to continued operating losses. For the fiscal years ended June 30, 2020 and June 30, 2019, we had net losses
of $4,740,723 and $5,758,369, respectively and used cash in operations of $1,849,589 and $2,060,037. Further, as of June
30, 2020, we had $67,007 in cash and had an accumulated deficit and a stockholders’ deficit of $55,781,770
and $3,641,425 respectively.
Based
upon our current business plan, we will need considerable cash investments to have the opportunity to be successful. Our capital
requirements and cash needs are significant and continuing. We can provide no assurance that we will be able to generate a sufficient
amount of revenue, if any, from our business in order to achieve profitability. It is not possible at this time for us to predict
with assurance the potential success of our business. The revenue and income potential of our proposed business and operations
are unknown. If we cannot continue as a viable entity, we may be unable to continue our operations and you may lose some or all
of your investment in our common stock.
We
face risks related to Novel Coronavirus (COVID-19) which could significantly disrupt our research and development, operations,
sales, and financial results.
Our
business will be adversely impacted by the effects of the Novel Coronavirus (COVID-19). In addition to global macroeconomic effects,
the Novel Coronavirus (COVID-19) outbreak and any other related adverse public health developments will cause disruption to our
operations, research and development, and sales activities. Our third-party manufacturers, third-party distributors, and our customers
have been and will be disrupted by worker absenteeism, quarantines and restrictions on employees’ ability to work, office
and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related
restrictions. Depending on the magnitude of such effects on our activities or the operations of our third-party manufacturers
and third-party distributors, the supply of our products will be delayed, which could adversely affect our business, operations
and customer relationships. In addition, the Novel Coronavirus (COVID-19) or other disease outbreak will in the short-run and
may over the longer term adversely affect the economies and financial markets of many countries, resulting in an economic downturn
that will affect demand for our products and impact our operating results. There can be no assurance that any decrease in sales
resulting from the Novel Coronavirus (COVID-19) will be offset by increased sales in subsequent periods. Although the magnitude
of the impact of the Novel Coronavirus (COVID-19) outbreak on our business and operations remains uncertain, the continued spread
of the Novel Coronavirus (COVID-19) or the occurrence of other epidemics and the imposition of related public health measures
and travel and business restrictions will adversely impact our business, financial condition, operating results and cash flows.
In addition, we have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations,
or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop
and design our products in a timely manner or meet required milestones or customer commitments.
37
We
have incurred significant losses since our inception. We expect to incur significant losses for the foreseeable future and may
never achieve or maintain profitability.
Since
inception, we have incurred significant operating losses. Our net loss was $4,740,723 and $5,758,369, respectively, for
the fiscal years ended June 30, 2020 and June 30, 2019. As of June 30, 2020, we had a deficit accumulated of $55,781,770. To date,
we have not generated any revenues and have financed most of our operations with funds obtained from private financings.
Since
October 2007, we have devoted substantially all of our efforts to research and development of our product candidates, particularly
PRP, and efforts to protect our intellectual property. Most recently, from January-February 2016, and October 2016-April 2017,
we have contracted with third parties to perform a number of laboratory studies and dose range finding studies designed to examine
the anti-cancer effects of PRP and prepare for human clinical trials. Since mid-2017, we developed a suitable manufacturing process
for each active drug substance in the PRP formulation, capable of producing a full scale GMP manufacture of PRP for human trials.
We were granted Orphan Drug Designation status from the FDA for PRP for the treatment of pancreatic cancer. In March 2018, a scientific
advice meeting was conducted with the MHRA (Medicines and Healthcare Products Regulatory Agency) UK, to assist with preparation
of our first Clinical Trial Application (CTA). We expect that it will be many years, if ever, before we have a product candidate
ready for commercialization. We expect to incur significant expenses and increasing operating losses for the foreseeable future
if and as we progress PRP into clinical trials, continue our research and development, seek regulatory approvals, establish or
contract for a sales and marketing infrastructure, maintain and expand our intellectual property portfolio, and add personnel.
To
become profitable, we must develop and eventually commercialize PRP or some other product with significant market potential. This
will require us to successfully complete clinical trials, obtain market approval and market and sell PRP or whatever other product
that we obtain approval for. We might not succeed in any one or a number of these activities, and even if we do, we may never
generate revenues that are significant enough to achieve profitability. Our failure to become and remain profitable would decrease
our value and could impair our ability to raise capital, maintain our research and development efforts, expand our business or
continue our operations.
As
an early stage company, it may be difficult for you to evaluate the success of our business to date and to assess our future viability.
Despite
having been founded in 2007, we remain an early-stage company. We commenced active operations in the second half of 2010. Our
operations to date have been mainly limited to establishing our research programs, particularly PRP, building our intellectual
property portfolio and deepening our scientific understanding of our product development. We have not yet initiated, let alone
demonstrated any ability to successfully complete, any clinical trials, including large-scale, pivotal clinical trials, obtain
marketing approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales
and marketing activities necessary for successful product commercialization. It will take a number of years for PRP to be made
available for the treatment of cancer, if it ever is. Given our relatively short operating history compared to the timeline required
to fully develop a new drug, you are cautioned about making any predictions on our future success or viability based on our activities
or results to date. In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and
unknown factors. We will eventually need to transition from a company with a research focus to a company capable of supporting
commercial activities. We may not be successful in such a transition.
We
currently rely, and may continue to rely for the foreseeable future, on substantial debt financing that we are not able to repay
in cash.
In
order to maintain our operations, including our research and development efforts and our preclinical development of PRP, we have
over the last few years entered into a number of securities purchase agreements pursuant to which we issued convertible debt in
return for cash. We are not currently able to repay either the current principal or interest on this debt in cash. Our lenders,
therefore, can convert their debt into shares of our common stock, at a discount to current market prices and then attempt to
sell these shares on the open market in order to pay down their loans and receive a return on their investment. These financings
pose the risk that as these debts are converted, our stock price will reflect the reduced prices our lenders are willing to sell
their shares at, given the discount they have received. These financings contain no floor on the price our lenders can convert
their debt into shares of our common stock and they could conceivably reduce the price our common stock to near zero. These types
of financings negatively impact our balance sheet and the appeal of our common stock as an investment. While we are actively exploring
various alternatives to reduce if not eliminate this debt, for the foreseeable future we will continue to carry it on our balance
sheet, and we may have to enter into additional such financings in order to sustain our operations. As a result, the price of
our common stock and our market capitalization are subject to significant declines until our convertible debt is either refinanced
on a favorable basis or is eliminated.
38
As of June 30, 2020, the
total amount of debt outstanding under these convertible notes, including interest, is approximately $1,100,000 (not including
redemption premium). Please see the section captioned “Management’s Discussion of Financial Condition and Results
of Operations - Recent Developments” for further information
We
will continue to need substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay,
reduce or eliminate our product development programs or commercialization efforts.
We
expect our expenses to significantly increase in connection with our ongoing activities, particularly if we initiate clinical
trials of, and ultimately seek marketing approval for, PRP. In addition, even if we ultimately obtain marketing approval for PRP
or any other product candidate, we expect to incur significant commercialization expenses related to product sales, marketing,
manufacturing and distribution. We also hope to continue and expand our research and development activities. Accordingly, we will
need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital
when needed or on attractive terms, we would be forced to delay, reduce or eliminate our future commercialization efforts or any
research and development programs.
Our
future capital requirements will depend on many factors, including, among others, the scope, progress and, results of our potential
future clinical trials, the costs, timing and outcome of regulatory review of PRP, the costs of any future commercialization activities,
and the costs of preparing and filing future patent applications, if any. Accordingly, we will continue to rely on additional
financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or
at all. Even if we are able to enter into financing agreements, we may be forced to pay higher interest rates, accept default
provisions in financing agreements that we believe are overly punitive, make balloon payments as required, and, as noted below,
if we issue convertible debt the price of our common stock may well be negatively affected and our existing stockholders may suffer
dilution.
Raising
additional capital will cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our
technologies or product candidates.
Until
such time, if ever, as we can generate substantial product revenues, we expect to continue to finance our cash needs through a
combination of equity offerings and additional debt financings, and possibly also through future collaborations, strategic alliances
and licensing arrangements. To the extent that we raise additional capital through the sale of equity or debt securities, including
convertible debt securities, the ownership interest of our existing stockholders will be diluted upon conversion, and the terms
of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders.
Debt
financing, if available, may also involve agreements that include restrictive covenants limiting or restricting our ability to
take specific actions, such as merging with other companies or consummating certain changes of control, acquiring other companies,
engaging in new lines of business, incurring additional debt, making capital expenditures, making certain investments, paying
dividends, transferring or disposing of assets, amending certain material agreements, incurring additional indebtedness or enter
into various specified transactions. We therefore may not be able to engage in any of the foregoing transactions unless we obtain
the consent of the lender or terminate such debt agreements. Our debt agreements may also contain certain financial covenants,
including achieving certain milestones and may be secured by substantially all of our assets. In the event we enter into such
debt agreements, there is no guarantee that we will be able to generate sufficient cash flow or sales to pay the principal and
interest under our debt agreements or to satisfy all of the financial covenants.
If
we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have
to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant
licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings
when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts
or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
39
The
conversion of some or all of our currently outstanding convertible notes in shares of our common stock will dilute the ownership
interests of existing stockholders.
The
conversion of some or all of our currently outstanding convertible notes in shares of our common stock will dilute the ownership
interests of existing stockholders. As of June 30, 2020, we had 11 outstanding notes convertible into approximately 439,113,000
shares of our common stock (based on then applicable conversion prices). 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 us), and each note may not be converted during the first six-month period from the date of issuance. Any sales in the
public market of the common stock issuable upon such conversion or any anticipated conversion of our convertible notes into shares
of our common stock could adversely affect prevailing market prices of our common stock.
The
accounting method for convertible debt securities that may be settled in cash could have a material adverse effect on our reported
financial results.
Under
Financial Accounting Standards Board Accounting Standards Codification 470-20, Debt with Conversion and Other Options (“ASC
470-20”), we are required to separately account for the liability and equity components of our convertible notes because
they may be settled entirely or partially in cash upon conversion in a manner that reflects our economic interest cost. The effect
of ASC 470-20 on the accounting for our convertible notes is that the equity component is required to be included in the additional
paid-in capital section of stockholders’ deficit on our consolidated balance sheet, and the value of the equity component
would be treated as original issue discount for purposes of accounting for the debt component of our convertible notes. As a result,
we will be required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization
of the discounted carrying value of our convertible debt or notes to their face amount over the terms. We will report higher net
loss in our financial results in part because ASC 470-20 will require interest to include both the current period’s amortization
of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial
results, the trading price of our common stock and the trading price of our convertible notes.
In
addition, because our convertible notes may be settled entirely or partly in cash, under certain circumstances, these are currently
accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion are not included
in the calculation of diluted earnings per share except to the extent that the conversion value exceeds their principal amount.
Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of
shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued.
We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If
we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of our convertible notes,
then our diluted earnings per share would be adversely affected.
We
maintain our cash in Australian financial institutions that are not insured.
The
Company maintains its cash in banks and financial institutions in Australia. Bank deposits in Australian banks are uninsured.
The Company has not experienced any losses in such accounts through to date.
RISKS
RELATED TO THE DISCOVERY, DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCT CANDIDATES
Because
PRP remains in the early stages of development and may never become commercially viable, you may lose your investment.
At
present, our only product candidate, PRP, is still in preclinical development. While we are hopeful that the preclinical testing
we have completed will lead to our initiating human clinical trials in 2021, as noted elsewhere we expect that it will be several
years, at least, before PRP can be commercialized. Further, if clinical trials for PRP fail to produce statistically significant
results, we would likely be forced to either spend several more years in development attempting to correct whatever flaws were
identified in the trials, or we would have to abandon PRP altogether. Either of those contingencies, and especially the latter,
would dramatically increase the amount of time before we would be able to generate any product-related revenue, and we may well
be forced to cease operations. Under such circumstances, you may lose at least a portion of, and perhaps your entire, investment.
40
PRP
may cause undesirable side effects that could negatively impact its clinical trial results or limit its use, hindering further
development, subject us to possible product liability claims, and make it more difficult to commercialize PRP.
In
addition to the possibility that the clinical trials we hope to initiate for PRP could demonstrate a lack of efficacy, if we alternatively
identify adverse and undesirable side effects caused by it this will likely interrupt, delay or even halt our further development,
or possibly limit our planned therapeutic uses for it, and may even result in adverse regulatory action by the FDA or other regulatory
authorities.
Moreover,
this may subject us to product liability claims by the individuals enrolled in our clinical trials; while we intend to obtain
product liability insurance in connection with our clinical trials, it is possible that the potential liability of any claims
against us could exceed the maximum amount of this coverage, or at least increase our premiums. Either would result in an increase
in our operating expenses, in turn making it more difficult to complete our clinical development, or in the suspension or termination
of the clinical trial. Any negative information concerning PRP, however unrelated to its composition or method of use, could also
damage our chances to obtain regulatory approval.
Even
if we are able to complete PRP’s development and receive regulatory approvals, undesirable side effects could prevent us
from achieving or maintaining market acceptance of the product or substantially increase the costs and expenses of commercializing
it.
Because
successful development of our products is uncertain, our results of operations may be materially harmed.
Our
development of PRP and future product candidates is subject to the risks of failure inherent in the development of new pharmaceutical
products that are based on new technologies, including but not limited to delays in product development, clinical testing or manufacturing;
unplanned and higher expenditures; adverse findings relating to safety or efficacy; failure to receive regulatory approvals; the
emergence of superior or equivalent products; an inability by us or one of our collaborators to manufacture our product candidates
on a commercial scale on our own, or in collaboration with third parties; and, ultimately, a failure to achieve market acceptance.
Because
of these risks, our development efforts may not result in PRP, or any other product we attempt to develop, becoming commercially
viable. If even one aspect of these development efforts is not successfully completed, required regulatory approvals will not
be obtained, or if any approved products are not commercialized successfully, our business, financial condition and results of
operations will be materially harmed.
A
variety of factors, either alone or in concert with each other, could result in our clinical trials of PRP being delayed or unsuccessful.
While
we have conducted a variety of preclinical studies, which we have concluded provide evidence to support the potential therapeutic
utility of PRP, comprehensive human clinical trials in order to demonstrate the product’s safety, tolerability and efficacy
will now need to be completed. Clinical testing is expensive, difficult to design and implement, can take many years to complete
and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical
testing and even early clinical trials may not be predictive of the success of later clinical trials, and interim results of a
clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying
interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical
studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
41
Among
the numerous unforeseen events that may occur during, or as a result of, clinical trials that alone or in concert with each other
could either delay or prevent our ability to receive marketing approval or commercialize PRP are the following:
●
regulators
or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical
trial at a prospective trial site;
●
we
may have delays in reaching or fail to reach an agreement on acceptable clinical trial contracts or clinical trial protocols
with prospective trial sites;
●
as
noted previously, clinical trials of PRP may produce negative or inconclusive results, and we may decide, or regulators may
require us, to conduct additional clinical trials or abandon product development altogether;
●
the
number of patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may
be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate;
●
our
third-party contractors may fail to comply with regulatory requirements or fail to meet their contractual obligations to us
in a timely manner, or at all;
●
regulators
or institutional review boards may require that we or our investigators suspend or terminate clinical research for various
reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable
health risks;
●
the
cost of clinical trials may be greater than we anticipate;
●
the
supply or quality of PRP or other materials necessary to conduct its clinical trials may be insufficient or inadequate; and
●
PRP
may, as also noted above, have undesirable side effects or other unexpected characteristics, causing us or our investigators,
regulators or institutional review boards to suspend or terminate the trials.
If
we are required to conduct additional clinical trials or other testing of PRP beyond those that we currently contemplate, if we
are unable to successfully complete clinical trials of PRP or other testing, if the results of these trials or tests are not positive
or are only modestly positive or if there are safety concerns, we may:
●
be
delayed in obtaining marketing approval;
●
not
obtain marketing approval at all;
●
obtain
approval for indications or patient populations that are not as broad as intended or desired;
●
obtain
approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;
●
be
subject to additional post-marketing testing requirements; or
●
fail
to obtain that degree of market acceptance necessary for commercial success.
Any
delay in, or termination of, our clinical trials may result in increased development costs, which would very likely cause the
market price of our shares to decline and severely limit our ability to obtain additional financing and, ultimately, our ability
to commercialize our products and generate product revenues. This in turn would likely materially harm our business, financial
condition and operating results, and possibly lead us to cease operations.
If
we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market PRP in those jurisdictions.
We
intend to seek regulatory approval for PRP in the United Kingdom, Europe, Australia and/or other countries outside of the United
States and expect that these countries will be important markets for our product, if approved. Marketing our product in these
countries will require separate regulatory approvals in each market and compliance with numerous and varying regulatory requirements.
The regulations that apply to the conduct of clinical trials and approval procedures vary from country to country and may require
additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.
42
If,
in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell
and market PRP, we may not be successful in commercializing our product candidates if and when they are approved.
We
do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical
products. To achieve commercial success for PRP or any other approved product, we must either develop a sales and marketing organization
or outsource these functions to third parties. In the future, we may choose to build a focused sales and marketing infrastructure
to market or co-promote some of our product candidates if and when they are approved.
There
are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties
to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay
any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing
capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization
expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors
that may inhibit our efforts to commercialize our products on our own include:
●
our
inability to recruit and retain adequate numbers of effective sales and marketing personnel;
●
the
inability of sales personnel to obtain access to physicians or persuade an adequate number of physicians to prescribe any
future products;
●
the
lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to
companies with more extensive product lines; and
●
unforeseen
costs and expenses associated with creating an independent sales and marketing organization.
If
we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenues or the
profitability of these product revenues to us are likely to be lower than if we were to market and sell any products that we develop
ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product
candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties,
and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do
not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will
not be successful in commercializing PRP.
We
face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully
than we do.
The
development and commercialization of new drug products is highly competitive. We face competition with respect to our current
product candidate, and will face competition with respect to any product candidates that we may seek to develop or commercialize
in the future from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There
are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development
of products for the treatment of the disease indications for which we are developing our product candidates. Some of these competitive
products and therapies are based on scientific approaches that target and eradicate cancer stem cells to treat metastatic cancer.
Potential competitors also include academic institutions, government agencies and other public and private research organizations
that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing
and commercialization.
43
We
are developing PRP for the treatment of pancreatic, ovarian and colorectal cancer. There are a variety of available therapies
marketed for cancer. In many cases, these drugs are administered in combination to enhance efficacy. Some of these drugs are branded
and subject to patent protection, and others are available on a generic basis. Many of these approved drugs are well-established
therapies and are widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also
encourage the use of generic products. We expect that if our product candidate is approved, it will be priced at a significant
premium over competitive generic products. This may make it difficult for us to achieve our business strategy of using PRP in
combination with existing therapies or replacing existing therapies with PRP.
There
are also a number of products in clinical development by other parties to treat and prevent metastatic cancer. Our competitors
may develop products that are more effective, safer, more convenient or less costly than any that we are developing or that would
render our product candidate obsolete or non-competitive. In addition, our competitors may discover biomarkers that more efficiently
measure their effectiveness to treat and prevent metastatic cancer, which may give them a competitive advantage in developing
potential products. Our competitors may also obtain marketing approval from the FDA or other regulatory authorities for their
products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market
position before we are able to enter the market.
Most
of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical
testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions
in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number
of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining
qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials,
as well as in acquiring technologies complementary to, or necessary for, our programs. In addition, to the extent that product
or product candidates of our competitors demonstrate serious adverse side effects or are determined to be ineffective in clinical
trials, the development of our product candidates could be negatively impacted.
Even
if we are able to commercialize PRP, we will need to seek approval for reimbursement before it can be marketed, and it may become
subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would
harm our business.
The
regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to country.
In the United States, recently passed legislation may significantly change the approval requirements in ways that could involve
additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it
can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted.
In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial
approval is granted. As a result, we might obtain marketing approval for PRP in a particular country, but then be subject to price
regulations that delay our commercial launch of it, possibly for lengthy time periods, and negatively impact the revenues we are
able to generate from the sale of PRP in that country. Adverse pricing limitations may hinder our ability to recoup our investment
in PRP, even after it has obtained marketing approval.
Our
ability to commercialize PRP successfully also will depend in part on the extent to which reimbursement for it will be available
from government health administration authorities, private health insurers and other organizations. Government authorities and
third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay
for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government
authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular
medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from
list prices and are challenging the prices charged for medical products. We cannot be sure that reimbursement will be available
for PRP that we commercialize and, if reimbursement is available, the level of reimbursement. Reimbursement may impact the demand
for, or the price of, PRP. Obtaining reimbursement for it may be particularly difficult because of the higher prices often associated
with drugs administered under the supervision of a physician. If reimbursement is not available or is available only to limited
levels, we may not be able to successfully commercialize PRP.
44
There
may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes
for which the drug is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for
reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research,
development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient
to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical
setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into
existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government
healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries
where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy
and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable
payment rates from both government-funded and private payors for any approved products that we develop could have a material adverse
effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
RISKS
RELATED TO OUR DEPENDENCE ON THIRD PARTIES
We
will depend on collaborations with third parties for the development and commercialization of PRP and other product candidates,
and these collaborations may be unsuccessful.
We
currently seek third-party collaborators for the development and commercialization of PRP, contract manufacturers (CMOs), contract
research organizations (CROs), regulatory and development consultants, and hospitals for clinical trial sites. We intend to continue
to rely on third-party collaborators for current and future product candidates for the foreseeable future. Our likely collaborators
for any collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies
and biotechnology companies. If we do enter into any such arrangements with any third parties, we will likely have limited control
over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product
candidates. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully
perform the functions assigned to them in these arrangements.
Collaborations
involving our product candidates would pose the following risks to us:
●
collaborators
have significant discretion in determining the efforts and resources that they will apply to these collaborations;
●
collaborators
may not pursue development and commercialization of our product candidates or may elect not to continue or renew development
or commercialization programs based on clinical trial results, changes in the collaborator’s strategic focus or available
funding or external factors such as an acquisition that diverts resources or creates competing priorities;
●
collaborators
may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product
candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
●
collaborators
could independently develop, or develop with third parties, products that compete directly or indirectly with our products
or product candidates if the collaborators believe that competitive products are more likely to be successfully developed
or can be commercialized under terms that are more economically attractive than ours;
●
collaborators
with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution
of such product or products;
45
●
collaborators
may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way
as to invite litigation that could jeopardize or invalidate our proprietary information or expose us to potential litigation;
●
disputes
may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization
of our products or product candidates or that result in costly litigation or arbitration that diverts management attention
and resources; and
●
collaborations
may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization
of the applicable product candidates.
Collaboration
agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a
present or future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our
product development or commercialization program could be delayed, diminished or terminated.
If
we are not able to establish collaborations, we may have to alter our development and commercialization plans.
Our
potential commercialization of PRP will require substantial additional cash to fund clinical trial and other expenses. As noted
above, we may decide to collaborate with other pharmaceutical and biotechnology companies for the development and potential commercialization
of PRP and perhaps future product candidates as well.
We
face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for collaboration will
depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions
of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include
the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the
United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering
such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership
of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry
and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar
indications that may be available to collaborate on and whether such collaboration could be more attractive than the one with
us for our product candidate. Collaborations are complex and time-consuming to negotiate and document. In addition, there have
been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced
number of potential future collaborators.
We
may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may
have to curtail the development of such product candidate, reduce or delay its development program or one or more of our other
development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase
our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures
to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available
to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates
or bring them to market and generate product revenue.
We
currently contract with a third party for the manufacture of PRP and this third party may not perform satisfactorily or at all,
and our reliance on any third-party for the supply of PRP carries material risks.
We
do not have any manufacturing facilities or personnel. We currently obtain all of our supply of PRP for clinical development through
our Manufacturing Service Agreement (the “MSA”) with Amatsigroup, and we expect to continue to rely on Amatsigroup
for the manufacture of clinical and, if necessary, commercial quantities of PRP. We anticipate that our payments to Amatsigroup
under the MSA will range between $2.5 million and $5.0 million over three years, when the finished drug product is manufactured
and released for clinical trials. The Company has spent a total of $1,689,146 of costs to date under this contract of which
$49,854 was expensed in fiscal 2019, $701,973 in fiscal 2018 and $937,319 in fiscal 2017. The MSA shall continue for a term
of three years unless extended by mutual agreement in writing. Either party to the MSA has the right to terminate. The
MSA expired in 2019 and may be extended by mutual agreement in writing with a possible extension currently under consideration.
If we are not current with payments to Amatsigroup and Amatsigroup terminates the MSA or suspends its manufacturing services
to us, this adversely affect our supply of PRP and result in harm to our business and results of operations.
46
This
reliance on a third party increases the risk that we will not have sufficient quantities of PRP on hand at any given time, which
could delay, prevent or impair our development efforts. We do not currently have alternative arrangements in place to supply us
with PRP should Amatsigroup fail to perform for any reason. Amatsigroup may also fail to comply with current good manufacturing
practices (“cGMP”) regulations or similar regulatory requirements outside the United States. Any such failure to comply
with applicable regulations could result in sanctions being imposed on Amatsigroup, and possibly us as well. These sanctions could
include fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls
of PRP, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our supply of
PRP and result in harm to our business and results of operations.
PRP
and any other product that we may develop may compete with other product candidates and products for access to manufacturing facilities.
Although we believe that there are several potential alternative manufacturers who could manufacture PRP, we may incur added costs
and delays in identifying and qualifying any such replacement, as well as producing the drug product. In addition, we would then
have to enter into technical transfer agreements and share our know-how with the new third-party manufacturers, which can be time-consuming
and may result in delays.
Even
if we were able to quickly establish agreements with other third-party manufacturers, our general reliance on third-party manufacturers
entails many of the same risks as our agreement with Amatsigroup, including:
●
reliance
on the third party for regulatory compliance and quality assurance;
●
the
possible breach of the manufacturing agreement by the third party, including the misappropriation of our proprietary information,
trade secrets and know-how;
●
the
possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us; and
●
disruptions
to the operations of our manufacturers or suppliers caused by conditions unrelated to our business or operations, including
the bankruptcy of the manufacturer or supplier or a catastrophic event affecting our manufacturers or suppliers.
Our
current reliance on the services of Amatsigroup and current and anticipated future dependence upon others for the manufacture
of PRP may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval
on a timely and competitive basis.
RISKS
RELATED TO OUR INTELLECTUAL PROPERTY
If
we fail to comply with our obligations under any intellectual property licenses with third parties, we could lose license rights
that are important to our business.
We
are currently a party to a joint commercialization agreement with the University of Bath, and hope to enter into other license
agreements in the future. If we fail to comply with the obligations included in any future license we may enter into in the future,
such licensors may have the right to terminate these agreements, in which event we might not be able to market any product that
is covered by the agreements, or to convert the exclusive licenses to non-exclusive licenses, which could materially adversely
affect the value of the product candidate being developed under these license agreements. As a general matter, termination of
license agreements or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated
licenses with less favorable terms.
47
If
we are unable to obtain and maintain patent protection for our technology and products, or if any licensors are unable to obtain
and maintain patent protection for the technology or products that we may license from them in the future, or if the scope of
the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products
similar or identical to ours, and our ability to successfully commercialize our technology and products may be adversely affected.
We
have obtained patent protection for PRP in thirty-two countries and have a further thirty-three patent applications either pending
or under examination in major global jurisdictions. Our future success depends in large part on our and, as applicable, our licensors’,
ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology.
We cannot be certain that patents will be issued in those countries where our applications are still under examination.
The
patent process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent
applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects
of our research and development output before it is too late to obtain patent protection.
The
patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual
questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability
and commercial value of our patent rights are uncertain. Our pending and future patent applications may not result in patents
being issued which protect our technology or products or which effectively prevent others from commercializing competitive technologies
and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries
may diminish the value of our patents or narrow the scope of our patent protection.
The
laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries
in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions
are typically not published until 18 months after filing. Therefore, we cannot be certain that we or our licensors were the first
to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our licensors were
the first to file for patent protection of such inventions.
Assuming
the other requirements for patentability are met, in the United States, for patents that have an effective filing date prior to
March 15, 2013, the first to make the claimed invention is entitled to the patent, while outside the United States, the first
to file a patent application is entitled to the patent. In March 2013, the United States transitioned to a first inventor to file
system in which, assuming the other requirements for patentability are met, the first inventor to file a patent application will
be entitled to the patent. We may be subject to a third party preissuance submission of prior art to the U.S. Patent and Trademark
Office, or become involved in opposition, derivation, reexamination, inter parties review or interference proceedings challenging
our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could
reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete
directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing
third-party patent rights.
Even
if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful
protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors
may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing
manner.
The
issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents
may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity
or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to
stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection
of our technology and products. Given the amount of time required for the development, testing and regulatory review of new product
candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result,
our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products
similar or identical to ours.
48
We
may become involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.
Competitors
may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can
be expensive and time consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is invalid
or unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not
cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk
of being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection
with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure
during this type of litigation. In addition, our licensors may have rights to file and prosecute such claims and we are reliant
on them.
Third
parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which
would be uncertain and could have a material adverse effect on the success of our business.
Our
commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell PRP
and any other product candidates and use our proprietary technologies without infringing the proprietary rights of third parties.
We have yet to conduct comprehensive freedom-to-operate searches to determine whether our use of certain of the patent rights
owned by or licensed to us would infringe patents issued to third parties. We may become party to, or threatened with, future
adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including
interference proceedings before the U.S. Patent and Trademark Office and their European Union and global equivalents. Third parties
may assert infringement claims against us based on existing patents or patents that may be granted in the future. If we are found
to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party
to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on
commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our
competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing
the infringing technology or product. In addition, we could be found liable for monetary damages. A finding of infringement could
prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially
harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have
a similar negative impact on our business.
Intellectual
property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even
if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur
significant expenses, and could distract our personnel from their normal responsibilities. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors
perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation
or proceedings could substantially increase our operating losses and reduce the resources available for development activities
or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately
conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings
more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation
of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
49
If
we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In
addition to seeking patents for some of our technology and products, we also rely on trade secrets, including unpatented know-how,
technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in
part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees,
corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties.
We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these
efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets,
and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated
a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and
outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully
obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information
to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive
position would be harmed.
RISKS
RELATED TO REGULATORY APPROVAL OF OUR PRODUCT CANDIDATES AND OTHER LEGAL COMPLIANCE MATTERS
If
we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize
PRP, and our ability to generate revenue will be materially impaired.
PRP
and the activities associated with its development and commercialization, including design, testing, manufacture, safety, efficacy,
recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation
by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries. Failure to obtain
marketing approval for PRP will prevent us from commercializing it. We have not received approval to market PRP or any other product
candidate from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications
necessary to gain marketing approvals and expect to rely on third-party contract research organizations to assist us in this process.
Securing FDA approval requires the submission of extensive preclinical and clinical data and supporting information to the FDA
for each therapeutic indication to establish PRP’s safety and efficacy. Securing FDA approval also requires the submission
of information about the product manufacturing process to, and inspection of manufacturing facilities by, the FDA. PRP may not
be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other
characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.
The
process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional
clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including
the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development
period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted
product application, may cause delays in the approval or rejection of an application. The FDA has substantial discretion in the
approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require
additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical
and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we ultimately
obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially
viable.
If
we experience delays in obtaining approval or if we fail to obtain approval of PRP, the commercial prospects for PRP may be harmed
and our ability to generate revenues will be materially impaired.
Failure
to obtain marketing approval in international jurisdictions would prevent PRP from being marketed abroad.
We
intend to seek regulatory approval for PRP in a number of countries outside of the United States and expect that these countries
will be important markets for it, if approved. In order to market and sell our products in the European Union, the UK, Australia
and many other jurisdictions, we or our third-party collaborators must obtain separate marketing approvals and comply with numerous
and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time
required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process
outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries
outside the United States, it is required that the product be approved for reimbursement before the product can be approved for
sale in that country. We or these third parties may not obtain approvals from regulatory authorities outside the United States
on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions,
and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other
countries or jurisdictions or by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals
to commercialize our products in any market.
50
PRP
or any other product candidate for which we obtain marketing approval could be subject to restrictions or withdrawal from the
market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated
problems with our products, when and if any of them are approved.
PRP,
or any other product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical
data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review
by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information
and reports, registration and listing requirements, cGMP requirements relating to quality control, quality assurance and corresponding
maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even
if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for
which the product may be marketed or to the conditions of approval, or contain requirements for costly post-marketing testing
and surveillance to monitor the safety or efficacy of the product. The FDA closely regulates the post-approval marketing and promotion
of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved
labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we do not
market our products for their approved indications, we may be subject to enforcement action for off-label marketing.
In
addition, later discovery of previously unknown problems with our products, manufacturers or manufacturing processes, or failure
to comply with regulatory requirements, may yield various results, including:
●
restrictions
on such products, manufacturers or manufacturing processes;
●
restrictions
on the labeling or marketing of a product;
●
restrictions
on product distribution or use;
●
requirements
to conduct post-marketing clinical trials;
●
warning
or untitled letters;
●
withdrawal
of the products from the market;
●
refusal
to approve pending applications or supplements to approved applications that we submit;
●
recall
of products;
●
fines,
restitution or disgorgement of profits or revenue;
●
suspension
or withdrawal of marketing approvals;
●
refusal
to permit the import or export of our products;
●
product
seizure; or
●
injunctions
or the imposition of civil or criminal penalties.
51
Our
current attempts to both expand our patent protection and seek regulatory approvals from multiple countries, as well as our future
relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other laws
and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished
profits and future earnings.
As
we seek to obtain patent protection from multiple jurisdictions and eventually to seek marketing approval for PRP in those counties,
we are and will continue to be subject to the Foreign Corrupt Practices Act, which makes it illegal for any U.S. business, even
one like Propanc that is physically located in another country, to influence foreign officials with personal payments and rewards.
Moreover,
healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of PRP
and any other product candidate for which we obtain marketing approval. Our future arrangements with third-party payors and customers
may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business
or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing
approval. Restrictions under applicable federal and state healthcare laws and regulations, include the following:
●
the
federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering,
receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of
an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal
and state healthcare programs such as Medicare and Medicaid;
●
the
federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals
or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false
or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
●
the
federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic
and Clinical Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program
and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and
transmission of individually identifiable health information;
●
the
federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or
making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
●
the
federal transparency requirements under the Health Care Reform Law requires manufacturers of drugs, devices, biologics and
medical supplies to report to the Department of Health and Human Services information related to physician payments and other
transfers of value and physician ownership and investment interests; and
●
analogous
state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements
and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers,
and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance
guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers
to report information related to payments to physicians and other health care providers or marketing expenditures.
Efforts
to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve
substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with
current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us,
we may be subject to significant civil, criminal and administrative penalties, damages, fines and exclusion from government funded
healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians
or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they
may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
52
Recently
enacted and future legislation, particularly in the United States, may increase the difficulty and cost for us to obtain marketing
approval of and commercialize PRP and affect the prices we may obtain.
In
the United States and some foreign jurisdictions there have been many legislative and regulatory changes and proposed changes
regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate
post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval.
In
the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“Medicare Modernization Act”),
changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases
by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs.
In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class.
Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for
any approved products. While the Medicare Modernization Act applies only to drug benefits for Medicare beneficiaries, private
payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any
reduction in reimbursement that results from the Medicare Modernization Act may result in a similar reduction in payments from
private payors.
In
March 2010, President Obama signed into law the Patient Protection and Affordable Care Act (“Affordable Care Act”),
a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance
remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new
taxes and fees on the health industry and impose additional health policy reforms. Among other things, the Affordable Care Act
revised the definition of “average manufacturer price” for reporting purposes, which could increase the amount of
Medicaid drug rebates to states, and it imposed a significant annual fee on companies that manufacture or import branded prescription
drug products.
At
present, the future of the Affordable Care Act is the subject of significant debate in the U.S. Congress, with proposals to either
partially or entirely repeal it being considered and the likelihood that there will be a new law to replace it is uncertain. It
is not yet possible for us to determine the impact, if any, the enactment of any of these proposals will have on our future ability
to obtain approval of or commercialize PRP.
The
UK’s decision to leave the European Union could significantly increase regulatory burdens on obtaining approvals for PRP
within the UK.
On
March 29, 2017, the UK invoked Article 50 of Lisbon Treaty to initiate complete withdrawal from the European Union which was
effected on January 31, 2020, and therefore, the regulatory drug approval process in that country may be significantly different
from the current drug regulatory policies in the European Union. We currently are considering holding our clinical trials in the
UK, among other countries, and therefore this event could significantly impact our efforts to successfully bring PRP to market.
It is not yet possible for us to determine the impact of the UK’s withdrawal from the European Union, but any additional
costs or delays in obtaining approvals may hinder our ability to conduct clinical trials or market PRP in the UK.
RISKS
RELATING TO EMPLOYEE MATTERS AND MANAGING GROWTH
Our
future success depends on our ability to retain our chief executive officer and our chief scientific officer and, as we continue
to develop and grow as a company, to attract, retain and motivate qualified personnel.
We
are highly dependent on our management team, specifically Mr. James Nathanielsz, our Chief Executive Officer, Acting Chairman,
Secretary, Treasurer and a director; Dr. Julian Kenyon, our director who also serves as our chief scientific officer in
a non-executive officer capacity, and Mr Carlo Campiciano our Chief Financial Officer. While we have a current employment
agreement with Mr. Nathanielsz and a director agreement with Dr. Kenyon, both such employment agreement and director agreement
permit each of the respective parties thereto to terminate such agreements upon notice. If we lose this key employee and/or the
services of our other director, our business will suffer and we may have to cease operations.
53
Recruiting
and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our future
success, as we continue to develop PRP and attempt to grow as a company. We may not be able to attract and retain these personnel
on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We
also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In
addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research
and development and commercialization strategy. Our consultants and advisors, including our scientific co-founders, may be employed
by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit
their availability to us.
We
expect to expand our development, regulatory and future sales and marketing capabilities, and as a result, we may encounter difficulties
in managing our growth, which could disrupt our operations.
We
expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas
of drug development, regulatory affairs and sales and marketing. To manage our anticipated future growth, we must continue to
implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train
additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing
a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and
train additional qualified personnel. The physical expansion of our operations may lead to significant costs and may divert our
management and business development resources. Any inability to manage growth could delay the execution of our business plans
or disrupt our operations.
We
have identified material weaknesses in our internal control over financial reporting that, if not properly remediated, could result
in material misstatements in our consolidated financial statements in future periods.
In
connection with the audits of our consolidated financial statements for the fiscal years ended June 30, 2020 and 2019,
we identified certain deficiencies relating to our internal control over financial reporting that constitute a material weakness
under standards established by the Public Company Accounting Oversight Board (the “PCAOB”). The PCAOB defines a material
weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be
prevented or detected on a timely basis. A deficiency in internal control exists when the design or operation of a control does
not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements
on a timely basis.
The
following material weaknesses in our internal control over financial reporting continued to exist at June 30, 2020:
●
we
do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls
over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);
●
we
do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our limited
size and early stage nature of operations, segregation of all conflicting duties may not always be possible and may not be
economically feasible; however, to the extent possible, the initiation of transactions, the custody of assets and the recording
of transactions should be performed by separate individuals;
●
lack
of independent audit committee of our board of directors; and
●
insufficient
monitoring and review controls over the financial reporting closing process, including the lack of individuals with current
knowledge of U.S. GAAP.
54
We
outsource certain functions that would normally be performed by a principal financial officer to assist us in implementing
the necessary financial controls over the financial reporting and the utilization of internal management and staff to effectuate
these controls.
We
believe that these material weaknesses primarily relate, in part, to our lack of sufficient staff with appropriate training in
U.S. GAAP and U.S. Securities and Exchange Commission (the “SEC”) rules and regulations with respect to financial
reporting functions, and the lack of robust accounting systems, as well as the lack of sufficient resources to hire such staff
and implement these accounting systems.
We
plan to take a number of actions in the future to correct these material weaknesses including, but not limited to, establishing
an audit committee of our board of directors comprised of at least two independent directors, adding additional experienced
accounting and financial personnel and retaining third-party consultants to review our internal controls and recommend improvements,
subject to receiving sufficient additional capital. If we receive sufficient capital, we hope to increase the chief financial
officer’s role from part-time to full-time as the next step in building out our accounting department. We will
need to take additional measures to fully mitigate these issues, and the measures we have taken, and expect to take, to improve
our internal controls may not be sufficient to (1) address the issues identified, (2) ensure that our internal controls are effective
or (3) ensure that the identified material weakness or other material weaknesses will not result in a material misstatement of
our annual or interim financial statements. In addition, other material weaknesses may be identified in the future. If we are
unable to correct deficiencies in internal controls in a timely manner, our ability to record, process, summarize and report financial
information accurately and within the time periods specified in the rules and forms of the SEC will be adversely affected. This
failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence
in our reported financial information, subject us to civil and criminal investigations and penalties, and generally materially
and adversely impact our business and financial condition.
We
do not have any independent directors, which represents a potential conflict of interest, and helps create a material weakness
in our disclosure controls and procedures as well as our internal control over financial reporting.
We
do not have any independent directors, and no audit or compensation committees that in a larger company would be expected to be
comprised of independent directors. The functions of these committees, as well as other important functions that would normally
be carried out by independent directors, are performed by our directors, one of whom also serves as principal executive and financial
officer of the Company, resulting in an inherent and obvious conflict of interest.
Also,
our lack of independent directors and an audit committee necessitates that we do not currently have a director who qualifies as
an audit committee financial expert. This fact, together with our additional lack of in-house accounting personnel knowledgeable
in debt and equity transactions and our extremely small administrative staff that makes it impossible to segregate critical duties,
combine to create material weaknesses in both our disclosure controls and procedures and our internal control over financial reporting.
If
we fail to implement and maintain an effective system of internal control over financial reporting, we may not be able to accurately
report our financial results or prevent fraud.
Effective
internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate
disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls,
or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any
testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent
registered public accounting firm, if and when required, may reveal additional deficiencies in our internal controls over financial
reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our consolidated
financial statements or identify other areas for further attention or improvement. If in the future we identify other material
weaknesses in our internal control over financial reporting, including at some of our acquired companies, if we are unable to
comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is
effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of
our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial
reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by
the stock exchange on which our securities are then listed, the SEC, or other regulatory authorities, which could require additional
financial and management resources. Inferior internal controls could also cause investors to lose confidence in our reported financial
information, which could have a negative effect on the trading price of our common stock.
55
Additionally,
we currently do not have an internal audit group nor an audit committee of our board of directors, and we will eventually need
to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge
to have effective internal controls for financial reporting.
We
will continue to incur significant increased costs as a result of operating as a public company.
As
a public company, we will continue to incur significant legal, accounting and other expenses. For example, we are subject to mandatory
reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which require, among
other things, that we continue to file with the SEC annual, quarterly and current reports with respect to our business and financial
condition. We have incurred and will continue to incur costs associated with the preparation and filing of these SEC reports.
In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the “Dodd-Frank Act”) and national stock exchanges have imposed various other requirements
on public companies. Stockholder activism, the current political environment and the current high level of government intervention
and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance
costs and impact (in ways we cannot currently anticipate) the manner in which we operate our business. Our management and other
personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations
have and will continue to increase our legal and financial compliance costs and will make some activities more time-consuming
and costly. For example, we will incur additional expense to increase our director and officer liability insurance.
In
addition, if and when we cease to be a smaller reporting company and become subject to Section 404(b) of the Sarbanes-Oxley Act,
we will be required to furnish an attestation report on internal control over financial reporting issued by our independent registered
public accounting firm. To achieve compliance with Section 404 within the prescribed time period, we will continue to be engaged
in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In
this regard, we will need to dedicate substantially greater internal resources, potentially engage outside consultants and adopt
a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve
control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous
reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that our
independent registered public accounting firm, when required, will not be able to conclude within the prescribed timeframe that
our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction
in the financial markets due to a loss of confidence in the reliability of our financial statements.
Judgments
that our stockholders obtain against us may not be enforceable.
Substantially
all of our assets are located outside of the United States. In addition, our Chief Executive Officer, James Nathanielsz, and
our Chief Financial Officer, Carlo Campiciano, reside in Australia and our other director, Dr. Julian Kenyon, resides in the
UK. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It is uncertain
whether the courts of Australia or the UK would recognize or enforce judgments of the United States or state courts against us
or such persons predicated upon the civil liability provisions of the laws of the United States or any state.
56
RISKS
RELATED TO OUR COMMON STOCK
The
market price of our common stock may continue to be highly volatile, you may not be able to resell your shares at or above the
public offering price and you could lose all or part of your investment.
The
trading price of our common stock may continue to be highly volatile. Our stock price could continue to be subject to wide fluctuations
in response to a variety of factors, including the following:
●
actual
or anticipated results of our clinical trials;
●
actions
of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts
who follow our company, or our failure to meet these estimates or the expectations of investors;
●
issuance
of our equity and/or debt securities, or disclosure or announcements relating thereto;
●
additional
shares of our common stock being sold into the market by us or our existing stockholders and/or holders of convertible debt
or the anticipation of such sales;
●
stock
market valuations of companies in our industry;
●
price
and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;
●
lawsuits
threatened or filed against us;
●
regulatory
developments in the United States and foreign countries applicable to biotech and biopharma companies; and
●
other
events or factors, including those resulting from war or incidents of terrorism, or responses to these events.
The
stock markets in general, and the small-cap biotech market, in particular, have experienced extreme price and volume fluctuations
in recent years that have significantly affected the quoted prices of the securities of many companies, including companies in
our industry. The changes often appear to occur without regard to specific operating performance. The price of our shares of common
stock could fluctuate based upon factors that have little or nothing to do with our company and these fluctuations could materially
reduce our share price. Broad market, clinical trial results and industry factors may negatively affect the market price of our
common stock, regardless of our actual operating performance.
Currently
there is a limited public market for our common stock, and we cannot predict the future prices or the amount of liquidity of our
common stock.
Currently,
there is a limited public market for our common stock. Our common stock is quoted on the OTCQB under the symbol “PPCB.”
However, the OTCQB is not a liquid market in contrast to the major stock exchanges. We cannot assure you as to the liquidity or
the future market prices of our common stock if a market does develop. If an active market for our common stock does not develop,
the fair market value of our common stock could be materially adversely affected. We cannot predict the future prices of our common
stock.
The
designation of our common stock as a “penny stock” would limit the liquidity of our common stock.
Our
common stock may be deemed a “penny stock” (as that term is defined under Rule 3a51-1 of the Exchange Act) in any
market that may develop in the future. Generally, a “penny stock” is a common stock that is not listed on a securities
exchange and trades for less than $5.00 a share. Prices often are not available to buyers and sellers and the market may be very
limited. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document
prepared by the SEC. The document provides information about penny stocks and the nature and level of risks involved in investing
in the penny stock market. A broker must also provide purchasers with bid and offer quotations and information regarding broker
and salesperson compensation and make a written determination that the penny stock is a suitable investment for the purchaser
and obtain the purchaser’s written agreement to the purchase. Many brokers choose not to participate in penny stock transactions.
Because of the penny stock rules, there may be less trading activity in any market that develops for our common stock in the future
and stockholders are likely to have difficulty selling their shares.
57
Although
our common stock is currently quoted on the OTCQB, if we do not meet or comply with the OTCQB’s quotation requirements,
our shares would be downgraded from the OTCQB and would be traded on the OTC Pink (aka the Pink Sheets).
Although
our common stock is currently quoted on the OTCQB, to be eligible to continue to be quoted on the OTCQB, among other things, our
common stock is required to meet a minimum closing bid test of $0.01 per share on at least one of the prior thirty consecutive
calendar days. On July 2, 2020, the OTCQB informed us that the bid price for our common stock has closed below $0.01 for
more than 30 consecutive calendar days, and therefore, our common stock no longer meets the Standards for Continued Eligibility
for OTCQB. The OTCQB has granted us a cure period of 90 calendar days from such date (being September 29, 2020) during
which the minimum closing bid price of our common stock must be $0.01 or greater for ten consecutive trading days in order for
our common stock to continue trading on the OTCQB.
Our
management determined that a Reverse Stock Split would allow us to satisfy such minimum closing price requirement for the duration
of the required period. On August 22, 2020 we submitted a Form 14C to Finra to affect a 1:1000 reverse split of the Company’s
stock. The application has progressed and there are no matters outstanding that have not been addressed by the Company and as
such we believe that the application is in the final stages of approval by Finra. At the date of this report it is unlikely that
the reverse split will be affected by the deadline of September 29, 2020, as such it is likely that the Company’s stock
will be removed from the OTCQB marketplace and will move to the Pink market. In the event that the Company’s stock is removed
from the OTCQB market, the Company will reapply for quotation on the OTCQB market as soon as the reverse split is affected.
Because
our directors and officers currently and for the foreseeable future will continue to control our Company, it is not likely that
you will be able to elect directors or have any say in the policies of our Company.
Our
stockholders are not entitled to cumulative voting rights. Consequently, the election of directors and all other matters requiring
stockholder approval will be decided by majority vote. Our directors and officers beneficially own less than 1.0% of our outstanding
common stock. In addition, our chief executive officer and chief financial officer beneficially owns all of our preferred stock,
which entitles him, as a holder of Series A preferred stock, to vote on all matters submitted or required to be submitted to a
vote of the stockholders, except election and removal of directors, and each share entitles him to five hundred votes per share
of Series A preferred stock, and as a holder of Series B preferred stock, to voting power equivalent of the number of votes equal
to the total number of shares of common stock outstanding as of the record date for the determination of stockholders entitled
to vote at each meeting of our stockholders and entitled to vote on all matters submitted or required to be submitted to a vote
of our stockholders. Due to such a disproportionate voting power, new investors will not be able to affect a change in our business
or management, and therefore, stockholders would have limited recourse as a result of decisions made by management.
Moreover,
this preferred stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain
control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock
price.
Future
sales and issuances of our common stock or rights to purchase common stock could result in additional dilution of the percentage
ownership of our stockholders and could cause our stock price to decline.
We
are authorized to issue up to 1,000,000,000 shares of our common stock, $0.001 par value per share. We have the right to raise
additional capital or incur borrowings from third parties to finance our business. The board of directors has the authority, without
the consent of any of the shareholders, to cause us to issue more shares of our common stock and/or securities convertible into
our common stock. We will likely issue additional shares of our common stock and/or such securities in the future and such future
sales and issuances of our common stock or rights to purchase our common stock could result in substantial dilution to our existing
stockholders. We may sell common stock, convertible securities and other equity securities in one or more transactions at prices
and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, our stockholders
may be materially diluted. New investors in such subsequent transactions could gain rights, preferences and privileges senior
to those of holders of our common stock.
58
In
the future, we may issue additional preferred stock without the approval of our stockholders, which could make it more difficult
for a third party to acquire us and could depress our stock price.
We
are authorized to issue up to 1,500,005 shares of our preferred stock, par value $0.01 per share, having such rights, preferences
and privileges as are determined by our board of directors in their discretion. We have the right to raise additional capital
or incur borrowings from third parties to finance our business. The board of directors has the authority, without the consent
of any of the stockholders, to cause us to issue more shares of our preferred stock. Our board of directors may issue, and has
in the past issued, without a vote of our stockholders, one or more series of our preferred stock with such rights and preferences
as it determines. This could permit our board of directors to issue preferred stock to investors who support us and our management
and permit our management to retain control of our business. Additionally, issuance of preferred stock could block an acquisition
which could result in both a drop in our stock price and a decline in interest of our common stock.
Since
we intend to retain any earnings for development of our business for the foreseeable future, you will likely not receive any dividends
for the foreseeable future, and capital appreciation, if any, will be the source of gain for our stockholders.
We
have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future
earnings to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common
stock in the foreseeable future. As a result, capital appreciation, if any, of our common stock will be the sole source of gain
for our stockholders for the foreseeable future.
Our
ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
Section
382 (“Section 382”) of the Internal Revenue Code of 1986, as amended (the “Code”), contains rules that
limit the ability of a company that undergoes an ownership change to utilize its net operating losses (“NOLs”) and
tax credits existing as of the date of such ownership change. Under the rules, such an ownership change is generally any change
in ownership of more than 50% of a company’s stock within a rolling three-year period. The rules generally operate by focusing
on changes in ownership among stockholders considered by the rules as owning, directly or indirectly, 5% or more of the stock
of a company and any change in ownership arising from new issuances of stock by the company. As a result of this Section 382 limitation,
any ownership changes as defined by Section 382 may limit the amount of NOL carryforwards that could be utilized annually to offset
future taxable income.
As
a smaller reporting company, we are subject to scaled disclosure requirements that may make it more challenging for investors
to analyze our results of operations and financial prospects.
As
a “smaller reporting company,” we (i) are able to provide simplified executive compensation disclosures in our filings,
(ii) are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting
firms provide an attestation report on the effectiveness of internal control over financial reporting and (iii) have certain other
decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial
statements in annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and
financial prospects.
We will remain a smaller
reporting company until we have a public float of $250 million held by non-affiliates or our annual revenues are
greater than $100 million.
***
The
risks above do not necessarily comprise of all those associated with an investment in our Company. This Annual Report contains
forward looking statements that involve unknown risks, uncertainties and other factors that may cause our actual results, financial
condition, performance or achievements to be materially different from any future results, performance or achievements expressed
or implied by such forward looking statements. Factors that might cause such a difference include, but are not limited to, those
set out above.
59
Item
1B. Unresolved Staff Comments.
None.
Item
2. Properties.
Our
principal executive office is located at 302, 6 Butler Street, Camberwell, VIC, 3124 Australia, which we lease from Horizon Pty
Ltd., a related party, of which Mr. Nathanielsz, our chief executive officer, chief financial officer and a director, and his
wife are owners and directors. The lease has a five-year term commencing May 5, 2016, and we are currently obligated
to pay $3,606 AUD or $2,431 USD (depending on exchange rate), inclusive of tax, in rent per month
Item
3. Legal Proceedings.
A
complaint against us, dated September 26, 2019, has been filed by Foley Shechter Ablovatskiy (“Foley Shechter”), our
former counsel, seeking $151,031 in legal fees, in addition to interest and costs of suit. The Company believes these claims to
be unfounded and is vigorously defending itself. To that end, on November 20, 2019 the Company filed a motion to dismiss certain
counts of the complaint, with prejudice. That motion remains pending with the Supreme Court of the State of New York, County of
New York. Oral argument is scheduled for November 5, 2020. Upon resolution of the motion, the Company shall file an answer, together
with affirmative defences and counterclaims. The counterclaims shall include, without limitation, malpractice claims, arising
out of Foley Shechter’s grossly negligent mishandling of certain transactions and excessive billing related thereto. Certain
amounts related to this claim are included in accounts payable and accrued expenses in the accompanying Financial Statements.
If our motion to dismiss is granted, our potential liability would be reduced to $51,031 plus interest and attorney’s fees
Regal Consulting,
LLC (“Regal”) initiated litigation against the Company in Clark County District Court, Nevada. Regal is demanding
approximately $400,000 and 60,000 shares of the Company’s common stock as payment for services that Regal purports to have
performed. Regal additionally claims that $106,500 remains due on a Convertible Note executed by the Company in May of 2017
(the “2017 Note”), and asserts that it is owed in excess of $100,000 in penalties in connection with the Company’s
refusal to honor certain Conversion Notices. The
Company filed an Answer and Counterclaim, denying liability and alleging that Regal procured by fraud the Company’s execution
of various consulting agreements and additionally failed to provide the consulting services contemplated by said agreements.
The
discovery process is ongoing. In addition, the parties have agreed to mediate their dispute and are in the process of selecting
a mediator and scheduling their mediation.
IRS
Liability
As
part of its requirement for having a foreign operating subsidiary, the Company’s parent U.S. entity is required to file
an informational Form 5471 to the Internal Revenue Service (the “IRS”), which is a form that explains the nature of
the relationship between the foreign subsidiary and the parent company. From 2012 through the 2014, the Company did not file this
form in a timely manner. As a result of the non-timely filings, the Company incurred a penalty from the IRS in the amount of $10,000
per year, or $30,000 in total, plus accrued interest, such penalty and interest having been accrued and is included in the Accrued
expenses and other payable figure in the Balance Sheet. The Company recorded the penalties for all three years during the year
ended June 30, 2018 and is negotiating a payment plan. The Company is current on all subsequent filings.
In
addition to the above, from time to time, we may be involved in litigation in the ordinary course of business. Other than as set
forth above, we are not currently involved in any litigation that we believe could have a material adverse effect on our financial
condition or results of operations. Other than as set forth above, to our knowledge, there is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to
the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting our Company, our common stock,
any of our subsidiaries or any of our subsidiaries’ officers or directors in their capacities as such, in which an adverse
decision could have a material adverse effect.
Item
4. Mine Safety Disclosures.
Not
applicable.
60
PART II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market
Information
Our
common stock is quoted under the ticker symbol “PPCB” on the OTCQB. Only a limited market exists for our common stock.
There is no assurance that a regular trading market will develop, or if developed, that it will be sustained. Therefore, a stockholder
may be unable to resell his securities in our Company.
On
September 14, 2020, the last reported sales price per share of our common stock on the OTCQB was $0.0019.
Penny
Stock
The
SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are
generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such
securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature
and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of
the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect
to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description
of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;
(d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure
document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including
language, type size and format, as the SEC shall require by rule or regulation.
The
broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations
for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares
to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for
such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.
In
addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the
broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive
the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions
involving penny stocks, and a signed and dated copy of a written suitability statement.
These
disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may
have difficulty selling our securities.
Number
of Holders
As of September 28, 2020,
we had 74 record holders of our common stock holding 688,670,618 shares,
one holder of our Series A Preferred Stock holding 500,000 shares and one holder of our Series B Preferred Stock holding one share.
61
Dividends
We
have not paid any cash dividends to our stockholders. The declaration of any future cash dividends is at the discretion of our
Board and depends upon our earnings, if any, our capital requirements and financial position, and general economic conditions.
It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any,
in our business operations.
Recent
Sales of Unregistered Securities
There
were no unregistered sales of the Company’s equity securities during the year ended June 30, 2020 that were not previously
disclosed in a Current Report on Form 8-K or Quarterly Report on Form 10-Q.
Issuance
of Shares of Common Stock upon Conversion
Fiscal
Year 2017
During
our first quarter ended September 30, 2016, we issued 124 shares of our common stock at an average conversion price of $1,240
as a result of the conversion of principal and interest in the aggregate amount of $153,610 underlying certain convertible notes
converted during such period.
During
our second quarter ended December 31, 2016, we issued 511 shares of our common stock at an average conversion price of $865 as
a result of the conversion of principal and interest in the aggregate amount of $424,374 underlying certain convertible notes
converted during such period.
During
our third quarter ended March 31, 2017, we issued 457 shares of our common stock at an average conversion price of $760 as a result
of the conversion of principal and interest in the aggregate amount of $356,257 underlying certain convertible notes converted
during such period.
62
During
our fourth quarter ended June 30, 2017, we issued 1,378 shares of our common stock at an average conversion price of $345 as a
result of the conversion of principal and interest in the aggregate amount of $472,495 underlying certain convertible notes converted
during such period.
Fiscal
Year 2018
During
our first quarter ended September 30, 2017, we issued 3,536 shares of our common stock at an average conversion price of $135
as a result of the conversion of principal and interest in the aggregate amount of $432,791 underlying certain convertible notes
converted during such period.
During
our second quarter ended December 31, 2017, we issued 22,664 shares of our common stock at an average conversion price of $45
as a result of the conversion of principal and interest in the aggregate amount of $945,137 underlying certain convertible notes
converted during such period.
During
our third quarter ended March 31, 2018, we issued 24,845 shares of our common stock at an average conversion price of $35 as a
result of the conversion of principal and interest in the aggregate amount of $796,772 underlying certain convertible notes converted
during such period.
During
our fourth quarter ended June 30, 2018, we issued 30,750 shares of our common stock at an average conversion price of $20 as a
result of the conversion of principal and interest in the aggregate amount of $595,488 underlying certain convertible notes converted
during such period.
Fiscal
Year 2019
During
our first quarter ended September 30, 2018, we issued 258,285 shares of our common stock at an average conversion price of $5
as a result of the conversion of principal and interest in the aggregate amount of $1,413,317 underlying certain convertible notes
converted during such period.
During
our second quarter ended December 31, 2018, we issued 127,684 shares of our common stock at an average conversion price of $10
as a result of the conversion of principal and interest in the aggregate amount of $1,095,100 underlying certain outstanding convertible
notes converted during such period.
During
our third quarter ended March 31, 2019, we issued 140,673 shares of our common stock at an average conversion price of $4.20,
as a result of the conversion of principal and interest in the aggregate amount of $583,331 underlying certain outstanding convertible
notes converted during such period.
During
our fourth quarter ended June 30, 2019, we issued 177,615 shares of our common stock at an average conversion price of $1.46,
as a result of the conversion of principal and interest in the aggregate amount of $259,034 underlying certain outstanding convertible
notes converted during such period.
We
had 3,409,692 shares of our common stock reserved for future issuances based on lender note conversion requirements pursuant to
underlying financing documents at June 30, 2019.
Fiscal
Year 2020
During
our first quarter ended September 30, 2019, we issued 181,939 shares of our common stock at an average conversion price of $0.68
as a result of the conversion of principal and interest in the aggregate amount of $123,712 underlying certain convertible
notes converted during such period.
During
our second quarter ended December 31, 2012, we issued 1,064,920 shares of our common stock at an average conversion price of $0.206
as a result of the conversion of principal and interest in the aggregate amount of $219,466 underlying certain outstanding convertible
notes converted during such period.
During
our third quarter ended March 31, 2020, we issued 16,096,509 shares of our common stock at an average conversion price of $0.053,
as a result of the conversion of principal and interest in the aggregate amount of $856,338 underlying certain outstanding convertible
notes converted during such period.
63
During
our fourth quarter ended June 30, 2020, we issued 230,275,879 shares of our common stock at an average conversion price of $0.004,
as a result of the conversion of principal and interest in the aggregate amount of $925,658 underlying certain outstanding convertible
notes converted during such period.
We
had 735,747,157 shares of our common stock reserved for future issuances based on lender note conversion requirements pursuant
to underlying financing documents at June 30, 2020.
Other
Issuance of Shares of Common Stock
On
October 5, 2018, we issued 7,701 shares of our common stock to L2 Capital as the commitment fee under the L2 Equity Purchase Agreement.
On
July 19, 2019, we issued 20,000 shares of our common stock to Regal Consulting LLC for services rendered under a Consulting Agreement
entered into between the Company and Regal Consulting LLC.
On
March 3, 2020 we issued 150,000 shares of our common stock to Sylva International LLC for services rendered under a Consulting
Agreement entered into between the Company and Sylva International LLC.
On
April 6, 2020 we issued 804,518 shares of our common stock to Ionic Ventures LLC pursuant to a Securities Purchase Agreement.
On
April 8, 2020 we issued 1,151,682 shares of our common stock to Sylva International LLC for services rendered under a Consulting
Agreement entered into between the Company and Sylva International LLC.
On
June 26, 2020 we issued 7,406,892 shares of our common stock to Sylva International LLC for services rendered under a Consulting
Agreement entered into between the Company and Sylva International LLC.
Issuance
of Restricted Stock Units
On
May 14, 2019, our board of directors approved a grant of an aggregate of 78,000 restricted stock units (“RSUs”) to
Mr. Nathanielsz, our Chief Executive Officer, Chairman, acting Chief Financial Officer and a director. 39,000 of such RSUs shall
vest on the one-year anniversary of the date of the grant, subject to Mr. Nathanielsz being employed by us on such vesting date.
The remaining 39,000 RSUs shall vest based on the Company achieving certain milestones as set forth in Mr. Nathanielsz’s
Amended and Restated Employment Agreement and summarized elsewhere in this Annual Report. The fair value of the granted RSUs at
such grant date was $4.25 per RSU or $331,500 in total based on the closing price of the shares of our common stock on the date
of the grant. On May 14, 2019, our board of directors also approved a grant of an aggregate of 39,000 RSUs to Dr. Kenyon, our
Chief Scientific Officer and a director. 19,500 of such RSUs shall vest on the one-year anniversary of the date of the grant,
subject to Dr. Kenyon being employed by us on such vesting date. The remaining 19,500 RSUs shall vest based on the Company achieving
certain milestones as set forth in Dr. Kenyon’s Amended and Restated Services Agreement and summarized elsewhere in this
Annual Report. The fair value of the granted RSUs at such grant date was $4.25 per RSU or $165,750 in total based on the closing
price of the shares of our common stock on the date of the grant.
Issuance
of Options
As
of June 30, 2020, the Company had outstanding agreements to grant options to purchase 59,644 shares of its common
stock, with a weighted average exercise price per share of $76.37.
On
May 14, 2019, our board of directors approved a grant of 39,000 stock options to Mr. Nathanielsz, with an exercise price of $4.675
per share, which shall vest annually over a period of three years from the date of the grant, provided, that on each such vesting
date Mr. Nathanielsz is employed by us and subject to the other provisions of his Amended and Restated Employment Agreement. On
May 14, 2019, our board of directors also approved a grant of 19,500 stock options to Dr. Kenyon, with an exercise price of $4.25
per share, which shall vest annually over a period of three years from the date of the grant, provided, that on each such vesting
date Dr. Kenyon is employed by us and subject to the other provisions of his Amended and Restated Services Agreement.
64
On
April 14, 2016, our board of directors approved a grant of 572 stock options, with an exercise price of $3,750 (market value of
the shares of our common stock on such grant date), to each of Mr. Nathanielsz, our Chief Executive Officer, Chief Financial Officer
and a director, and Dr. Kenyon, our non-executive director. 191 of such options vested on such grant date and expire on April
14, 2021, 191 of such options vested on April 14, 2017 (first anniversary of such grant date) and expire on April 14, 2021 and
191 of such options vested on April 14, 2018 (second anniversary of such grant date) and expire on April 14, 2021. The fair value
of each grant of the 572 options at such grant date was $1,962,440 (aggregate total of $3,924,880).
No
stock options were issued during the fiscal year ended June 30, 2020.
Issuance
of Warrants
In
connection with the consulting agreement, dated May 7, 2015, we issued to a consultant 5-year warrants to purchase 27 shares of
our common with an exercise price of $3,750 per share.
In
connection with the consulting agreement, dated May 21, 2015, we issued to a consultant 5-year warrants to purchase 8 shares of
our common stock with an exercise price of $8,750 per share.
On
October 28, 2015, pursuant to a convertible debenture, we issued 4-year warrants to purchase 210 shares of our common stock with
an exercise price of $75,000 per share.
In
connection with the consulting agreement, dated November 11, 2015, on February 22, 2016, we issued to a consultant 5-year warrants
to purchase 32 shares of our common stock with an exercise price of $5,625 per share.
On
July 8, 2016, the 2015 Warrant to purchase 210 shares of our common stock issued to Delafield Limited Investments (“Delafield”)
was fully exercised at a price of $1,500 per share for a total of $314,286 in connection with the Letter Agreement, dated July
1, 2016, entered into with Delafield.
On
August 3, 2016, pursuant to the Letter Agreement, dated August 3, 2016 (the “August Letter Agreement”), entered into
with Delafield we issued warrants to purchase 1,920 shares of our common stock. 1,600 of these warrants had exercise prices ranging
from $1,500 to $2,500 per share and expired five months from the date of issuance. 320 of these warrants had an exercise price
of $12,500 per share and expired two years from the date of issuance. These warrants were subsequently cancelled.
On
August 18, 2016, pursuant to the August Letter Agreement, warrants to purchase 100 shares of our common stock issued to Delafield
were exercised at a price of $1,500 per share under the first tranche of the Five Month Warrant or $150,000 in the aggregate.
These shares were subsequently cancelled.
On
November 9, 2016, we entered into an agreement (the “November Agreement”) to adjust the exercise price of a warrant,
issued on September 30, 2013, to purchase 24 shares of our common stock. Under the terms of the November Agreement, the exercise
price for the shares underlying the warrant was reduced to $1,440 per share. The November Agreement did not affect the remaining
terms of the warrant.
On
December 12, 2016, pursuant to the December Letter Agreement, dated December 2, 2016, entered into with Delafield, we issued a
2-year warrant to purchase 208 shares of our common stock with an exercise price of $6,250 per share.
As
of June 30, 2019, there were 59 warrants outstanding and exercisable with expiration dates commencing May 2020 and continuing
through November 2020, with a weighted average exercise price per share of $4,765.
On
August 30, 2019, pursuant to a Securities Purchase Agreement, we issued to Auctus Fund LLC (i) a Common Stock Purchase Warrant
permitting the holder to purchase 450,000 shares of common stock of the Company for an exercise price of $2.25, (ii) a Common
Stock Purchase Warrant permitting the holder to purchase 300,000 shares of common stock of the Company for an exercise price of
$3.33, and (iii) a Common Stock Purchase Warrant permitting the holder to purchase 225,000 shares of common stock of the Company
for an exercise price of $4.50.
65
On
September 10, 2019, the Company entered into an agreement with a certain consultant to provide services over a three-month period
beginning September 10, 2019 and ending December 10, 2019 in exchange for 1,000,000 warrants to purchase the Company’s common
stock at $2.00 per share with an expiry date of September 10, 2022. The Fair Market Value of the warrants was $984,810 on the
date of grant as calculated under the Black Scholes Option Pricing model. The Company recorded $984,810 of share based compensation
expenses with respect to the grant of such warrants during the six months ended December 31, 2019.
On
March 30, 2020, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) whereby
an investor (the “Investor”) purchased from the Company, 7,500,000 units (the “Units”), each consisting
of (i) 1.5 shares of the Company’s common stock (the “Common Stock”), or pre-funded warrants (the “Prefunded
Warrants”) and (ii) 1.5 warrants to purchase one share of Common Stock (“Series A Warrants”, and collectively
with the Common Stock the “Units”). In addition to the Units, the Investor was issued 63,750,000 warrants to purchase
one share of Common Stock (the “Series B Warrants”) and an additional 63,750,000 warrants to purchase one share of
Common Stock, subject to a vesting schedule (the “Series C Warrants” and, together with the Prefunded Warrants, the
Series A Warrants, and the Series B Warrants, the “Warrants”). The aggregate purchase price for the Units, the Series
A Warrants, the Series B Warrants and the Series C Warrants of $450,000 was paid at closing (the “Purchase Price”).
The 11,250,000 shares of Common Stock underlying the Units issuable at closing of the Securities Purchase Agreement are comprised
of 804,518 shares of restricted Common Stock and 10,445,482 Prefunded Warrants.
As
of June 30, 2020, there were 151,170,514 warrants outstanding and exercisable with expiration dates commencing August 2020
and continuing through August 2024, with a weighted average exercise price per share of $0.15.
Except
as otherwise noted, the securities in the transactions describe above were sold in reliance on the exemption from registration
provided in Section 4(a)(2) of the Securities Act for transactions not involving any public offering. Each of the persons acquiring
the foregoing securities was an accredited investor (as defined in Rule 501(a) of Regulation D) and confirmed the foregoing and
acknowledged, in writing, that the securities must be acquired and held for investment. All certificates evidencing the shares
sold bore a restrictive legend. No underwriter participated in the offer and sale of these securities, and no commission or other
remuneration was paid or given directly or indirectly in connection therewith. The proceeds from these sales were used for general
corporate purposes.
Item
6. Selected Financial Data.
Not
applicable to smaller reporting companies.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You
should read the following discussion and analysis of our business and results of operations in conjunction with the information
set forth under Part I, Item 1A “Risks Factors,” and our consolidated financial statements and notes thereto appearing
under Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report. Our discussion includes
forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives,
expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors. See “Forward-Looking Statements” on page 3 of this Annual Report. As
used herein, references to the “Company,” “Propanc,” “we,” “our,” and “us”
refer to Propanc Biopharma, Inc. and its consolidated subsidiary, unless otherwise indicated.
U.S.
Dollars are denoted herein by “USD,” “$” and “dollars”.
Overview
We
were incorporated in the state of Delaware as Propanc Health Group Corporation on November 23, 2010. In January 2011, to reorganize
our Company, we acquired all of the outstanding shares of Propanc PTY LTD, an Australian corporation, on a one-for-one basis and
Propanc PTY LTD became our wholly-owned subsidiary. Effective April 20, 2017, we changed our name to “Propanc Biopharma,
Inc.” to better reflect our current stage of operations and development.
66
We
are a development-stage healthcare company that is currently focused on developing new cancer treatments for patients suffering
from pancreatic, ovarian and colorectal cancer. Utilizing our scientific and oncology consultants, we have developed a rational,
composite formulation of anti-cancer compounds, which together exert a number of effects designed to control or prevent tumors
from recurring and spreading through the body. Our lead product candidate, PRP, is a variation upon our novel formulation and
involves pro-enzymes, the inactive precursors of enzymes.
As
a result of positive early indications of the anti-cancer effects of our technology over the last 12-24 months we have conducted
successful pre-clinical studies on PRP and also commenced preparation for a clinical study in advanced cancer patients. Subject
to us receiving sufficient financing, we plan to begin our Investigational Medicinal Product Dossier, study proposal and Investigator’s
Brochure in the second half of 2020 calendar year. Our plan is to then commence our study preparation process with the contract
research organization, analytical lab and trial site(s) selection and to begin our clinical trial application for PRP (“CTA”)
compilation in the third calendar quarter of 2020 and complete the CTA compilation and submit the CTA in the first calendar quarter
of 2021. In first or second quarter of 2021, we plan to begin the preparation of logistics and trial site initiation visits.
Subject to raising additional sufficient capital, we subsequently plan to commence a First-In-Human (FIH), Phase Ib study in patients
with advanced solid tumors, evaluating the safety, pharmacokinetics and anti-tumor efficacy of PRP in the first half of 2021 calendar
year, which study we hope to complete within twelve months thereafter. We intend to develop our PRP to treat early-stage cancer
and pre-cancerous diseases and as a preventative measure for patients at risk of developing cancer based on genetic screening.
To
date, we have generated no revenue, have no cancer treatment products available to market and have no products which have reached
the clinical trial stage. We require substantial additional financing to continue to test and commercialize PRP.
Recent
Developments
Business
Developments
Appointment
of our Chief Financial Officer - In July 2019, we appointed Mr. Carlo Campiciano as Chief Financial Officer. Mr. Campiciano brings
significant experience to the Company across a broad range of financial disciplines in the healthcare sector, including taxation,
finance, operations, planning and financial strategy. Mr. Campiciano will assist with the transformational stage into a clinical
development company, along with the goal of up-listing to a U.S. national stock exchange.
Certificate
for Advance Overseas Finding – In January 2020, we announced that a Certificate for Advance Overseas Finding was received
from the Board of Innovation and Science Australia to receive up to a 43.5% “cash back” benefit from overseas R&D
expenses. The finding relates to the planned Phase 1 clinical trial – Multiple Ascending Dose Studies of proteolytic proenzymes
for the treatment of pancreatic cancer, for 2018/19 and the two following financial years. Overseas activities to be undertaken
include the development of an analytical assay for the quantification of active pharmaceutical ingredients in the Company’s
lead product candidate, PRP, and its manufacture of the finished product for the Phase 1 clinical trial. The finding from the
Board agreed there is a significant link between the two supporting activities and the planned Phase 1 clinical trial, and the
two activities cannot be conducted solely in Australia. The Phase 1 clinical trial is planned to be conducted at the Peter Mac
Center, one of the world’s leading cancer research, education and treatment centers, globally and is Australia’s only
public hospital solely dedicated to caring for people affected by cancer.
Initiation
of Development of a Bio-Analytical Assay ― In March 2019, we announced that we have initiated development of a bio-analytical
assay intended to quantify the active ingredients of our lead product candidate, PRP, in preparation for human trials, planned
for the beginning of the 2020 calendar year. The work will be conducted by a specialist Contract Research Organization with extensive
knowledge in the development of functional assays for different bio-therapeutics. PRP is a solution of two proenzymes, trypsinogen
and chymotrypsinogen, administered by I.V. injection. Development of the bio-analytical assay will be an important step towards
the clinical development of PRP, as we consider the possible sites to conduct a First-In-Human study in advanced cancer patients,
possibly in Europe, specifically the UK, or at a prominent cancer hospital in Australia, with significant experience in early
stage clinical development. Attractive R&D tax incentive benefits could be gained by undertaking the trial in Australia, as
well as utilizing world-class facilities dedicated to treating and caring for people with cancer. We will investigate selected
clinical trial sites more thoroughly as we commence preparation of a clinical trial application for PRP.
USPTO
Notice of Allowance ― In March 2019, we announced that we have received a Notice of Allowance from the United States Patent
and Trademark Office (the “USPTO”) confirming composition of matter claims involving trypsinogen and chymotryosinogen
have been allowed. The additional composition claims are a continuation from the original foundation patent in the U.S. and as
a result, both method of treatment and composition claims will protect PRP, our lead product candidate. A Notice of Allowance
is issued by the USPTO to indicate that it believes an invention qualifies for a patent. The reasons for allowance stipulated
by the USPTO examiner stated that the scientific declarations presented establishes that compositions comprising trypsinogen and
chymotrypsinogen exhibit a synergistic ability to inhibit the growth of various cancer cell lines, and that this effect would
be unexpected to one of ordinary skill in the art, thus concluding the claims were patentable.
Reverse
Stock Split ― In March 2019, our board of directors and stockholders holding majority of the outstanding voting power of
our capital stock approved for the following actions to be taken by our Company: (i) at the discretion of our Board, to carry
out a reverse stock split of our common stock at a reverse stock split ratio in the range of between 1-for-150 and 1-for-500 (the
“Reverse Stock Split”), which specific ratio will be determined by our Board at its sole discretion, with a corresponding
pro-rata decrease of the authorized number of shares of our Common Stock; and (ii) (2) to fix the number of authorized shares
of our common stock after the Reverse Stock Split at 100,000,000 shares, which change will effected in connection with the consummation
of the Reverse Stock Split. Our Board has the authority, but not the obligation, in its sole discretion and without further action
on the part of our stockholders, to select the ratio for the Reverse Stock Split (not to exceed 1-for-500) and to effect the Reverse
Stock Split. On May 25, 2019, our Board determined that the reverse stock split ratio should be 1-for-500. The Reverse Stock Split,
at a ratio of 1-for-500, occurred on June 24, 2019.
67
Partnership
with University of Jaén ― In January 2019, we announced that a cooperation agreement has been entered into between
the University of Jaén and our Company to commence the POP1 joint drug discovery program to be co-funded by both parties.
The agreement coincides with the appointment of research scientist, Mr. Aitor González, to lead the drug discovery and
research activities over the next 3 to 4 years. The objective of the program is to identify and develop suitable backup compounds
to our lead product candidate, PRP.As part of the agreement, Macarena Perán, Ph.D. and Julian Kenyon, M.D. have been appointed
as joint supervisors, representing the University and our Company, respectively. The program involves advancing new compounds
through a drug screening process, followed by preclinical and early stage clinical development. As the drug candidate progresses
along the development pathway, the collaboration will also involve the Universities of Granada and Jaén, as well as Granada
and Almeria Hospitals, which are members of FIBAO, a Public Health Foundation, based in Granada, Spain, committed to assisting
commercial partners with the development and commercialization of innovative technologies designed to benefit humankind.
In
December 2018, we announced that our foundation patent application has been granted by the Office of the Controller General of
Patents, Design and Trademarks, India. The foundation patent, which covers our lead product candidate, PRP, pioneers the discovery
of a pharmaceutical composition for treating cancer via a combination of trypsinogen and/or chymotrypsinogen pancreatic proenzymes.
As of June 30, 2020, the foundation patent has been granted in the USA, Europe (including Belgium, Czech Republic, Denmark,
France, Germany, Ireland, Italy, the Netherlands, Portugal, Spain, Sweden, Switzerland/Liechtenstein, Turkey and the United Kingdom),
China, Japan, Indonesia, Malaysia, Israel, Australia, New Zealand, Singapore, South Africa, Mexico, Republic of Korea, Hong Kong
and more recently, India. It is presently under examination in Canada and Brazil.
Financing
Activities
In
February 2019, we entered into the Equity Purchase Agreement (the “Equity Purchase Agreement”) with Oasis Capital,
LLC, an institutional accredited investor (“Oasis Capital”) pursuant to which Oasis Capital committed to purchase
up to $10,000,000 worth of shares of our common stock (the “Equity Line”).
Effective
May 23, 2019, we entered into a securities purchase agreement with Redstart Holdings Corp. (“Redstart”), pursuant
to which Redstart purchased a convertible promissory note (the “May 2019 Redstart Note”) from us in the aggregate
principal amount of $133,000, such principal and the interest thereon convertible into shares of our common stock at the option
of Redstart. The transactions contemplated by the securities purchase agreement closed on or about May 30, 2019. We intend to
use the net proceeds ($130,000) from this financing for general working capital purposes.
On
April 3, 2020, the Company closed on a transaction related to a Securities Purchase Agreement (the “Securities Purchase
Agreement”) entered into on March 30, 2020, whereby an investor (the “Investor”) purchased from the Company,
7,500,000 units (the “Units”), each consisting of (i) 1.5 shares of the Company’s common stock (the “Common
Stock”), or pre-funded warrants (the “Prefunded Warrants”) upon Investor’s election due to the 4.99% blocker
provision as discussed below and (ii) 1.5 warrants to purchase one share of Common Stock (“Series A Warrants”), along
with such purchaser’s pro-rata portion of the Series B Warrants and Series C Warrants (“the Units”). In aggregate
the Investor was issued 63,750,000 warrants to purchase one share of Common Stock (the “Series B Warrants”) and an
additional 63,750,000 warrants to purchase one share of Common Stock, subject to a vesting schedule based on the Investors exercise
of the Series B Warrants (the “Series C Warrants” and, together with the Prefunded Warrants, the Series A Warrants,
and the Series B Warrants referred to herein as, the “Warrants”). See discussion of warrant terms under “Warrants”
below.
The
aggregate purchase price for the Units, the Series A Warrants with exercise price of $0.20 per share, the Series B Warrants with
exercise price of $0.04 per share and the Series C Warrants with exercise price of $0.20 per share, of $450,000 was paid at closing
(the “Purchase Price”) or $0.06 per unit purchase price.
The
Securities Purchase Agreement contains a blocker provision whereby the Investor or any of its affiliates would not beneficially
own in excess of 4.99% of the outstanding number of shares of Common Stock (“Beneficial Ownership Limitation”). As
such, the Investor may elect to purchase Prefunded Warrants equal to the same number of shares of Common Stock that the Company
would have been issued.
Due
to the Beneficial Ownership Limitation, the 11,250,000 shares of Common Stock underlying the Units issuable at closing of the
Securities Purchase Agreement are comprised of 804,518 shares of restricted Common Stock and 10,445,482 Prefunded Warrants with
exercise price of $0.0001 (but can be less than par value). The Prefunded Warrants shall be exercisable immediately and
shall expire when exercised in full.
The
Securities Purchase Agreement contains such representations, warranties and covenants as are typical for a transaction of this
nature.
Series
A Warrants
Pursuant
to the Securities Purchase Agreement, the Investor purchased Series A Warrants to purchase up to 11,250,000 shares of Common Stock,
subject to adjustment as provided therein. The Series A Warrants have a cash exercise price of $0.20 per share and are immediately
exercisable and expire in 3 years. The Series A Warrants contain a provision for cashless exercise in the event there is no effective
registration statement registering the shares underlying the Series A Warrants calculated based on the difference between the
exercise price of the Series A Warrant and the trading price of the stock (the “Cashless Exercise”).Additionally,
the Series A Warrants contain a provision for a cashless conversion at the Holder’s option should the trading price of the
Common Stock fall below $0.20 per share calculated based on the difference between the exercise price of the Series A Warrant
and 70% of the Market Price, as defined therein (the” Alternate Cashless Exercise”).
Series
B Warrants
Pursuant
to the Securities Purchase Agreement, the Investor purchased Series B Warrants to purchase up to 63,750,000 shares of Common Stock,
subject to adjustment as provided therein; provided, however, commencing on the 90th day following the effective date, the Company
may reduce the number of Warrant Shares issuable upon exercise thereof by 37,500,000 upon 10 Trading Days’ prior written
notice to the Holder provided that the Company issues to the Holder 3,750,000 shares of Common Stock (or, at the election of the
Holder, an equivalent number of pre-funded warrants) and Series A Warrants to purchase up to 3,750,000 shares of Common Stock,
which shares shall be issued pursuant to a registration statement without restrictions on resale. The Series B Warrants have a
cash exercise price of $0.04 per share and expire in 3 years. The Series B Warrants contain a provision for Cashless Exercise.
Series
C Warrants
Pursuant
to the Securities Purchase Agreement, the Investor purchased Series C Warrants to purchase up to 63,750,000 shares of Common Stock,
subject to adjustment as provided therein and expire in 3 years. The Series C Warrants have a cash exercise price of $0.20 per
share, subject to a vesting schedule, which is based on such Holder’s exercise of all the Series C Warrants. The Series
C Warrants contain provisions for Cashless Exercise and Alternate Cashless Exercise.
Critical
Accounting Estimates
Below
is a discussion of our more subjective accounting estimation processes for purposes of explaining (i) the methodology used in
calculating the estimates, (ii) the inherent uncertainties pertaining to such estimates, and (iii) the possible effects of a significant
variance in actual experience, from that of the estimate, on our financial condition. Estimates involve numerous assumptions that,
if incorrect, could create a material adverse impact on the Company’s results of operations and financial condition.
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 filing 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.
68
Foreign
Currency Translation and Comprehensive Income (Loss) : The Company’s wholly owned subsidiary’s functional
currency is the AUD. For financial reporting purposes, the Australian Dollar (“AUD”) has been translated into USD
as the Company’s 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 statement
of operations and comprehensive loss as other income (expense).
Accounting
for Income Taxes: We are governed by Australian and United States income tax laws, which are administered by the Australian
Taxation Office and the United States Internal Revenue Service, respectively. We follow ASC 740, “ 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 adopted provisions of 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.
Accounting
for Stock Based Compensation : We record stock based compensation in accordance with ASC 718, “ Stock Compensation ”
and Staff Accounting Bulletin No. 107 issued by the SEC in March 2005 regarding its interpretation of ASC 718. ASC 718 requires
the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the related requisite
service period. The statement also requires the recognition of compensation expense for the fair value of any unvested stock option
awards outstanding at the date of adoption. We value any employee or non-employee stock based compensation at fair value using
the Black-Scholes Option Pricing Model.
We
account for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718.
Derivative
Instruments: ASC 815, “ Derivatives and Hedging, ” 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, we record the fair value of the conversion shares, remove the fair value of the related derivative liability,
remove any discounts and record a net gain or loss on debt extinguishment.
Convertible
Notes with Variable Conversion Options : We have 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 or around
a fixed discount to the price of the common stock at the time of conversion. We treat these convertible notes as stock settled
debt under ASC 480 and measure 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 record the put premium as accretion to interest expense.
Research
and Development Tax Credits : We 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, we do 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 we have net income then we can receive the credit
which reduces its income tax liability. If we have net losses, then we may still receive a cash payment for the credit, however,
our net operating loss carry forwards 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.
69
Recent
Accounting Pronouncements
For a discussion of recently issued and adopted accounting pronouncements,
please see section captioned “Recent Accounting Pronouncements” in Note 1 to our consolidated financial statements
included in this Annual Report.
Reverse
Stock Split Presentation
The
share and per share figures in this Management’s Discussion and Analysis of Financial Condition and Results of operations
section, along with elsewhere in this annual report, have been adjusted to reflect the 1-for-500 Reverse Stock Split of our authorized
and outstanding shares of common stock, which occurred on June 24, 2019.
Results
of Operations
The
following discussion should be read in conjunction with the Company’s consolidated financial statements and notes thereto
included elsewhere in this Annual Report. The results discussed below are of the Company and its wholly-owned Australian subsidiary,
Propanc PTY LTD.
Fiscal
Year Ended June 30, 2020, as compared to the Fiscal Year Ended June 30, 2019
Revenue
For
the fiscal years 2020 and 2019 we generated no revenue because we are currently undertaking research and development activities
for market approval and no sales were generated in this period.
Administration
Expense
Administration
expense increased to $3,281,464 for the year ended June 30, 2020 as compared to $2,326,350 for the year ended June 30, 2019. This
increase of approximately $955,000 is primarily attributable to an increase of approximately $1,154,000 in stock-based expenses
for services, an increase of approximately $119,000 in capital raising costs, an increase in general consulting and accountancy
fee of approximately $64,000, an increase in insurance expense of approximately $17,000, an increase of approximately $139,000
in marketing and market research expense, increase of approximately $3,000 of other general and administrative expenses and, offset
by decrease of approximately $122,000 in employee remuneration expense as a result of a one off adjustment in employee leave liability
of approximately $157,000 in the year ended June 30, 2019, decreases in in investor relations based expense of approximately $80,000,
a decrease of approximately $69,000 in general legal and intellectual property legal expense, a decrease of approximately $42,000
in public company filing fees, a decrease of $45,000 in travel expense and a decrease of approximately $183,000 in employee leave
accruals which is a result of an adjustment of approximately $176,000 to employee leave accruals during the year ended June 30,
2019 in order to comply with Australian leave entitlements.
Occupancy
Expense
Occupancy
expense increased by approximately $4,700 to $32,809 for the year ended June 30, 2020. The increase primarily relates to rent
adjustment on under paid rent of $4,800 during the year ended June 30, 2020.
Research
and Development Expenses
Research
and development expenses were $179,987 for the year ended June 30, 2020, as compared to $260,335 for the year ended June 30, 2019.
The decrease in research and development expenses is primarily attributable to completion of process development activities and
preparation for commencement of the engineering run and subsequent full scale GMP manufacture of PRP for clinical trials, with
the process, preparation and small scale manufacture having been completed in the period ended December 31, 2017, which the clinical
trials we hope to commence in 2021 calendar year, if we raise sufficient proceeds by raising additional capital. Completed activities
include raw material purification and stabilization process development, development of analytical quality assurance and control
methods, reproduction runs for raw materials, and preparation of raw materials and finished product specifications for future
full scale GMP manufacture of PRP.
70
Interest
Expense/Income
Interest
expense increased to $1,748,381 for the year ended June 30, 2020, as compared to $1,314,539 for the year ended June 30, 2019.
Interest expense is primarily comprised of approximately $734,130 of debt discount amortization and approximately $836,724 accretion
of debt premium. This increase is primarily attributable to an increase in the issuance of debt containing embedded derivatives
resulting in an increase amortization of debt discount, along with the increase in issuance of convertible notes with discounted
debt features during the year ended June 30, 2020.
Change
in Fair Value of Derivative Liabilities
Change
in fair value of derivative liabilities changed by $2,857,439, to a gain of $385,293 for the year ended June 30, 2020,
as compared to a loss of $(2,472,146) for the year ended June 30, 2019. This change is primarily attributable
to an increase in the volatility of the prices of our shares of common stock along with a decrease in stock price during the year
ended June 30, 2020, which resulted in the recognition of a smaller loss from change in fair value.
Gain
on Debt Settlements, Net
There
were no debt settlements during the year ended June 30, 2020 and as a result there were no gains or (losses) on settlement of
debt during that period, as compared with a gain of $14,101 for the year ended June 30, 2019.
Gain
(loss) on Extinguishment of Debt, net
During the year ended June 30, 2020, notes
with principal amounts totaling $254,500 and accrued interest of $15,408 contained bifurcated embedded conversion option
derivatives. Accordingly, the fair market value of the shares issued was $565,746 resulting in a loss on extinguishment at
the time of conversion of $295,838 and $362,961 of derivative fair value was recorded as a gain on extinguishment at the time
of conversion. During the year ended June 30, 2019, the Company repaid three convertible notes which were treated as derivative
instruments, incurred penalties of $92,133 and recorded a gain on the removal of the derivatives of $936,650. Additionally, the
Company issued shares of common stock with a value of $1,335,047 which resulted in a gain on extinguishment of $359,725 as the
note and derivative fair value exceeded the fair value of shares converted.
Foreign
Currency Transaction Gain (Loss)
Foreign
currency transaction decreased to a loss of $(143,808) for the year ended June 30, 2020 as compared with a loss of $(690,748)
for the year ended June 30, 2019. The decrease in foreign currency transaction loss is primarily attributable to fluctuation in
exchange rates during the year ended June 30, 2020, as compared to during the year ended June 30, 2019, and 2020 having less
intercompany loans.
Income
Tax Benefit
During
the years ended June 30, 2020 and 2019, the Company applied for and received from the Australian Taxation Office a research and
development tax credit in the amount of $134,728 and $115,437, respectively.
Net
loss
Net
loss decreased to $(4,740,723) for the year ended June 30, 2020 as compared to a net loss of $(5,758,369) for the year ended June
30, 2019. The change relates to the factors discussed above.
Liquidity
and Capital Resources
Current
Financial Condition
As of June 30, 2020, we had total assets of
$98,518, comprised primarily of cash of $67,007, GST tax receivable of $2,015, property and equipment, net, of $5,747 and
operating lease right of use asset, net, $21,682. This compares with total assets of $101,652 as of June 30, 2019, comprised primarily
of cash of $2,394, GST tax receivable of $5,439, prepaid expenses and other current assets of $83,299 and property and equipment,
net, of $8,417.
We had current liabilities of $3,739,943,
primarily comprised of net convertible debt of $1,557,734, accounts payable and accrued expenses of $1,544,387 and
embedded conversion option liabilities of $354,109, as of June 30, 2020. This compares with current liabilities of $4,402,888,
primarily comprised of net convertible debt of $1,657,377, accounts payable and accrued expenses of $1,640,379 and embedded conversion
option liabilities of $698,264, as of June 30, 2019.
71
We
have funded our operations primarily through the issuance of equity and/or convertible securities for cash. The cash was used
primarily for payments for research and development, administration expenses, occupancy expenses, professional fees, consultants
and travel.
During the year ended June 30, 2020, we borrowed
amounts of approximately $1,591,250 from the sale of convertible promissory notes during such period with various maturity
dates ranging from July 3, 2020 to March 12, 2021.
We
have substantial capital resource requirements and have incurred significant losses since inception. As of June 30, 2020, we had
$67,007 in cash. We depend upon debt and/or equity financing to fund our ongoing operations and to execute our current business
plan. Such capital requirements are in excess of what we have in available cash and for which we currently have commitments. Therefore,
we presently do not have enough available cash to meet our obligations over the next 12 months. If continued funding and capital
resources are unavailable at reasonable terms, we may curtail our plan of operations. We will be required to obtain alternative
or additional financing from financial institutions, investors or otherwise, in order to maintain and expand our existing operations.
The failure by us to obtain such financing would have a material adverse effect upon our business, financial condition and results
of operations, and adversely affecting our ability to complete ongoing activities in connection with our research and development
programs.
Sources
and Uses of Cash
For
the Fiscal Year
Ended
June
30,
2020
2019
Net
cash used in operating activities
$
(1,849,589
)
$
(2,060,037
)
Net
cash used in investing activities
$
-
$
(2,874
)
Net
cash provided by financing activities
$
1,890,240
$
2,118,560
Effect
of exchange rate changes on cash
$
23,962
$
(73,176
)
Net cash used in operating activities was
$1,849,589 for the fiscal year ended June 30, 2020 compared to $2,060,037 for the fiscal year ended June 30, 2019. This decrease
is primarily due to a decrease in change in fair value of derivative liabilities of approximately $2,857,000, decrease in accrued
expenses of approximately $21,000, decrease in employment related liabilities of approximately $153,000, changes in foreign
currency transaction loss of approximately $547,000 offset by increases primarily due to increase in stock-based compensation
of $1,154,000, amortization of debt discount of $344,000, accretion of put premium of $131,000, increase in gain on extinguishment
of debt of approximately $1,229,000, increase in prepaid expenses and other assets of $166,000 and accounts payable of
$105,000.
Cash
flows provided by financing activities for the fiscal year ended June 30, 2020 were $1,890,240 as compared to $2,118,560 for the
fiscal year ended June 30, 2019. During the year ended June 30, 2020, we received net proceeds from the issuance of convertible
promissory notes of $1,465,250 and net proceeds from sale of common stock of $424,990. During the year ended June 30, 2019,
we received net proceeds from the issuance of convertible promissory notes of $1,305,150 and sale of common stock of $1,085,380
net, offset by repayments of convertible notes of $272,000.
The
effect of the exchange rate on cash resulted in a $23,962 positive adjustment to cash flows in the year ended June 30, 2020 as
compared to a negative adjustment of $73,176 to cash flows in the year ended June 30, 2019. The reason for the fluctuation is
due to the application of currency translation rates throughout the cash flow statement, the volume of transactions within each
period and the daily fluctuation in exchange rates.
Going
Concern Qualification
We did not generate
any revenue for the fiscal years ended June 30, 2020 and 2019 and have incurred significant losses and cash used in operations,
and such losses and use of cash are expected to continue. Our independent registered public accounting firm has included a “Going
Concern Qualification” in their audit report for each of the fiscal years ended June 30, 2020 and 2019. In addition, we
have negative working capital and convertible debt that is past maturity that we are currently negotiating with lenders in order
to amend the maturity dates. The foregoing raises substantial doubt about our ability to continue as a going concern for a
period of 12 months from the issue date of this report. Our ability to continue as a going concern is dependent on our ability
to execute our strategy and on our ability to raise additional funds and/or to consummate a public offering. Management is currently
seeking additional funds, primarily through the issuance of equity and/or debt securities for cash to operate our business. No
assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory
to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of
debt financing or cause substantial dilution for our stockholders, in case of equity and/or convertible debt financing. The consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty. The “Going Concern
Qualification” might make it substantially more difficult to raise capital.
72
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources.
Item
7A. Quantitative and Qualitative Disclosures about Market Risk.
Not
applicable to smaller reporting companies.
Item
8. Financial Statements and Supplementary Data.
The
following audited consolidated financial statements of Propanc Biopharma, Inc. are included in this Annual Report:
73
PROPANC
BIOPHARMA, INC.
INDEX
TO FINANCIAL STATEMENTS
Audited
Consolidated Financial Statements for the Fiscal Years Ended June 30, 2020 and 2019
Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets as of June 30, 2020 and 201 9
F-3
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended June 30, 2020 and 201 9
F-4
Consolidated Statements of Changes in Stockholders’ Deficit for the years ended June 30, 2020 and 2019
F-5
Consolidated Statements of Cash Flows for the years ended June 30, 2020 and 201 9
F-6
Notes to Consolidated Financial Statements
F-7
F- 1
Report
of Independent Registered Public Accounting Firm
To
the Stockholders’ and the Board of Directors of:
Propanc
Biopharma, Inc.
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of Propanc Biopharma, Inc. and Subsidiary (the “Company”)
as of June 30, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’
deficit, and cash flows, for each of the two years in the period ended June 30, 2020, and the related notes (collectively referred
to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,
in all material respects, the consolidated financial position of the Company as of June 30, 2020 and 2019, and the consolidated
results of its operations and its cash flows for each of the two years in the period ended June 30, 2020, in conformity with accounting
principles generally accepted in the United States of America.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 2 to the consolidated financial statements, the Company has a net loss and cash used in operations of $4,740,723
and $1,849,589, respectively, in 2020 and has a working capital deficit, stockholders’ deficit and accumulated deficit of
$3,670,921, $3,641,425 and $55,781,770, respectively, at June 30, 2020. These matters raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s Plan in regards to these matters is also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over
financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
Salberg & Company, P.A.
SALBERG
& COMPANY, P.A.
We
have served as the Company’s auditor since 2011.
Boca
Raton, Florida
October 1, 2020
2295
NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431
Phone:
(561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920
www.salbergco.com
• info@salbergco.com
Member
National Association of Certified Valuation Analysts • Registered with the PCAOB
Member
CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality
F- 2
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEETS
June 30, 2020
June 30, 2019
ASSETS
CURRENT ASSETS:
Cash
$ 67,007
$ 2,394
GST tax receivable
2,015
5,439
Prepaid expenses and other current assets
-
83,299
TOTAL CURRENT ASSETS
69,022
91,132
Security deposit - related party
2,067
2,103
Operating lease right-of-use assets, net - related party
21,682
-
Property and equipment, net
5,747
8,417
TOTAL ASSETS
$ 98,518
$ 101,652
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable
$ 842,156
$ 917,337
Accrued expenses and other payables
702,231
723,042
Convertible notes and related accrued interest and premiums, net of discounts
1,557,734
1,657,377
Operating lease liability - related party
25,072
-
Embedded conversion option liabilities
177,009
698,264
Due to former director - related parties
30,639
31,164
Loans from directors and officer - related parties
50,993
51,867
Employee benefit liability
354,109
323,837
TOTAL CURRENT LIABILITIES
3,739,943
4,402,888
TOTAL LIABILITIES
$ 3,739,943
$ 4,402,888
Commitments and Contingencies (See Note 9)
STOCKHOLDERS’ DEFICIT:
Preferred stock, 1,500,005 shares authorized, $0.01 par value:
Series A preferred stock, $0.01 par value; 500,000 shares authorized; 500,000 shares issued
and outstanding as of June 30, 2020 and 2019
$ 5,000
$ 5,000
Series B preferred stock, $0.01 par value; 5 shares authorized; 1 share issued and outstanding
as of June 30, 2020 and 2019
-
-
Common stock, $0.001 par value; 1,000,000,000 shares authorized; 258,120,381
and 968,042 shares issued; 258,120,332 and 967,993 outstanding as of June 30, 2020 and 2019, respectively
258,120
968
Additional paid-in capital
50,656,031
45,713,322
Accumulated other comprehensive income
1,267,671
1,066,998
Accumulated deficit
(55,781,770 )
(51,041,047 )
Treasury stock (49 shares)
(46,477 )
(46,477 )
TOTAL STOCKHOLDERS’ DEFICIT
(3,641,425 )
(4,301,236 )
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
$ 98,518
$ 101,652
The
accompanying notes are an integral part of these consolidated financial statements.
F- 3
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Years Ended June 30,
2020
2019
REVENUE
Revenue
$ -
$ -
OPERATING EXPENSES
Administration expenses
3,281,464
2,326,350
Occupancy expenses
32,809
28,062
Research and development
179,987
260,335
TOTAL OPERATING EXPENSES
3,494,260
2,614,747
LOSS FROM OPERATIONS
(3,494,260 )
(2,614,747 )
OTHER INCOME (EXPENSE)
Interest expense
(1,748,381 )
(1,314,539 )
Interest income
946
31
Other income
57,636
-
Derivative income (expense)
385,293
(2,472,146 )
Gain on debt settlements, net
-
14,101
Gain on extinguishment of debt, net
67,123
1,204,242
Foreign currency transaction loss
(143,808 )
(690,748 )
TOTAL OTHER EXPENSE, NET
(1,381,191 )
(3,259,059 )
LOSS BEFORE TAXES
(4,875,451 )
(5,873,806 )
TAX BENEFIT
134,728
115,437
NET LOSS
$ (4,740,723 )
$ (5,758,369 )
BASIC AND DILUTED NET LOSS PER SHARE
$ (0.19 )
$ (10.97 )
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
24,633,637
524,939
NET LOSS
$ (4,740,723 )
$ (5,758,369 )
OTHER COMPREHENSIVE INCOME
Unrealized foreign currency translation gain
200,673
709,069
TOTAL OTHER COMPREHENSIVE INCOME
200,673
709,069
TOTAL COMPREHENSIVE INCOME (LOSS)
$ (4,540,050 )
$ (5,049,300 )
The
accompanying notes are an integral part of these consolidated financial statements.
F- 4
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED JUNE 30, 2020 AND 2019
Preferred
stock
Accumulated
Series
A
Series
B
Common
Stock
Additional
Other
Total
No.
of Shares
Value
No.
of Shares
Value
No.
of Shares
Value
Paid-in
Capital
Accumulated
Deficit
Treasury
Stock
Comprehensive
Income
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
-
-
-
-
704,258
704
3,350,079
-
-
-
3,350,783
Issuance
of common stock under put premium
-
-
-
-
147,200
147
1,100,233
-
-
-
1,100,380
Reclassification
of put premium upon debt conversion
-
-
-
-
-
-
1,824,317
-
-
-
1,824,317
Extinguishment
of derivative liability associated with convertible notes
-
-
-
-
-
-
1,029,039
-
-
-
1,029,039
Issuance
of common stock for exercise of warrants
-
-
-
-
24
-
30
-
-
-
30
Issuance
of common stock for offering costs
-
-
-
-
7,701
8
298,914
-
-
-
298,922
Issuance
of common stock for services
-
-
-
-
16,000
16
168,984
-
-
-
169,000
Stock
based compensation in connection with stock option and restricted stock unit grants
-
-
-
-
-
-
41,436
-
-
-
41,436
Amortization
of offering costs
-
-
-
-
-
-
(313,923 )
-
-
-
(313,923 )
Foreign
currency translation loss
-
-
-
-
-
-
-
-
-
709,069
709,069
Net
loss for the fiscal year ended June 30, 2019
-
-
-
-
-
-
-
(5,758,369 )
-
-
(5,758,369 )
Balance
at June 30, 2019
500,000
5,000
1
-
968,042
968
45,713,322
(51,041,047 )
(46,477 )
1,066,998
(4,301,236 )
Issuance
of units for cash
-
-
-
-
804,518
804
424,186
-
-
-
424,990
Issuance
of common stock for conversion of convertible debt and accrued interest
-
-
-
-
247,619,247
247,619
1,877,555
-
-
-
2,125,174
Reclassification
of put premium upon debt conversion
-
-
-
-
-
-
874,924
-
-
-
874,924
Issuance
of common stock for services
-
-
-
-
8,728,574
8,729
104,913
-
-
-
113,642
Relative
fair value of warrants issued with convertible debt
-
-
-
-
-
-
375,905
-
-
-
375,905
Stock
based compensation in connection with stock option grants and restricted stock unit grants
-
-
-
-
-
-
300,416
-
-
-
300,416
Stock
based compensation in connection with fair value of warrants issued for services
-
-
-
-
-
-
984,810
-
-
-
984,810
Foreign
currency translation gain
-
-
-
-
-
-
-
-
-
200,673
200,673
Net
loss for the fiscal year ended June 30, 2020
-
-
-
-
-
-
-
(4,740,723 )
-
-
(4,740,723 )
Balance
at June 30, 2020
500,000
$ 5,000
1
$ -
258,120,381
$ 258,120
$ 50,656,031
$ (55,781,770 )
$ (46,477 )
$ 1,267,671
$ (3,641,425 )
The
accompanying notes are an integral part of these consolidated financial statements.
F- 5
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Years
Ended June 30,
2020
2019
CASH
FLOWS FROM OPERATING ACTIVITIES:
Net
loss
$ (4,740,723 )
$ (5,758,369 )
Adjustments
to Reconcile Net Loss to Net Cash Used in Operating Activities:
Issuance
and amortization of common stock and warrants for services
1,098,452
245,145
(Gain)
loss on settlements, net
-
(14,101 )
Foreign
currency transaction loss (gain)
143,808
690,748
Depreciation
expense
2,473
2,306
Amortization
of debt discounts
734,130
389,673
Derivative
income (expense)
(385,293 )
2,472,146
Gain
on extinguishment of debt
(67,123 )
(1,296,376 )
Stock
option and restricted stock expense
300,416
-
Non-cash
interest expense
15,000
-
Put
premiums on convertible debt issued
836,724
706,154
Changes
in Assets and Liabilities:
GST
receivable
3,332
489
Prepaid
expenses and other assets
83,157
(83,296 )
Accounts
payable
(59,737 )
(164,926 )
Deferred
rent
3,394
-
Employee
benefit liability
35,724
188,326
Put
premiums on convertible debt issued
(9,740 )
377,846
Accrued
interest
156,417
184,198
NET
CASH USED IN OPERATING ACTIVITIES
(1,849,589 )
(2,060,037 )
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
1,591,250
1,369,000
Repayments
of convertible promissory notes
-
(272,000 )
Proceeds
from the sale of common stock
450,000
1,100,380
Fees
associated with offering costs
(25,010 )
(15,000 )
Debt
issuance costs
(126,000 )
(63,850 )
Proceeds
from the exercise of warrants
-
30
NET
CASH PROVIDED BY FINANCING ACTIVITIES
1,890,240
2,118,560
Effect
of exchange rate changes on cash
23,962
(73,176 )
NET
INCREASE (DECREASE) IN CASH
64,613
(17,527 )
CASH
AT BEGINNING OF YEAR
2,394
19,921
CASH
AT END OF YEAR
$ 67,007
$ 2,394
Supplemental
Disclosure of Cash Flow Information
Cash
paid during the year:
Interest
$ 6,110
$ 100,719
Income
Tax
$ -
$ -
Supplemental
Disclosure of Non-Cash Investing and Financing Activities
Reduction
of put premium related to conversions of convertible notes
$ 874,924
$ 1,824,317
Conversion
of convertible notes and accrued interest to common stock
$ 1,814,336
$ 3,350,783
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
$ 180,000
Operating
lease right-of-use asset and operating lease liability recorded on adoption of ASC 842
$ 48,662
$ -
The
accompanying notes are an integral part of these consolidated financial statements.
F- 6
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 and 2019
NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Nature
of Operations
Propanc
Biopharma, Inc. (the “Company,” “we,” “us” or “our”) was originally incorporated
in Melbourne, Victoria Australia on October 15, 2007 as Propanc PTY LTD, and continues to be based in Camberwell, Victoria Australia.
Since its inception, substantially all of the operations of the Company have been focused on the development of new cancer treatments
targeting high-risk patients, particularly cancer survivors, who need a follow-up, non-toxic, long-term therapy designed to prevent
the cancer from returning and spreading. The Company anticipates establishing global markets for its technologies. Our lead product
candidate, which we refer to as PRP, is an enhanced pro-enzyme formulation designed to enhance the anti-cancer effects of multiple
enzymes acting synergistically. It is currently in the preclinical phase of development.
On
November 23, 2010, the Company was incorporated in the state of Delaware as Propanc Health Group Corporation. In January 2011,
to reorganize the Company, we acquired all of the outstanding shares of Propanc PTY LTD on a one-for-one basis making it a wholly-owned
subsidiary of the Company.
On
July 22, 2016, the Company formed a wholly owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the
purpose of submitting an orphan drug application to the European Medicines Agency as a small and medium-sized enterprise. As of
June 30, 2020, there has been no activity within this entity.
Effective
April 20, 2017, the Company changed its name to “Propanc Biopharma, Inc.” to better reflect the Company’s stage
of operations and development.
The
Company has filed multiple patent applications relating to its lead product, PRP. The first application was filed in October 2010.
This patent has been granted and remains in force in the United States, Belgium, Czech Republic, Denmark, France,
Germany, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein, Turkey, United Kingdom, Australia,
China, Hong Kong, Japan, Indonesia, Israel, New Zealand, Singapore, Malaysia, South Africa, Mexico, Republic of Korea and India.
In Brazil and Canada, the patent application remains under examination.
In
2016 and 2017 we filed other patent applications. Three applications were filed under the Patent Cooperation Treaty (the “PCT”).
The PCT assists applicants in seeking patent protection by filing one international patent application under the PCT, which allows
the applicants to seek protection for an invention in over 150 countries. Once national or regional applications are filed, the
application is placed under the control of the national or regional patent offices, as applicable, in what is called the national
or regional phase. One PCT application, filed in November 2016, entered the national phase in July 2018. A second application
filed in January 2017 entered the national phase commencing July 2018. A third application entered the national phase in October
2018.
The
Company hopes to capture and protect additional patentable subject matter based on the Company’s field of technology relating
to pharmaceutical compositions of proenzymes for treating cancer by filing additional patent applications as it advances its lead
product candidate, PRP, through various stages of development.
Changes
in Authorized Common Stock and Reverse Split
On
June 24, 2019, the Company effected a one-for-five hundred (1:500) reverse stock split whereby the Company (i) decreased the number
of authorized shares of common stock, $0.001 par value per share, to 100,000,000 and (ii) decreased by a ratio of one-for-five
hundred (1:500) the number of retroactively issued and outstanding shares of common stock. Proportional adjustments for the reverse
stock split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share
data and amounts have been retroactively adjusted as of the earliest period presented in the consolidated financial statements
to reflect the reverse stock split.
On
February 4, 2020 the Directors resolved to increase the Common Stock of the Company from 100,000,000 authorized shares to 1,000,000,000
authorized shares and believes that such number of authorized shares of Common Stock will be in the best interests of the Corporation
and its stockholders because the Board believes that the availability of more shares of Common Stock for issuance will allow the
Corporation greater flexibility in pursuing financing from investors, meeting business needs as they arise, taking advantage of
favorable opportunities and responding to a changing corporate environment. The Company filed the necessary documents with the
U.S. Securities and Exchange Commission on February 6, 2020 and at the date of this filing the increase in authorized shares to
1,000,000,000 has been effected on March 13, 2020.
F- 7
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 and 2019
Principles
of Consolidation
The
consolidated financial statements include the accounts of Propanc Biopharma, Inc., the parent entity, and its wholly-owned subsidiary,
Propanc PTY LTD. All inter-company balances and transactions have been eliminated in consolidation. Propanc (UK) Limited was an
inactive subsidiary from inception through June 30, 2020.
Use
of Estimates
The
preparation of financial statements in conformity with the accounting principles generally accepted in the United States of America
(“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates
in the accompanying consolidated financial statements include the estimates of useful lives for depreciation, valuation of the
operating lease liability and related right-of-use asset, valuation of derivatives, valuation of beneficial conversion features
on convertible debt, allowance for uncollectable receivables, valuation of equity based instruments issued for other than cash,
the valuation allowance on deferred tax assets and foreign currency translation due to certain average exchange rates applied
in lieu of spot rates on transaction dates.
Foreign
Currency Translation and Other Comprehensive Income (Loss)
The
Company’s wholly owned subsidiary’s functional currency is the Australian dollar (AUD). For financial reporting purposes,
the Australian dollar has been translated into the Company’s reporting currency which is the United States dollar ($) and/or
(USD). Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are
translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each
historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to
period are included as a component of stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss).”
Gains and losses resulting from foreign currency transactions are included in the statements of operations and comprehensive income
(loss) as other comprehensive income (loss). There have been no significant fluctuations in the exchange rate for the conversion
of Australian dollars to USD after the balance sheet date.
Other
Comprehensive Income (Loss) for all periods presented includes only foreign currency translation gains (losses).
Assets
and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing
at the consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency included in the consolidated results of operations as incurred. For
the year ended June 30, 2020, the Company recognized an exchange loss of approximately $133,000 on intercompany loans made by
the parent to the subsidiary which have not been repaid as at June 30, 2020.
As
of June 30, 2020 and 2019, the exchange rates used to translate amounts in Australian dollars into USD for the purposes of preparing
the consolidated financial statements were as follows:
June 30, 2020
June 30, 2019
Exchange rate on balance sheet dates
USD : AUD exchange rate
0.6891
0.7153
Average exchange rate for the period
USD : AUD exchange rate
0.6742
0.7009
Change
in Accumulated Other Comprehensive Income (Loss) by component during the years ended June 30, 2020 and 2019 was as follows:
Foreign
Currency Items:
Beginning balance, June 30, 2018
$ 357,929
Foreign currency translation gain
709,069
Balance, June 30, 2019
1,066,998
Foreign currency translation gain
200,673
Ending balance, June 30, 2020
$ 1,267,671
F- 8
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 and 2019
Fair
Value of Financial Instruments and Fair Value Measurements
The
Company measures its financial assets and liabilities in accordance with US GAAP. For certain financial instruments, including
cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, the carrying amounts approximate fair
value due to their short maturities. Amounts recorded for notes payable, net of discount, and loans payable also approximate fair
value because current interest rates available for debt with similar terms and maturities are substantially the same.
The
Company follows accounting guidance for financial assets and liabilities. This standard defines fair value, provides guidance
for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but
rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply
to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable
market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the
service capacity of an asset or replacement cost).
The
guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three
broad levels. The following is a brief description of those three levels:
Level
1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level
2: Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar
assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not
active.
Level
3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed
by us, which reflect those that a market participant would use.
Also
see Note 12 - Derivative Financial Instruments and Fair Value Measurements.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less
with financial institutions, and bank overdrafts. Bank overdrafts are reflected as a current liability on the balance sheets.
There were no cash equivalents as of June 30, 2020 or June 30, 2019.
Property
and Equipment
Property
and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are expensed as incurred;
additions, renewals, and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related
cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation
of property and equipment is provided using the declining balance method. The depreciable amount is the cost less its residual
value.
The
estimated useful lives are as follows:
Machinery
and equipment
-
5 years
Furniture
-
7 years
Patents
Patents
are stated at cost and reclassified to intangible assets and amortized on a straight-line basis over the estimated future periods
if and once the patent has been granted by a regulatory agency. However, the Company will expense any patent costs as long as
we are in the startup stage. Accordingly, as the Company’s products are not currently approved for market, all patent costs
incurred from 2013 through June 30, 2020 were expensed immediately. This practice of expensing patent costs immediately ends when
a product receives market authorization from a government regulatory agency.
Impairment
of Long-Lived Assets
In
accordance with ASC 360-10, “ Long-lived assets,” which include property and equipment and intangible assets,
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of
an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount
of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future
discounted cash flows or market value, if readily determinable.
F- 9
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 and 2019
Employee
Benefit/Liability
Liabilities
arising in respect of wages and salaries, accumulated annual leave, accumulated long service leave and any other employee benefits
expected to be settled within twelve months of the reporting date are measured based on the employees remuneration rates applicable
at the reporting date. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow
to be made in respect of services provided by employees up to the reporting date. All employee liabilities are owed within the
next twelve months.
Australian
Goods and Services Tax (“GST”)
Revenues,
expenses and balance sheet items are recognized net of the amount of GST, except payable and receivable balances which are shown
inclusive of GST. The GST incurred is payable on revenues to, and recoverable on purchases from, the Australian Taxation Office.
Cash
flows are presented in the statements of cash flow on a gross basis, except for the GST component of investing and financing activities,
which are disclosed as operating cash flows.
As
of June 30, 2020 and 2019, the Company was owed $2,015 and $5,439, respectively, from the Australian Taxation Office. These amounts
were fully collected subsequent to the balance sheet reporting dates.
Derivative
Instruments
ASC
Topic 815, Derivatives and Hedging (“ASC Topic 815”), establishes accounting and reporting standards for derivative
instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair
value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings. On the date of conversion
or payoff of debt, the Company records the fair value of the conversion shares, removes the fair value of the related derivative
liability, removes any discounts and records a net gain or loss on debt extinguishment. On July 1, 2019 the Company adopted ASU
2017-11 under which down-round Features in Financial Instruments will no longer cause derivative treatment. The Company applies
the modified prospective method of adoption. There were no cumulative effects on adoption.
Convertible
Notes With Variable Conversion Options
The
Company has entered into convertible notes, some of which contain variable conversion options, whereby the outstanding principal
and accrued interest may be converted, by the holder, into common shares at a fixed discount to the price of the common stock
at or around the time of conversion. The Company treats these convertible notes as stock settled debt under ASC 480, “ Distinguishing
Liabilities from Equity ” and measures the fair value of the notes at the time of issuance, which is the result of the
share price discount at the time of conversion and records the put premium as interest expense.
Income
Taxes
The
Company is governed by Australia and United States income tax laws, which are administered by the Australian Taxation Office and
the United States Internal Revenue Service, respectively. The Company follows ASC 740 “ Accounting for Income Taxes ,”
when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements
and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws
and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in deferred tax assets and liabilities.
The
Company follows ASC 740, Sections 25 through 60, “ Accounting for Uncertainty in Income Taxes .” These sections
provide detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized
in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective
date to be recognized upon the adoption of ASC 740 and in subsequent periods.
F- 10
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 and 2019
Research
and Development Costs and Tax Credits
In
accordance with ASC 730-10, “Research and Development-Overall,” research and development costs are expensed
when incurred. Total research and development costs for the fiscal years ended June 30, 2020 and 2019 were $179,987 and $260,335,
respectively.
The
Company may apply for research and development tax concessions with the Australian Taxation Office on an annual basis. Although
the amount is possible to estimate at year end, the Australian Taxation Office may reject or materially alter the claim amount.
Accordingly, the Company does not recognize the benefit of the claim amount until cash receipt since collectability is not certain
until such time. The tax concession is a refundable credit. If the Company has net income, then the Company can receive the credit
which reduces its income tax liability. If the Company has net losses, then the Company may still receive a cash payment for the
credit, however, the Company’s net operating loss carryforwards are reduced by the gross equivalent loss that would produce
the credit amount when the income tax rate is applied to that gross amount. The concession is recognized as an income tax benefit,
in operations, upon receipt.
During
each of the fiscal years ended June 30, 2020 and 2019, the Company applied for, and received from the Australian Taxation Office,
a research and development tax credit in the amount of $134,728 and $115,437, respectively, which is reflected as a tax benefit
in the accompanying consolidated statements of operations and comprehensive income (loss).
Stock
Based Compensation
The
Company records stock-based compensation in accordance with ASC 718, “ Stock Compensation ”. ASC 718 requires
the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the shorter of
the service period or the vesting period. The Company values employee and non-employee stock-based compensation at fair value
using the Black-Scholes Option Pricing Model.
The
Company adopted ASU 2018-07 and accounts for non-employee share-based awards in accordance with the measurement and recognition
criteria of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective
method of adoption. There was no cumulative effect of adoption on July 1, 2019.
Revenue
Recognition
The
Company adopted and implemented on July 1, 2018, ASC 606 – Revenue from Contracts with Customers (“ASC 606”).
ASC 606 did not have a material impact on the consolidated financial statements.
Upon
implementation of ASC 606, the Company recognizes revenue in accordance with that core principle by applying the following steps:
Step
1: Identify the contract(s) with a customer.
Step
2: Identify the performance obligations in the contract.
Step
3: Determine the transaction price.
Step
4: Allocate the transaction price to the performance obligations in the contract.
Step
5: Recognize revenue when (or as) the entity satisfies a performance obligation.
Subject
to these criteria, the Company intends to recognize revenue relating to royalties on product sales in the period in which the
sale occurs and the royalty term has begun.
Legal
Expenses
All
legal costs for litigation are charged to expense as incurred.
Leases
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). The
updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the
updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue
guidance in ASC 606. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018. The
Company adopted this guidance effective July 1, 2019.
On
July 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before
the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain
leases and; (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the
inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is
based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially
all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of
the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone
price to determine the lease payments.
F- 11
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020 and 2019
Operating
lease ROU assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized
based on the present value of future minimum lease payments over the lease term at commencement date. As most leases do not provide
an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining
the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the
lease term and is included in general and administrative expenses in the condensed consolidated statements of operations.
Basic
and Diluted Net Loss Per Common Share
Basic
net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the
period. Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares
outstanding for the period and, if dilutive, potential common shares outstanding during the period. Potentially dilutive securities
consist of the incremental common shares issuable upon exercise of common stock equivalents such as stock options, warrants and
convertible debt instruments. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.
As a result, the basic and diluted per share amounts for all periods presented are identical. As of June 30, 2019, there were
59 warrants outstanding, 59,644 stock options and 10 convertible notes payable, which notes are convertible into approximately
1,810,347 shares of the Company’s common stock. As of June 30, 2020, there were 151,170,514 warrants outstanding, 59,644
stock options and 11 convertible notes payable, which notes are convertible into approximately 439,113,281 shares of the Company’s
common stock. Each holder of the notes has agreed to a 4.99% beneficial ownership conversion limitation (subject to certain noteholders’
ability to increase such limitation to 9.99% upon 60 days’ notice to the Company), and each note may not be converted during
the first six-month period from the date of issuance. Such securities are considered dilutive securities which were excluded from
the computation since the effect is anti-dilutive.
Recent
Accounting Pronouncements
We
have reviewed the FASB issued ASU accounting pronouncements and interpretations thereof that have effectiveness dates during the
periods reported and in future periods. We have carefully considered the new pronouncements that alter previous generally accepted
accounting principles and do not believe that any new or modified principles will have a material impact on the Company’s
reported financial position or operations in the near term. The applicability of any standard is subject to the formal review
of the Company’s financial management.
NOTE
2 – GOING CONCERN
The
accompanying consolidated financial statements have been prepared in conformity with US GAAP, which contemplate continuation of
the Company as a going concern. For the fiscal year ended June 30, 2020, the Company had no revenues, had a net loss of $4,740,723
and had net cash used in operations of $1,849,589. Additionally, as of June 30, 2020, the Company had a working capital deficit,
stockholders’ deficit and accumulated deficit of $3,670,921, $3,641,425 and $55,781,770, respectively. It is management’s
opinion that these conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period
of at least twelve months from the date of this filing.
The
consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and
classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.
Successful
completion of the Company’s development program and, ultimately, the attainment of profitable operations are dependent upon
future events, including obtaining adequate financing to fulfill its development activities, acceptance of the Company’s
patent applications, obtaining additional sources of suitable and adequate financing and ultimately achieving a level of sales
adequate to support the Company’s cost structure and business plan. The Company’s ability to continue as a going concern
is also dependent on its ability to further develop and execute on its business plan. However, there can be no assurances that
any or all of these endeavors will be successful.
In
March 2020, the outbreak of COVID-19 (coronavirus) caused by a novel strain of the coronavirus was recognized as a pandemic by
the World Health Organization, and the outbreak has become increasingly widespread in the United States, Europe and Australia,
including in each of the areas in which the Company operates. The COVID-19 (coronavirus) outbreak has had a notable impact on
general economic conditions, including but not limited to the temporary closures of many businesses, “shelter in place”
and other governmental regulations, reduced business and consumer spending due to both job losses, reduced investing activity
and M&A transactions, among many other effects attributable to the COVID-19 (coronavirus), and there continue to be many unknowns.
While to date the Company has not been required to stop operating, management is evaluating its use of its office space, virtual
meetings and the like. The Company continues to monitor the impact of the COVID-19 (coronavirus) outbreak closely. The extent
to which the COVID-19 (coronavirus) outbreak will impact our operations, ability to obtain financing or future financial results
is uncertain.
F- 12
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
NOTE
3 – PROPERTY AND EQUIPMENT
Property
and equipment consist of the following as of June 30,
2020
2019
Office equipment at cost
$ 26,299
$ 26,749
Less: Accumulated depreciation
(20,552 )
(18,332 )
Total property, plant, and equipment
$ 5,747
$ 8,417
Depreciation
expense for the years ended June 30, 2020 and 2019 were $2,473 and $2,306, respectively
NOTE
4 – DUE TO FORMER DIRECTOR - RELATED PARTY
Due
to director - related party represents unsecured advances made primarily by a former director for operating expenses on behalf
of the Company such as intellectual property and formation expenses. The expenses were paid for on behalf of the Company and are
due upon demand. The Company is currently not being charged interest under these advances. The total amount owed the former director
at June 30, 2020 and 2019 is $30,639 and $31,164, respectively. The Company plans to repay the advances as its cash resources
allow. (see Note 10)
NOTE
5 – LOANS AND NOTES PAYABLE
Loans
from Directors and Officer - Related Parties
Loans
from the Company’s directors and officer at June 30, 2020 and 2019 were $50,993 and $51,867, respectively. The loans bear
no interest and are all payable on demand. The Company did not repay any amount on these loans during the years ended June 30,
2020 and 2019, respectively. (See Note 10)
NOTE
6 – CONVERTIBLE NOTES
The
Company’s convertible notes outstanding at June 30, 2020 and 2019 were as follows:
June 30, 2020
June 30, 2019
Convertible notes and debenture
$ 1,029,496
$ 1,076,785
Unamortized discounts
(126,667 )
(131,893 )
Accrued interest
80,101
99,482
Premium, net
574,804
613,003
Convertible notes, net
$ 1,557,734
$ 1,657,377
Eagle
Equities Financing Agreements
December
12, 2016 Securities Purchase Agreement
On
December 12, 2016, the Company entered into a Securities Purchase Agreement, with Eagle Equities, pursuant to which Eagle Equities
purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal amount of $100,000. The first
note (the “December 12 Note”) was funded with cash and the second note (the “December 12 Eagle Back-End Note”)
was initially paid for by an offsetting promissory note issued by Eagle Equities to the Company (the “December 12 Note Receivable”).
The terms of the December 12 Eagle Back-End Note require cash funding prior to any conversion thereunder. The December 12 Note
Receivable was due on December 12, 2017, unless certain conditions were not met, in which case both the December 12 Eagle Back-End
Note and the December 12 Note Receivable may both be cancelled. Both the December 12 Note and the December 12 Eagle Back-End Note
had a maturity date one year from the date of issuance upon which any outstanding principal and interest is due and payable. The
outstanding principal amounts plus accrued interest under both the December 12 Note and the December 12 Eagle Back-End Note were
convertible into the Company’s common stock at a conversion price equal to 60% of the lowest closing bid price of the common
stock for the ten trading days prior to the conversion, subject to adjustment in certain events. On April 11, 2017, the Company
received payment of the December 12 Note Receivable in the amount of $100,000 that offset the December Eagle Back-End Note. Proceeds
from the Note Receivable of $5,000 were paid directly to legal fees resulting in net cash proceeds of $95,000 received by the
Company. As a result, the December 12 Eagle Back-End Note then became convertible. The December 12 Note and the December 12 Eagle
Back-End Note were treated as stock settled debt under ASC 480 and accordingly the Company recorded a put premium of $66,667 as
each of the notes were funded. As of June 30, 2018, the outstanding principal under the December 12 Note along with $8,296 of
accrued interest was fully converted into shares of the Company’s common stock. As of June 30, 2019, the outstanding balance
of $100,000 under the December 12 Eagle Back-End Note along with $13,144 of accrued interest was fully converted (see Note 8 –
Stockholders’ Deficit) resulting in full repayment of the note and a full reduction of the put premium. There was no outstanding
balance as of June 30, 2019.
F- 13
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
January
27, 2017 Securities Purchase Agreement
On
January 27, 2017, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC, pursuant to which Eagle Equities
purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal amount of $230,000. The first
note (the “January 2017 Eagle Note”) was funded with cash and the second note (the “January 2017 Eagle Back-End
Note”) was initially paid for by an offsetting promissory note issued by Eagle Equities to the Company (the “January
2017 Eagle Note Receivable”). The terms of the January 2017 Eagle Back-End Note require cash funding prior to any conversion
thereunder. The January 2017 Eagle Note Receivable was due September 27, 2017, unless certain conditions were not met, in which
case both the January 2017 Eagle Back-End Note and the January 2017 Eagle Note Receivable may both be cancelled. Both the January
2017 Eagle Note and the January 2017 Eagle Back-End Note had a maturity date one year from the date of issuance upon which any
outstanding principal and interest is due and payable. The outstanding principal amounts plus accrued interest under both the
January 2017 Eagle Note and the January 2017 Eagle Back-End Note are convertible into common stock of the Company at a conversion
price equal to 60% of the lowest closing bid price of the common stock for the ten trading days prior to the conversion, subject
to adjustment in certain events. On May 4, 2017, the Company received a partial payment of the January 2017 Note Receivable in
the amount of $40,000 and on June 3, 2017 the balance of $190,000 was funded, of which $11,250 was paid directly to legal fees.
As a result, the January 2017 Eagle Back-End Note then became convertible. The January 2017 Eagle Note and the January 2017 Eagle
Back-End Note were treated as stock settled debt under ASC 480 and accordingly the Company is recording a put premium of $153,333
as each of the notes were funded. As of June 30, 2018, the outstanding principal under the January 2017 Eagle Note along with
$14,988 of accrued interest was fully converted. As of June 30, 2019, the outstanding balance of $230,000 under the January 2017
Eagle Back-End Note along with $33,356 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit)
resulting in full repayment of the note and a full reduction of the put premium. There was no outstanding balance as of June 30,
2019.
March
1, 2017 Securities Purchase Agreement
On
March 1, 2017, the Company entered into a Securities Purchase Agreement with Eagle Equities, pursuant to which Eagle Equities
purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal amount of $220,500. The first
note (the “March 2017 Eagle Note”) was funded with cash and the second note (the “March 2017 Eagle Back-End
Note”) was initially paid for by an offsetting promissory note issued by Eagle Equities to the Company (the “March
2017 Eagle Note Receivable”). The terms of the March 2017 Eagle Back-End Note require cash funding prior to any conversion
thereunder. Both the March 2017 Eagle Note and the March 2017 Eagle Back-End Note had a maturity date of March 1, 2018, upon which
any outstanding principal and interest was due and payable. The outstanding principal amounts plus accrued interest under both
the March 2017 Eagle Note and the March 2017 Eagle Back-End Note were convertible into shares of common stock, of the Company
at a conversion price equal to 60% of the lowest closing bid price of the common stock for the ten trading days prior to the conversion,
subject to adjustment in certain events. On July 5, 2017, the Company received payment of the March 2017 Eagle Note Receivable
in the amount of $220,500 that offset the March 2017 Eagle Back-End Note. Proceeds from the March 2017 Eagle Note Receivable of
$10,500 were paid directly to legal fees resulting in net cash proceeds of $210,000 received by the Company. As a result, the
March 2017 Eagle Back-End Note then became convertible. The March 2017 Eagle Note and the March 2017 Eagle Back-End Note were
treated as stock settled debt under ASC 480 and accordingly the Company recorded a put premium of $147,000 as each of the notes
were funded. As of June 30, 2018, the outstanding principal balance under the March 2017 Eagle Note along with $20,061 of accrued
interest was fully converted. As of June 30, 2019, the outstanding balance of $220,500 under the March 2017 Back-End Note along
with $19,526 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in a full reduction
of the put premium. There was no outstanding balance as of June 30, 2019.
August
9, 2017 Securities Purchase Agreement
On
August 9, 2017, the Company entered into a Securities Purchase Agreement dated as of August 8, 2017, with Eagle Equities, pursuant
to which Eagle Equities purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal amount
of $200,000. The first note (the “August 2017 Eagle Note”) was funded with cash and the second note (the “August
2017 Eagle Back-End Note”) was initially paid for by an offsetting promissory note issued by Eagle Equities to the Company
(the “August 2017 Eagle Note Receivable”). The terms of the August 2017 Eagle Back-End Note require cash funding prior
to any conversion thereunder. The August 2017 Eagle Note Receivable was due August 8, 2018, unless certain conditions were not
met, in which case both the August 2017 Eagle Back-End Note and the August 2017 Eagle Note Receivable may both be cancelled. Both
the August 2017 Eagle Note and the August 2017 Eagle Back-End Note had a maturity date one year from the date of issuance upon
which any outstanding principal and interest is due and payable. The outstanding principal amounts plus accrued interest under
both the August 2017 Eagle Note and the August 2017 Eagle Back-End Note were convertible into common stock of the Company at a
conversion price equal to 60% of the lowest closing bid price of the common stock for the ten trading days prior to the conversion,
subject to adjustment in certain events. On September 14, 2017, the Company received payment of the August 2017 Eagle Note Receivable
in the amount of $200,000 that offset the August 2017 Eagle Back-End Note. Proceeds from the August 2017 Eagle Note Receivable
of $10,000 were paid directly to legal fees resulting in net cash proceeds of $190,000 received by the Company. As a result, the
August 2017 Eagle Back-End Note then became convertible. The August 2017 Eagle Note and the August 2017 Eagle Back-End Note were
treated as stock settled debt under ASC 480 and accordingly the Company recorded a put premium of $133,333 as each of the notes
were funded. As of June 30, 2018 $120,000 of principal under the August 2017 Eagle Note along with $5,273 in interest was converted.
As of June 30, 2019, the remaining outstanding balance of $80,000 under the August 2017 Eagle Note along with $6,850 of accrued
interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment of the note and a full
reduction of the put premium. As of June 30, 2019, the remaining outstanding principal balance of $200,000 under the August 2017
Eagle Back-Note along with $30,568 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting
in full repayment of the note and a full reduction of the put premium. There was no outstanding balance as of June 30, 2019.
F- 14
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
October
25, 2017 Securities Purchase Agreement
On
November 3, 2017, the Company entered into a Securities Purchase Agreement dated as of October 25, 2017, with Eagle Equities,
pursuant to which Eagle Equities purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal
amount of $200,000. The first note (the “October 2017 Eagle Note”) was funded with cash and the second note (the “October
2017 Eagle Back-End Note”) was initially paid for by an offsetting promissory note issued by Eagle Equities to the Company
(the “October 2017 Eagle Note Receivable”). The terms of the October 2017 Eagle Back-End Note require cash funding
prior to any conversion thereunder. The October 2017 Eagle Note Receivable was due June 25, 2018, unless certain conditions were
not met, in which case both the October 2017 Eagle Back-End Note and the October 2017 Eagle Note Receivable may both be cancelled.
Both the October 2017 Eagle Note and the October 2017 Eagle Back-End Note had a maturity date one year from the date of issuance
upon which any outstanding principal and interest is due and payable. The amounts cash funded plus accrued interest under both
the October 2017 Eagle Note and the October 2017 Eagle Back-End Note were convertible into common stock, par value $0.001 of the
Company at a conversion price equal to 60% of the lowest closing bid price of the common stock for the ten trading days prior
to the conversion, subject to adjustment in certain events. On December 6, 2017, the Company received payment of the October 2017
Eagle Note Receivable in the amount of $200,000 that offset the October 2017 Eagle Back-End Note. Proceeds from the October 2017
Eagle Note Receivable of $10,000 were paid directly to legal fees resulting in net cash proceeds of $190,000 received by the Company.
As a result, the October 2017 Eagle Back-End Note then became convertible. The October 2017 Eagle Note and the October 2017 Eagle
Back-End Note were treated as stock settled debt under ASC 480 and accordingly the Company recorded a put premium of $133,333
as each of the notes were funded. As of June 30, 2019, the outstanding principal balance under the October 2017 Eagle Note along
with $14,653 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment
of the note and a full reduction of the put premium. There was no outstanding balance as of June 30, 2019.
December
29, 2017 Securities Purchase Agreement
The
Company entered into an executory contract on December 29, 2017, whereby the Company entered into a securities purchase agreement
with Eagle Equities, pursuant to which Eagle Equities purchased a convertible promissory note (the “December 2017 Eagle
Note”) from the Company in the aggregate principal amount of $532,435, with principal and the interest thereon convertible
into shares of the Company’s common stock at the option of Eagle Equities at any time. The transactions closed on January
2, 2018.
The
December 2017 Eagle Note contained an original issue discount of $25,354 such that the purchase price was $507,081. The maturity
date of the December 2017 Eagle Note was December 29, 2018. The Company was in discussions with Eagle Equities to extend the maturity
date. The December 2017 Eagle Note bore interest at a rate of 8% per annum, which interest were to be paid by the Company to Eagle
Equities in shares of the Company’s common stock upon receipt of a notice of conversion by the Company from Eagle Equities
at any time.
The Company recorded $20,065 of accrued interest
for the December 2017 Eagle Note and total principal outstanding as of June 30, 2019 under the December 2017 Eagle Note was $171,965
following conversion of $360,470 of principal and $43,535 of accrued interest during the fiscal year ended June 30, 2019. The
Company recorded $0 of accrued interest for the December 2017 Eagle Note and total principal outstanding as of June 30, 2020 under
the December 2017 Eagle Note was $0 following conversion of the remaining principal $171,965 and $24,751 of accrued
interest during the fiscal year to June 30, 2020. Accordingly, there was no outstanding balance as of June 30, 2020.
Eagle
Equities had the option to convert all or any amount of the principal face amount of the December 2017 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s
common stock as reported on the OTCQB for the ten prior trading days, including the day upon which the Company receives a notice
of conversion from Eagle Equities. The note was treated as stock settled debt under ASC 480 and accordingly the Company recorded
a $354,956 put premium of which $240,313 was released to additional paid in capital following conversion of $360,470 of principal
during the fiscal year to June 30, 2019, and a further $114,643 was released to additional paid in capital following conversion
of the remaining principal of $171,965 during the fiscal year to June 30, 2020.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. In April 2020, Eagle
Equities agreed to waive the 24% default interest on this note.
F- 15
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
June
14, 2018 Securities Purchase Agreement
Effective
June 14, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “June 2018 Eagle Note”) from the Company in the aggregate principal amount
of $105,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of Eagle Equities any time after the six-month anniversary of the June 2018 Eagle Note. The transactions contemplated by the Purchase
Agreement closed on June 19, 2018. Pursuant to the terms of the Purchase Agreement, Eagle Equities deducted $5,000 from the principal
payment due under the June 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.
The
maturity date of the June 2018 Eagle Note was on June 14, 2019. The June 2018 Eagle Note bears interest at a rate of 8% per annum,
which interest shall be paid by the Company to Eagle Equities in shares of the Company’s common stock upon receipt of a
notice of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the June 2018 Eagle Note.
Additionally,
Eagle Equities had the option to convert all or any amount of the principal face amount of the June 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s
common stock as reported on the OTC quotation system for the ten prior trading days, including the day upon which the Company
receives a notice of conversion from Eagle Equities. However, in the event that the Company’s common stock is restricted
by the Depository Trust Company (“DTC”) for any reason, the Conversion Price shall be lowered to 50% of the lowest
closing bid price for the duration of such restriction. If the Company fails to maintain a reserve of shares of its common stock
at least four times the number of shares issuable upon conversion of the Note for at least 60 days after the issuance of the Note,
the conversion discount shall be increased by 10%. Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting
a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities
and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. The June 2018 Eagle Note was
treated as stock settled debt under ASC 480 and accordingly, the Company recorded a $70,000 put premium which was released to
additional paid in capital upon conversion of the note as discussed above.
Upon
an event of default, principal and accrued interest will become immediately payable under the note. Interest on the outstanding
principal shall accrue at a default interest rate of 24% per annum or at the highest rate permitted by law. Further, certain events
of default may trigger penalty and liquidated damage provisions.
No
payments or conversions occurred in fiscal 2018.
As
of June 30, 2019, the remaining outstanding principal balance of $105,000 under the June 14, 2018 Eagle Equities Note along with
$6,674 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment of
the note and a full reduction of the put premium. There was no outstanding balance as of June 30, 2019.
July
13, 2018 Securities Purchase Agreement
Effective
July 13, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “July 2018 Note”) from the Company in the aggregate principal amount
of $75,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the option
of Eagle Equities any time after the six month anniversary of the July 2018 Eagle Note. The transaction closed on July 16, 2018
and on July 19, 2018 the Company received proceeds of $71,250 as $3,750 was paid directly to legal fees.
The
maturity date of the July 2018 Eagle Note was July 13, 2019. The July 2018 Eagle Note bears interest at a rate of 8% per annum,
which interest shall be paid by the Company to Eagle Equities in shares of the Company’s common stock upon receipt of a
notice of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the Note.
Additionally,
Eagle Equities had the option to convert all or any amount of the principal face amount of the July 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s
common stock for the ten prior trading days, including the day upon which the Company receives a notice of conversion, subject
to adjustment in certain events. Eagle Equities shall be restricted from effecting a conversion if such conversion, along with
other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the
outstanding shares of the Company’s common stock. The July 2018 Eagle Note was treated as stock settled debt under ASC 480
and accordingly, the Company recorded a $50,000 put premium of which $50,000 was released in fiscal 2020 to additional paid in
capital following the full conversion of the note.
F- 16
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
The
Company recorded $5,786 of accrued interest and the total principal outstanding under the July 2018 Eagle Note was $75,000 as
of June 30, 2019. The Company recorded $0 of accrued interest and the total principal outstanding under the July 2018 Eagle Note
was $0 as of June 30, 2020 following conversion of $75,000 of principal and $9,300 of accrued interest during the fiscal year
ended June 30, 2020. The Company had the right to prepay the July 2018 Eagle Note with certain penalties until January 9, 2019.
No prepayment was made as of such date. As a result, the July 2018 Eagle Note was convertible.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. In April 2020, Eagle
Equities agreed to waive the 24% default interest on this note.
August
29, 2018 Securities Purchase Agreement
Effective
August 29, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “August 2018 Eagle Note”) from the Company in the aggregate principal
amount of $105,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the August 2018 Eagle Note. The transactions contemplated
by the agreement closed on August 30, 2018.
The
maturity date of the August 29, 2018 Eagle Note was August 29, 2019. The Company is currently in discussions with Eagle Equities
to extend the maturity date. The August 2018 Eagle Note bears interest at a rate of 8% per annum, which interest shall be paid
by the Company to Eagle Equities in shares of the Company’s common stock upon receipt of a notice of conversion by the Company
from Eagle Equities at any time after the six-month anniversary of the August 2018 Eagle Note.
Additionally,
Eagle Equities has the option to convert all or any amount of the principal face amount of the August 2018 Eagle Note, at any
time, into shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price (the “Closing
Bid Price”) of the Company’s common stock as reported on the OTC Markets quotation system for the ten prior trading
days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the “Conversion Price”).
However, in the event that the Company’s common stock is restricted by the DTC for any reason, the Conversion Price shall
be lowered to 50% of the lowest Closing Bid Price for the duration of such restriction. If the Company fails to maintain a reserve
of shares of its common stock at least four times the number of shares issuable upon conversion of the August 2018 Eagle Note
for at least 60 days after the issuance of the August 28, 2018 Eagle Note, the conversion discount shall be increased by 10%.
Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion if such conversion, along with other
shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the outstanding
shares of the Company’s common stock. The Company had the right to prepay the August 2018 Eagle Note with certain penalties
until February 25, 2019. No prepayment was made as of such date. As a result, the August 2018 Eagle Note then became convertible.
The August 2018 Eagle Note is treated as stock settled debt under ASC 480 and accordingly, the Company recorded a $70,000 put
premium of which $17,000 was released to additional paid in capital following conversion of principal during the fiscal year to
June 30, 2020.
The
Company recorded $7,042 of accrued interest and the total principal outstanding under the August 2018 Eagle Note was $105,000
as of June 30, 2019.The Company recorded $11,663 of accrued interest and the total principal outstanding under the August 2018
Eagle Note was $79,500 as of June 30, 2020 following conversion of $25,500 of principal and $3,788 of accrued interest during
the fiscal year ended June 30, 2020.
Upon
an event of default, interest on the outstanding principal shall accrue at a default interest rate of 24% per annum or at the
highest rate permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. In April
2020, Eagle Equities agreed to waive the 24% default interest on this note, however, the note is currently past due.
October
2, 2018 Securities Purchase Agreement
Effective
October 2, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “October 2018 Eagle Note”) from the Company in the aggregate principal
amount of $210,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the October 2018 Eagle Note. The transactions contemplated
by the purchase agreement closed on October 3, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted
$10,000 from the principal payment due under the October 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.
The
maturity date of the October 2018 Eagle Note was October 2, 2019. The October 2018 Eagle Note shall bore interest at a rate of
8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice
of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the October 2018 Eagle Note.
F- 17
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
Additionally,
Eagle Equities had the option to convert all or any amount of the principal amount of the October 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 60% of the lowest closing bid price of the Company’s
common stock for the ten prior trading days, including the day upon which the Company receives a notice of conversion, subject
to adjustment in certain events. Eagle Equities shall be restricted from effecting a conversion if such conversion, along with
other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates, exceeds 4.99% of the
outstanding shares of the Company’s common stock. No prepayment was made as of such date. As a result, the October 2018
Eagle Note then became convertible. The October 2, 2018 Eagle Note was treated as stock settled debt under ASC 480 and accordingly,
the Company recorded a $140,000 put premium of which $140,000 was released to additional paid in capital following conversion
of principal during the year ended June 30, 2020.
The
Company recorded $12,473 of accrued interest and the total principal outstanding under the October 2018 Eagle Note was $210,000
as of June 30, 2019. The Company recorded $0 of accrued interest and the total principal outstanding under the October 2018 Eagle
Note was $0 as of June 30, 2020 following conversion of $210,000 of principal and $25,725 of accrued interest during the year
ended June 30, 2020. The Company had the right to prepay the October 2018 Eagle Note with certain penalties until March 31, 2019.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. In April 2020, Eagle
Equities agreed to waive the 24% default interest on this note.
November
30, 2018 Securities Purchase Agreement
Effective
November 30, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “November 2018 Eagle Note”) from the Company in the aggregate principal
amount of $105,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the November 2018 Eagle Note. The transactions contemplated
by the purchase agreement closed on December 3, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted
$5,000 from the principal payment due under the November 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.
The
maturity date of the November 2018 Eagle Note was November 30, 2019. The November 2018 Eagle Note bore interest at a rate of 8%
per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice of
conversion by the Company from Eagle Equities at any time after the six-month anniversary of the November 2018 Eagle Note.
Additionally,
Eagle Equities had the option to convert all or any amount of the principal amount of the November 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 61% of the lowest closing bid price (the “Closing Bid
Price”) of the Company’s common stock as reported on the OTC Markets Group, Inc. quotation system for the ten prior
trading days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the “Conversion
Price”). However, in the event that the Company’s common stock is restricted by the Depository Trust Company for any
reason, the Conversion Price shall be lowered to 51% of the lowest Closing Bid Price for the duration of such restriction. If
the Company fails to maintain a reserve of shares of its common stock at least two and a half times the number of shares issuable
upon conversion of the November 2018 Eagle Note for at least 60 days after the issuance of the November 2018 Eagle Note, the conversion
discount shall be increased by 10%. Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion
if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates,
exceeds 4.99% of the outstanding shares of the Company’s common stock. The November 2018 Eagle Note was treated as stock
settled debt under ASC 480 and accordingly, the Company recorded a $67,131 put premium of which $67,131 was released to additional
paid in capital following conversion of principal during the year ended June 30, 2020.
The
Company recorded $4,879 of accrued interest and the total principal outstanding under the November 2018 Eagle Note was $105,000
as of June 30, 2019. The Company recorded $0 of accrued interest and the total principal outstanding under the November 2018 Eagle
Note was $0 as of June 30, 2020 following conversion of $105,000 of principal and $12,832 of accrued interest during the year
ended June 30, 2020. The November 2018 Eagle Note may be prepaid with certain penalties by the Company until May 29, 2019. No
prepayment was made as of such date.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. In April 2020, Eagle
Equities agreed to waive the 24% default interest on this note.
December
24, 2018 Securities Purchase Agreement
Effective
December 24, 2018, the Company entered into a securities purchase agreement with Eagle Equities, pursuant to which Eagle Equities
purchased a convertible promissory note (the “December 2018 Eagle Note”) from the Company in the aggregate principal
amount of $126,000, such principal and the interest thereon convertible into shares of the Company’s common stock at the
option of Eagle Equities any time after the six-month anniversary of the December 2018 Eagle Note. The transactions contemplated
by the purchase agreement closed on December 24, 2018. Pursuant to the terms of the purchase agreement, Eagle Equities deducted
$6,000 from the principal payment due under the December 2018 Eagle Note, at the time of closing, to be applied to its legal expenses.
The Company used the net proceeds from the December 2018 Eagle Note to repay an outstanding convertible promissory note before
such note became convertible.
F- 18
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
The
maturity date of the December 2018 Eagle Note was December 24, 2019. The December 2018 Eagle Note shall bear interest at a rate
of 8% per annum, which interest shall be paid by the Company to Eagle Equities in shares of common stock upon receipt of a notice
of conversion by the Company from Eagle Equities at any time after the six-month anniversary of the December 2018 Eagle Note.
Additionally,
Eagle Equities has the option to convert all or any amount of the principal amount of the December 2018 Eagle Note, at any time,
for shares of the Company’s common stock at a price equal to 61% of the lowest closing bid price (the “Closing Bid
Price”) of the Company’s common stock as reported on the OTC Markets Group, Inc. quotation system for the ten prior
trading days, including the day upon which the Company receives a notice of conversion from Eagle Equities (the “Conversion
Price”). However, in the event that the Company’s common stock is restricted by the Depository Trust Company for any
reason, the Conversion Price shall be lowered to 51% of the lowest Closing Bid Price for the duration of such restriction. If
the Company fails to maintain a reserve of shares of its common stock at least two and a half times the number of shares issuable
upon conversion of the December 2018 Eagle Note for at least 60 days after the issuance of the December 2018 Eagle Note, the conversion
discount shall be increased by 10%. Notwithstanding the foregoing, Eagle Equities shall be restricted from effecting a conversion
if such conversion, along with other shares of the Company’s common stock beneficially owned by Eagle Equities and its affiliates,
exceeds 4.99% of the outstanding shares of the Company’s common stock. The December 2018 Eagle Note is treated as stock
settled debt under ASC 480 and accordingly, the Company recorded an $80,557 put premium.
The
Company recorded $5,220 of accrued interest and the total principal outstanding under the November 2018 Eagle Note was $126,000
as of June 30, 2019. The Company has recorded $15,327 of accrued interest and the total principal outstanding under the November
2018 Eagle Note was $126,000 as of June 30, 2020. The December 2018 Eagle Note may be prepaid with certain penalties until June
22, 2019. No prepayment was made as of such date.
Upon
an event of default, principal and accrued interest will become immediately due and payable under the notes. Additionally, upon
an event of default, both notes will accrue interest at a default interest rate of 24% per annum or the highest rate of interest
permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. In April 2020, Eagle
Equities agreed to waive the 24% default interest on this note, however, the note is currently past due.
The
total principal amount outstanding under the above Eagle Equities financing agreements, specifically the December 12, 2016, the
January 27, 2017, the March 1, 2017, the October 25, 2017, the August 9, 2017, the December 29, 2017, the June 14, 2018, the July
13, 2018, the August 29, 2018, the October 2, 2018, the November 30, 2018 and the December 24, 2018 agreements was $792,965 and
accrued interest totaled $55,675 as of June 30, 2019. The total principal amount outstanding under the above Eagle Equities financing
agreements, specifically the August 29, 2018 and the December 24, 2018 agreements was $205,500 as of June 30, 2020 and accrued
interest totaled $26,990.
GS
Capital Financing Agreements
July
24, 2017 Securities Purchase Agreement
On
July 24, 2017, the Company entered into a Securities Purchase Agreement with GS Capital, pursuant to which GS Capital purchased
two 8% convertible redeemable junior subordinated promissory notes, each in the principal amount of $160,000. The first note (the
“July 2017 GS Note”) was funded with cash and the second note (the “July 2017 GS Back-End Note”) was initially
paid for by an offsetting promissory note issued by GS Capital to the Company (the “July 2017 GS Note Receivable”).
The terms of the July 2017 GS Back-End Note required cash funding prior to any conversion thereunder. The July 2017 GS Note Receivable
was due March 24, 2018, unless certain conditions were not met, in which case both the July 2017 GS Back-End Note and the July
2017 GS Note Receivable may both be cancelled. Both the July 2017 GS Note and the July 2017 GS Back-End Note matured on July 24,
2018 upon which any outstanding principal and interest is due and payable. The amounts cash funded plus accrued interest under
both the July 2017 GS Note and the July 2017 GS Back-End Note are convertible into common stock of the Company at a conversion
price equal to 62% of the lowest closing bid price of the common stock for the ten trading days prior to the conversion, subject
to adjustment in certain events. On January 25, 2018, the Company received payment of the July 2017 GS Note Receivable in the
amount of $160,000 that offset the July 2017 GS Back-End Note. Proceeds from the July 2017 GS Note Receivable of $8,000 were paid
directly to legal fees resulting in net cash proceeds of $152,000 received by the Company. As a result, the July 2017 GS Back-End
Note is now convertible. The July 2017 GS Note and the July 2017 GS Back-End Note are treated as stock settled debt under ASC
480 and accordingly the Company recorded a $98,065 put premium as each of the notes was funded.
As
of June 30, 2018, the outstanding principal under the July 2017 GS Note and $8,169 of accrued interest was fully converted into
shares of the Company’s common stock. As of June 30, 2018, $125,000 of principal under the July 2017 GS Back-End Note along
with $3,420 in interest was converted. As of June 30, 2019, the remaining outstanding principal balance of $35,000 under the July
2017 GS Back-End Note along with $5,829 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit)
resulting in full repayment of the note and a full reduction of the put premium. There was no outstanding balance as of June 30,
2019.
F- 19
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
September
21, 2017 Securities Purchase Agreement
On
September 21, 2017, the Company entered into Securities Purchase Agreements, with GS Capital, dated as of September 12, 2017,
pursuant to which GS Capital purchased two 8% convertible redeemable junior subordinated promissory notes, each in the principal
amount of $160,000. The first note (the “September 2017 GS Note”) was funded with cash and the second note (the “September
2017 GS Back-End Note”) was initially paid for by an offsetting promissory note issued by GS Capital to the Company (the
“September 2017 GS Note Receivable”). The terms of the September 2017 GS Back-End Note require cash funding prior
to any conversion thereunder. The September 2017 GS Note Receivable was due March 24, 2018, unless certain conditions are not
met, in which case both the September 2017 GS Back-End Note and the September 2017 GS Note Receivable may both be cancelled. Both
the September 2017 GS Note and the September 2017 GS Back-End Note matured on September 12, 2018, upon which any outstanding principal
and interest is due and payable. The amounts cash funded plus accrued interest under both the September 2017 GS Note and the September
2017 GS Back-End Note are convertible into common stock of the Company at a conversion price equal to 62% of the lowest closing
bid price of the common stock for the ten trading days prior to the conversion, subject to adjustment in certain events. On February
27, 2018, the Company received payment of the September 2017 GS Note Receivable in the amount of $160,000 that offset the September
2017 GS Back-End Note. Proceeds from the September 2017 GS Note Receivable of $8,000 were paid directly to legal fees resulting
in net cash proceeds of $152,000 received by the Company. As a result, the September 2017 GS Back-End Note is now convertible.
The September 2017 GS Note and the September 2017 GS Back-End Note are treated as stock settled debt under ASC 480 and accordingly
the Company recorded a $98,065 put premium as each of the notes was funded.
As
of June 30, 2018, $30,000 of principal under the September 2017 GS Note along with $1,289 in interest was converted. As of June
30, 2019, the remaining outstanding principal balance of $130,000 under the September 2017 GS Note along with $9,695 of accrued
interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment of the note and a full
reduction of the put premium. As of June 30, 2019, the outstanding principal balance of $160,000 under the September 2017 GS Back-End
note along with $7,119 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full
repayment of the note and a full reduction of the put premium. There was no outstanding balance as of June 30, 2019.
March
23, 2018 Securities Purchase Agreement
On
March 23, 2018, the Company entered into a securities purchase agreement with GS Capital, pursuant to which GS Capital purchased
two 8% convertible redeemable junior subordinated promissory notes of the Company, each in the principal amount of $106,000. The
first note (the “March 2018 GS Note”) was funded with cash and the second note (the “March 2018 GS Back-End
Note”) was initially paid for by an offsetting promissory note issued by GS Capital to the Company (the “March 2018
GS Note Receivable”). The terms of the March 2018 GS Back-End Note require cash funding prior to any conversion thereunder.
The March 2018 GS Note Receivable is due November 23, 2018, unless certain conditions are not met, in which case both the March
2018 GS Back-End Note and the March 2018 GS Note Receivable may both be cancelled. Both the March 2018 GS Note and the March 2018
GS Back-End Note mature on March 23, 2019, upon which any outstanding principal and interest is due and payable. The amounts cash
funded plus accrued interest under both the March 2018 GS Note and the March 2018 GS Back-End Note are convertible into shares
of common stock of the Company at a conversion price equal to 62% of the lowest closing bid price of the common stock for the
ten trading days prior to the conversion, subject to adjustment in certain events. On May 31, 2018, the Company received payment
of the March 2018 GS Note Receivable in the amount of $106,000 that offset the March 2018 GS Back-End Note. Proceeds from the
March 2018 GS Note Receivable of $5,300 were paid directly to legal fees resulting in net cash proceeds of $100,700 received by
the Company. As a result, the March 2018 GS Back-End Note is now convertible. The March 2018 GS Note and the March 2018 GS Back-End
Note are treated as stock settled debt under ASC 480 and accordingly the Company recorded a $64,968 put premium as each of the
notes was funded.
As
of June 30, 2019, the outstanding principal balance of $106,000 under the March 2018 GS Note along with $2,765 of accrued interest
was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment of the note and a full reduction
of the put premium. As of June 30, 2019, the outstanding principal balance of $106,000 under the March 2018 GS Back-End note along
with $4,740 of accrued interest was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment
of the note and a full reduction of the put premium. There was no outstanding balance as of June 30, 2019.
April
13, 2018 Securities Purchase Agreement
On
April 13, 2018, the Company entered into a securities purchase agreement with GS Capital, pursuant to which GS Capital purchased
two 8% unsecured convertible promissory notes (the “April 2018 GS Notes”) from the Company each in the principal amount
of $150,000. The first note (the “April 2018 GS Note”) was funded with cash and the second note (the “April
2018 GS Back-End Note”) was initially paid for by an offsetting promissory note issued by GS Capital to the Company (the
“April 2018 GS Note Receivable”). The terms of the April 2018 Back-End Note require cash funding prior to any conversion
thereunder.
F- 20
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 and 2019
Both
the April 2018 GS Note and the April 2018 GS Back-End Note mature on April 13, 2019, upon which any outstanding principal and
interest thereon is due and payable. The amounts cash funded plus accrued interest under both the April 2018 GS Note and the April
2018 GS Back-End Note are convertibles into shares of the Company’s common stock, at any time after October 13, 2018, at
a conversion price for each share of common stock equal to 61% of the lowest closing bid price of the Company’s common stock
for the ten prior trading days including the day upon which a notice of conversion is received by the Company from GS Capital,
subject to adjustment in certain events. On September 12, 2018, the Company received payment of the April 2018 GS Note Receivable
in the amount of $150,000 that offset the March 2018 GS Back-End Note. Proceeds from the March 2018 GS Note Receivable of $7,500
were paid directly to legal fees resulting in net cash proceeds of $142,500 received by the Company. Both the April 2018 GS Note
and the April 2018 GS Back-End Note are treated as stock settled debt under ASC 480 and accordingly the Company recorded a $95,902
put premium as each of the notes were funded.
As
of June 30, 2019, the outstanding principal balance of $150,000 under the April 2018 GS Note along with $9,632 of accrued interest
was fully converted (see Note 8 – Stockholders’ Deficit) resulting in full repayment of the note and a full reduction
of the put premium
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.