Propanc Biopharma, Inc. 10-K

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 in our consolidated financial statements and notes thereto appearing under Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. 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 on Form 10-K. 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 The Company was originally formed in Melbourne, Victoria, Australia on October 15, 2007 as Propanc PTY LTD. On November 23, 2010, Propanc Health Group Corporation was incorporated in the State of Delaware and in January 2011, to reorganize our Company, we acquired all of the outstanding shares of Propanc PTY LTD on a one-for-one basis, whereby 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. 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. 26 Recent Developments June Purchase Agreement On June 29, 2023, the Company entered into a securities purchase agreement with an investor (the “June Investor”), which closed on July 6, 2023, pursuant to which the June Investor purchased a convertible promissory note (the “June Note”) from the Company in the aggregate principal amount of $65,000, such principal and the interest thereon convertible into shares of Common Stock at the option of June Investor at any time after 180 days of the June Note (the “June Conversion Shares”). The conversion price for the June Note is equal to 65% of the market price of the Common Stock, which is based on the average of the lowest three trading prices of the Common Stock for the ten trading days immediately prior to the delivery of a notice of conversion of the June Note. Pursuant to the June Note, the Company is required to maintain an initial reserve of at least 500% of the number of June Conversion Shares, subject to any increase of such reserved amount by the June Investor. The maturity date of the June Note is June 29, 2024 and bears interest at a rate of 8% per annum, which may be increased to 22% in the event of a default. Between the period beginning 60 days following the date of the June Note and 180 days thereafter, the Company has the right to prepay the principal and accrued but unpaid interest due under the June Note at a 110% premium plus accrued and unpaid interest , together with any other amounts that the Company may owe the June Investor under the terms of the June Note, in accordance with its terms, which premium increases during such period, up to a maximum of 129%. For further information on such purchase agreement and June Note, see the Current Report on Form 8-K filed by the Company with the SEC on July 12, 2023 and the exhibits filed therewith. July Loan Agreement On July 5, 2023, the Company and the July Investor entered into a letter agreement, pursuant to which the July Investor loaned the Company an aggregate of AU$230,000. Pursuant to the agreement, the term of such loan is three (3) years, ending on July 5, 2026, with an interest rate of 10% to be paid monthly in arrears. A portion of the proceeds of such loan were used to repay an outstanding balance of approximately $143,000 due on a convertible promissory note held by a third-party investor and which had been in default. In connection with such loan, the Company issued a common stock purchase warrant to the July Investor immediately exercisable for up to an aggregate of 15,000,000 shares of Common Stock, at an initial exercise price of $0.01 per share. For further information on such letter agreement and warrant, see the Current Report on Form 8-K filed by the Company with the SEC on July 12, 2023 and the exhibits filed therewith. July Purchase Agreement On July 19, 2023, the Company entered into an additional securities purchase agreement with the June Investor, which closed on July 28, 2023, pursuant to which the June Investor purchased the July Note from the Company in the aggregate principal amount of $45,000, such principal and the interest thereon convertible into shares of Common Stock at the option of June Investor at any time after 180 days of the July Note. The conversion price for the July Note is equal to 65% of the market price of the Common Stock, which is based on the average of the lowest three trading prices of the Common Stock for the ten trading days immediately prior to the delivery of a notice of conversion of the July Note. Pursuant to the July Note, the Company is required to maintain an initial reserve of at least 500% of the number of July Conversion Shares, subject to any increase of such reserved amount by the June Investor. The maturity date of the July Note is July 19, 2024 and bears interest at a rate of 8% per annum, which may be increased to 22% in the event of a default. Between the period beginning 60 days following the date of the July Note and 180 days thereafter, the Company has the right to prepay the principal and accrued but unpaid interest due under the July Note at a 110% premium plus accrued and unpaid interest, together with any other amounts that the Company may owe the June Investor under the terms of the July Note, in accordance with its terms, which premium increases during such period, up to a maximum of 129%. For further information on such purchase agreement and July Note, see the Current Report on Form 8-K filed by the Company with the SEC on August 8, 2023 and the exhibits filed therewith. 27 July Equity Line Agreement On July 20, 2023, we entered into the Stock Purchase Agreement with the Selling Stockholder providing for an equity financing facility, pursuant to which Company has the option to request that the Selling Stockholder commit to purchase up to $5,000,000 of the Shares over a 24-month term commencing on the date on which the registration statement of which this prospectus forms a part is declared effective by the SEC. For a more detailed description of the Stock Purchase Agreement and the issuance of the Shares to the Selling Stockholder, see the section here entitled “Private Placement”. Termination of November 2022 Equity Line Agreement As previously disclosed in our Quarterly Report on Form 10-Q filed on November 14, 2022, we entered into the Coventry Purchase Agreement with Coventry Enterprises, LLC, a Delaware limited company. On July 25, 2023, we terminated the Coventry Purchase Agreement in accordance with its terms, effective immediately. For further information on such purchase agreement, see the Quarterly Report on Form 10-Q filed by the Company with the SEC on November 14, 2022 and the exhibits filed therewith. August 16, 2023 Purchase Agreement On August 16, 2023, the Company entered into a securities purchase agreement with the August Investor, which closed on August 16, 2023, pursuant to which the August Investor purchased a convertible promissory from the Company in the aggregate principal amount of $55,000, such principal and the interest thereon convertible into shares Common Stock at the option of August Investor at any time after 180 days of the issuance date of the August Note (the “Conversion Shares”). The conversion price for the August Note is equal to 65% of the market price of the Common Stock, which is based on the average of the lowest three trading prices of the Common Stock for the ten trading days immediately prior to the delivery of a notice of conversion of the August Note. Notwithstanding the foregoing, such conversions are subject to a 4.99% beneficial ownership limitation and adjustments for stock splits, stock dividends or rights offerings, mergers, consolidations, reorganizations and similar events set forth in the August Note. Pursuant to the August Note, the Company is required to maintain an initial reserve of at least 500% of the number of Conversion Shares, subject to any increase or decrease of such reserved amount to reflect the Company’s obligations under the August Note. The maturity date of the August Note is August 16, 2024 and bears interest at a rate of 8% per annum, which may be increased to 22% in the event of a default. During the first 60 days following the date of the August Note, the Company has the right to prepay the principal and accrued but unpaid interest due under the August Note, together with any other amounts that the Company may owe the August Investor under the terms of the August Note, at a 110% premium of the face amount plus accrued and unpaid interest and any other amounts owed to the August Investor, which increases to (i) 115% if prepaid after 60 days, but less than 91 days from the issuance date, (ii) 120% if prepaid after 90 days, but less than 121 days from the issuance date, (iii) 125% if prepaid after 120 days, but less than 151 days from the issuance date, and (iv) 129% if prepaid after 150 days, but less than 181 days from the issuance date. After this initial 180-day period, the Company does not have a right to prepay the August Note. For further information on such purchase agreement and July Note, see the Current Report on Form 8-K filed by the Company with the SEC on August 21, 2023 and the exhibits filed therewith. August Promissory Note On August 15, 2023, the Company issued to an institutional investor (the “August Lender”) a 10% original issue discount promissory note (the “Promissory Note”) in consideration for $120,000, which has a principal face amount of $132,000, matures on November 15, 2023 and accrues interest at a rate of 10% per annum, which may be increased to 18% in the event of a default. The Company has the right to prepay the principal and accrued but unpaid interest due under the Promissory Note, together with any other amounts that the Company may owe the August Lender under the terms of the Promissory Note, on or before September 14, 2023 at a 110% premium of the face amount plus accrued and unpaid interest and any other amounts owed to the August Lender, which increases to (i) 120% if prepaid after such date, but on or before October 14, 2023, and (ii) 130% if prepaid after October 14, 2023, unless the Company and the Lender agree to otherwise effect repayment. For further information on such purchase agreement and July Note, see the Current Report on Form 8-K filed by the Company with the SEC on August 21, 2023 and the exhibits filed therewith. 28 August 23, 2023 Purchase Agreement On August 23, 2023, the Company entered into a securities purchase agreement with an investor (the “Investor”), which closed on August 23, 2023, pursuant to which the Investor purchased a convertible redeemable promissory note in the aggregate principal amount of $77,500 (the “Note”) from the Company for $72,500. The principal and the interest thereon is convertible into shares Common Stock at the option of Investor at any time (the “Conversion Shares”). The initial conversion price for the Note is equal to $0.04 per share (the “Fixed Price”), provided that the Fixed Price will be reduced to $0.02 per share in the event that the market price of the Common Stock trades below $0.03 per share for five consecutive trading days. In the event of a default under the Note and unless the Fixed Price is lower, such conversion price will equal the lowest trading price of the Common Stock for the ten trading days immediately preceding such default, which price is subject to re-adjustment every thirty calendar days during the period in which the Company remains in default. Pursuant to the Note, in the event that such conversion price is below the par value of the Common Stock, the Company has agreed to take all steps to reduce such par value or conduct a reverse split of its Common Stock, as applicable. Notwithstanding the foregoing, such conversion price and lookback periods are subject to adjustment in favor of the Investor in the event the Company issues securities to another party with more favorable conversion terms, and such conversions are subject to a 4.99% beneficial ownership limitation (which may be increased to 9.9% upon 60 days’ prior written notice from the holder of the Note) and adjustments for mergers, consolidations, reorganizations and similar events set forth in the Note, other than a transfer or sale of all or substantially all Company assets. Pursuant to the Note, the Company is required to maintain an initial reserve of at least 400% of the number of Conversion Shares, subject to any increase of such reserved amount to reflect the Company’s obligations under the Note. In addition, pursuant to the Note, in the event of a transfer or sale of all or substantially all of the Company’s assets, or certain merger, consolidation, reorganization and similar events described in the Note, the Company will be required to, upon the Investor’s request, (i) redeem the Note in cash for 150% of the principal and accrued but unpaid interest thereon through such redemption date or (ii) convert the unpaid principal and accrued but unpaid interest into shares of Common Stock immediately prior to such event at the conversion price then in effect. The maturity date of the Note is February 23, 2024 and bears interest at a rate of 8% per annum, which may be increased to 24% in the event of a default. Interest on such Note is payable only in Common Stock in accordance with the terms of conversion in the Note. During the first 60 days following the date of the Note, the Company has the right to prepay the principal and accrued but unpaid interest due under the Note, at a 110% premium of the face amount plus accrued and unpaid interest, which increases to (i) 120% if prepaid after 60 days, but less than 121 days from the issuance date and (ii) 125% if prepaid after 120 days, but less than 181 days from the issuance date. After this initial 180-day period, the Company does not have a right to prepay the Note. For further information on such purchase agreement and July Note, see the Current Report on Form 8-K filed by the Company with the SEC on August 29, 2023 and the exhibits filed therewith. 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 Report. The results discussed below are of the Company and its wholly-owned Australian subsidiary, Propanc PTY LTD. Fiscal Year Ended June 30, 2023, as compared to the Fiscal Year Ended June 30, 2022 Revenue For the fiscal years 2023 and 2022 we generated no revenue because we are currently undertaking research and development activities for market approval and no sales were generated in this period. 29 Administration Expenses Administration expenses decreased to $1,499,885 for the year ended June 30, 2023, as compared to $1,706,452 for the year ended June 30, 2022. This decrease of approximately $207,000 is primarily attributable to a decrease of approximately $231,000 in stock-based expenses, a decrease in general consulting, legal and investor relation fees of approximately $91,000 offset by increases in accounting fees of approximately $15,000, employee remuneration expense of approximately $89,000, marketing expense of $7,000 and other general and administrative expenses of approximately $4,000. Occupancy Expense Occupancy expense increased to $28,841 as compared to $28,366 for the year ended June 30, 2023. This increase of $475 is primarily attributable to exchange rate movements over the period when compared to the same year in 2022. Research and Development Expenses Research and development expenses decreased to $247,919 for the year ended June 30, 2023, as compared to $256,052 for the year ended June 30, 2022. The decrease in research and development expenses of $8,133 is primarily due to foreign currency fluctuations during the year. Such research and development expenses are related to the two-year collaboration agreement with University of Jaén, which was executed in October 2020 to provide certain research services to the Company ending on October 2022, relating to the investigation of a fully synthetic recombinant version of PRP. Additionally, on July 27, 2022, the Company entered into another two-year research agreement with the University of Jaén to provide certain research and experiment services to the Company relating to the investigation of the effects of pancreatic proenzymes against the tumor microenvironment. Interest Expense Interest expense decreased to $532,821 for the year ended June 30, 2023, as compared to $568,798 for the year ended June 30, 2022. Interest expense primarily comprised approximately $203,000 of debt discount amortization and accretion of put premium and interest expense from accrual of interest expense and other financing fees for a total of approximately $330,000 for the year ended June 30, 2023. This decrease in interest expense of $36,554 is primarily attributable to the decrease of approximately $220,000 in accretion of put premium offset by increase in amortization of debt discount of approximately $155,000 and increase in accrual of interest expense of $30,000. Change in Fair Value of Derivative Liabilities Change in fair value of derivative liabilities were increased to a loss of $(530,330) for the year ended June 30, 2023, as compared to a loss of $(99,111) for the year ended June 30, 2022. This increase in loss during the year ended June 30, 2023 of approximately $431,000 is primarily attributable to an increase in fair value of the principal amount of convertible notes with bifurcated embedded conversion option derivatives as a result of the decrease in the conversion prices of such notes during the year ended June 30, 2023. Gain from Settlement of Accounts Payable Gain from settlement of accounts payable was $17,499 for the year ended June 30, 2023, as compared to $0 for the year ended June 30, 2022. On August 16, 2022, the Company and a third-party investor relations consultant agreed to settle an outstanding payable of $23,050 in exchange for 2,305,000 warrants to purchase Common Stock at $0.01 per share with an expiry date of August 16, 2025 and fair market value of $5,551. Accordingly, the Company recognized gain from settlement of accounts payable of $17,499 during the year ended June 30, 2023. 30 Gain on Extinguishment of Debt, net During the year ended June 30, 2023, the principal aggregate amount of convertible notes of $168,200, accrued interest of $16,632 and conversion fees of $1,838 containing bifurcated embedded conversion option derivatives were converted into common stock. Accordingly, the fair market value of the shares issued upon conversion was $556,272, resulting in a loss on extinguishment at the time of conversion of $369,602 and $352,051 of derivative liability fair value was recorded as a gain on extinguishment at the time of conversion, resulting in a net loss of $17,551. Additionally, during the year ended June 30, 2023, the Company recognized the remaining put premium of $43,520 related to a convertible note into gain on extinguishment of debt. The holder of such convertible note agreed to surrender all conversion rights in its currently held convertible notes due to violation of Section 15(a)(1) of the Exchange Act, which resulted in a net gain on extinguishment of debt of $25,969 (when considering the above loss) for the year ended June 30, 2023 compared to a loss on extinguishment of debt for the year ended June 30, 2022 of ($17,503). Foreign Currency Transaction Gain (Loss) Foreign currency transaction decreased to a gain of $5,885 for the year ended June 30, 2023, as compared to a loss of $42,395 for the year ended June 30, 2022. The decrease of approximately $48,000 for the year ended June 30, 2023 is partially attributable to the decrease in exchange rates during the year ended June 30, 2023. Benefit (provision) for taxes During the years ended June 30, 2023 and 2022, the Company applied for and received from the Australian Taxation Office a research and development tax credit in the amount of $129,841 and $54,977, respectively. Net loss Net loss increased to $2,660,566 for the year ended June 30, 2023 as compared to a net loss of $2,658,087 for the year ended June 30, 2022. The change relates to the factors discussed above. Deemed dividend The Company recognized the value of the effect of a down round feature related to our Series A warrants when triggered. Upon the occurrence of the triggering event that resulted in a reduction of the strike price, the Company measured the value of the effect of the feature as the difference between the fair value of the warrants without the down round feature or before the strike price reduction and the fair value of the warrants with a strike price corresponding to the reduced strike price upon the down round feature being triggered. Accordingly, the Company recognized deemed dividend of $466,273 and $700,340 and a corresponding reduction of income available to common stockholders upon the alternate cashless exercise of these warrants during the years ended June 30, 2023 and 2022, respectively. Net loss available to common stockholders Net loss available to common stockholders increased to $3,126,839 for the year ended June 30, 2023 as compared to a net loss of $3,358,427 for the year ended June 30, 2022. The change relates to the factors discussed above. Liquidity and Capital Resources Current Financial Condition As of June 30, 2023, we had total assets of $60,328, comprised primarily of cash of $10,047, GST tax receivable of $2,867, prepaid expenses and other current assets of $6,125, property and equipment, net, of $302, operating lease ROU asset, net of $38,988, and security deposit of $1,999. As compared to June 30, 2022, we had total assets of $81,651, comprised primarily of cash of $4,067, GST tax receivable of $2,342, prepaid expenses and other current assets of $8,621, property and equipment, net, of $2,023, operating lease ROU asset, net of $62,523, and security deposit of $2,075. 31 We had current liabilities of $3,158,229, primarily comprised of net convertible debt of $390,539, loan payable of $65,280, accounts payable and accrued expenses of $1,546,425, employee benefit liability of $587,618, and embedded conversion option liabilities of $423,209 as of June 30, 2023. As compared to June 30, 2022, we had current liabilities of $3,062,981, primarily comprising net convertible debt of $926,438, accrued interest of $57,822, accounts payable and accrued expenses of $1,409,138, employee benefit liability of $415,799, and embedded conversion option liabilities of $151,262. 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, consulting fees and travel. During the year ended June 30, 2023, we received proceeds from exercise of warrants of $475,000, proceeds from issuance of convertible notes of $590,250, proceeds from sale of our stocks of $24,711 and proceeds from the collection of subscription receivables of $23,758. We have substantial capital resource requirements and have incurred significant losses since inception. As of June 30, 2023, we had $10,047 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 years ended June 30, 2023 2022 Net cash used in operating activities $ (1,105,251 ) $ (1,436,304 ) Net cash provided by financing activities $ 1,113,719 $ 1,490,786 Effect of exchange rate changes on cash $ (2,488 ) $ (52,670 ) Net Cash Flow from Operating Activities Net cash used in operating activities was $1,105,251 for the year ended June 30, 2023, due to our net loss of $2,660,566 offset primarily by non-cash charges of amortization of debt discount of $202,952, total stock-based compensation of $141,356, non-cash interest expense of $1,838, accretion of put premium of $232,674, change in fair value of derivatives of $530,330, foreign currency transaction gain of $5,885, and $25,969 gain on extinguishment of debt. Net changes in operating assets and liabilities totaled $472,587, which is primarily attributable to increase in accounts payable of $80,975, increase in accrued expenses and other payables of $130,511, employee benefit liability of $186,912, and accrued interest of $92,474. Net cash used in operating activities was $1,436,304 for the year ended June 30, 2022, due to our net loss of $2,658,087 offset primarily by non-cash charges of amortization of debt discount of $47,971, total stock-based compensation of $387,139, non-cash interest expense of $2,250, accretion of put premium of $452,308, change in fair value of derivatives of $99,111, foreign currency transaction loss of $42,395, and $17,503 loss on extinguishment of debt. Net changes in operating assets and liabilities totaled $171,113, which is primarily attributable to increase in accounts payable of $18,870, increase in accrued expenses and other payables of $65,017, employee benefit liability of $29,907, and accrued interest of $63,878. 32 Net Cash Flow from Financing Activities Cash flows provided by financing activities for the year ended June 30, 2023 were $1,113,719 as compared to $1,490,786 for the year ended June 30, 2022. During the year ended June 30, 2023 we received proceeds from the exercise of warrants of $475,000, proceeds from sale of common stock of $24,711, collections of subscription receivables of $23,758 and proceeds from issuance of convertible notes of $590,250. During the year ended June 30, 2022 we received proceeds from the exercise of warrants of $625,001, proceeds from sale of common stock of $99,285, and proceeds from issuance of convertible notes of $766,500. Effect of Exchange Rate The effect of the exchange rate on cash resulted in a $2,488 negative adjustment to cash flows in the year ended June 30, 2023 as compared to a negative adjustment of $52,670 to cash flows in the year ended June 30, 2022. 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. 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. 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). Effective fiscal year 2021, the Company determined that intercompany loans will not be repaid in the foreseeable future and thus, per ASC 830-20-35-3, gains and losses from measuring the intercompany balances are recorded within cumulative translation adjustment, a component of other comprehensive income. Accounting for Income Taxes: We are governed by Australian income tax laws 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. 33 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 shares of Common Stock 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. Recent Accounting Pronouncements Please see section captioned “Recent Accounting Pronouncements” in Note 1 to our consolidated financial statements included in this Annual Report for a discussion of recently issued and adopted accounting pronouncements. Going Concern Qualification 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, 2023, the Company had no revenues, had a net loss of $2,660,566 and had net cash used in operations of $1,105,251. Additionally, as of June 30, 2023, the Company had a working capital deficit, stockholders’ deficit and accumulated deficit of $3,139,190, $3,117,179, and $64,684,732, respectively. 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, 2023 and 2022. 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. 34 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. 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.