As filed with the Securities and Exchange Commission on August 18 , 2011

Registration No.   333-175092

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Amendment No. 1

PROPANC HEALTH GROUP CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		2834		33-0662986
(State or other jurisdiction of		(Primary Standard Industrial		(I.R.S. Employer
incorporation or organization)		Classification Code Number)		Identification No.)

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ

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Title of Each Class of Securities to be Registered		Amount to be Registered				Proposed Maximum Offering Price Per Share  (2)				Proposed Maximum Aggregate Offering Price (2)				Amount of  Registration Fee
Common stock, $0.001 par value per share(1)			14,383,174			$	1.50			$	21,574,761			$	2,504.83
Common stock, $0.001 par value per share(3)			5,000,000			$	1.50			$	7,500,000				870.75
Total			19,383,174							$	29,074,761			$	3,375.58

(1)

The shares of our common stock being registered hereunder are being registered for sale by the selling shareholders named in the prospectus.  Under Rule 416 of the Securities Act of 1933, the shares being registered include such indeterminate number of shares of common stock as may be issuable with respect to the shares being registered in this registration statement as a result of any stock splits, stock dividends or other similar event.

(2)

The proposed maximum offering price per share and the proposed maximum aggregate offering price have been estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457 under the Securities Act of 1933 on the basis of the last sales price of the company ’s common stock.

(3)	Represents shares of common stock being offered on a “best efforts” basis for the company ’s benefit.

 

EXPLANATORY NOTE

 

This registration statement contains two forms of prospectus, as set forth below:

 

§	Public Offering Prospectus.  A prospectus to be used for the public offering by the registrant of up to 5,000,000 shares of common stock (the “Public Offering Prospectus”); and

§	Selling Shareholders Prospectus.  A prospectus to be used in connection with the potential resale by the selling shareholders listed on page SS-4 hereof of up to 14,383,174 shares of our common stock (the “Selling Shareholders Prospectus”).

 

The Public Offering Prospectus and the Selling Shareholders Prospectus will be identical in all respects except for the following principal points:

 

§	they contain different front covers;

§	the Shares Registered for Resale section is included in the Selling Shareholders Prospectus;

§	they contain different Plan of Distribution sections;

§	they contain different Use of Proceeds sections;

§	a Selling Shareholders section is included in the Selling Shareholders Prospectus; and

§	they contain different back covers.

 

The registrant has included in this registration statement, after the financial statements, a set of alternate pages to reflect the foregoing differences between the Public Offering Prospectus and the Selling Shareholders Prospectus.

 

Investors who receive the Public Offering Prospectus from the company will all be potential investors in the public offering. The purpose of the alternative prospectus in connection with the resale offering is that the selling shareholders, whose shares are being registered in the Selling Shareholders Prospectus, will be responsible for delivering the alternative prospectus in connection with the sales made by such selling Shareholders.

 

Since this Offering is being done on a best-efforts basis, we may receive no proceeds if we are not successful in selling the Minimum Shares.

Funds received for subscriptions of up to the Minimum Shares will be placed into escrow.  Following the sale of the Minimum Shares, any subscriptions in excess of the Minimum Shares, up the number of Maximum Shares, will be accepted on a rolling basis. Once we accept subscriptions in excess of the Minimum Shares, the funds will be deposited into an account maintained by us and be immediately available to us.

 

This offering is a self-underwritten offering and there will be no underwriter involved in the sale of the shares.  We intend to offer the Shares through our officers and directors who will not be paid any commission for such sales.  The company’s officers and directors may be deemed “underwriters” within the meaning of the Securities Act of 1933, as amended, and any commissions or discounts given to any such officers and directors may be regarded as underwriting commissions or discounts under the Securities Act of 1933.

		public offering price				Underwriting discount and commissions				Proceeds to us*
Per share of common stock		$	1.50			$	0.00			$	1.495
Total amount of common stock		$	7,500,000			$	0.00			$	7,450,000

 

 

		Page
PROSPECTUS SUMMARY		1
RISK FACTORS		5
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS		13
TAX CONSIDERATIONS		13
USE OF PROCEEDS		13
CAPITALIZATION		14
DETERMINATION OF OFFERING PRICE		14
DILUTION		14
MARKET FOR COMMON STOCK		15
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		15
BUSINESS		19
MANAGEMENT		30
EXECUTIVE COMPENSATION		33
PRINCIPAL SHAREHOLDERS		34
RELATED PARTY TRANSACTIONS		34
SELLING SHAREHOLDERS		SS-3
DESCRIPTION OF SECURITIES		35
PLAN OF DISTRIBUTION		36
LEGAL MATTERS		36
EXPERTS		36
ADDITIONAL INFORMATION		37
INDEX TO FINANCIAL STATEMENTS		F-1

 

The nature of operations of the Australian subsidiary prior to the exchange offer was, and continues to be, focused on research and development activities for chronic diseases, in particular cancer.  Since the establishment of the Australian subsidiary in late 2007, James Nathanielsz has served as CEO and in collaboration with its directors, established the company’s research and development programs, set up joint research collaborations with academic institutions and developed its intellectual property base for commercial purposes.

 

Common Stock Outstanding Prior to the Offering :	71,915,889
Common Stock Offered by the Selling Shareholders :	14,383,174(1)
Common Stock Offered by the Company:	A minimum of 500,000 shares (the “Minimum Shares”) and a maximum of up to 5,000,000 shares (the “Maximum Shares”) of common stock , $0.001 par value per share, on a best efforts basis at a fixed price of $1.50 per share.
Common Stock Outstanding Immediately Following the Offering :	72,415,889, upon the sale of the Minimum Shares, or 76,915,889 if the Maximum Shares are sold.
Offering Period	The shares are being offered for a period of up to ninety (90) days following the date of this prospectus at a fixed price of $1.50, which may be extended by the company for up to an additional ninety (90) day period.
Use of proceeds:	We will not receive any proceeds from the sale of the shares of common stock being offered by the selling shareholders .  The selling shareholders named herein will receive all proceeds therefrom . Please see “Selling Shareholders” beginning on page SS-3.   We are offering a maximum of up to 5,000,000 shares of common stock on a best efforts basis at a fixed price of $1.50 per share, and accordingly we would receive gross proceeds of up to $7,500,000 assuming that all 5,000,000 shares are sold. We intend to use the net proceeds received from the sale of the shares of common stock pursuant to the best efforts offering for the purpose of clinical trials, continued research and development, the expansion of our business and for general working capital.  There can be no assurance that we will sell any of such shares and accordingly, we may receive no proceeds from the offering if we are not successful in selling the Minimum Shares.  Please see “Use of Proceeds” beginning on page 13.
Market for Common Stock	There is no public market for our common stock. After the effective date of the registration statement of which this prospectus is a part, we intend to try to identify a market maker to file an application on our behalf to have our common stock quoted on the OTC Bulletin Board. In order for such application to be accepted, we will have to satisfy certain criteria in order for our common stock to be quoted on the OTC Bulletin Board. We currently have no market maker that is willing to list quotations for our stock. There is no assurance that a market maker will be willing to quote our stock, that the Financial Industry Regulatory Authority or FINRA will approve such application, that a trading market will develop, or, if developed, that it will be sustained.

Dividend Policy	We have not declared or paid any dividends on our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future.
Risk Factors:	See “Risk Factors” beginning on page  5 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.

(1)	Currently issued and outstanding.

 

		Year Ended June 30, 2010				Year Ended June 30, 2009
Royalty revenue – related party		$	0			$	2,657
Loss from operations		$	(726,202)			$	(392,013)
Net loss		$	(842,487)			$	(443,849)
Net loss per share – basic and diluted		$	(0.02)			$	(0.01)
Weighted average number of shares of common stock (basic and diluted)			51,952,264				41,829,231

										For the period from
										October 15,
		For the Nine Months Ended								2007 (Inception)
		March 31,								to March 31,
		2011				2010				2011
		unaudited				unaudited				unaudited
Revenue
Royalty revenue - related party		$	-			$	-			$	30,974
Net Loss		$	(1,498,293	)		$	(293,874	)		$	(3,192,656	)
Basic And Diluted Net Loss Per Share		$	(0.02	)		$	(0.01	)		$	(0.08	)
Basic And Diluted Weighted
Average Shares Outstanding			62,238,581				51,300,000				41,374,601

 

 

		March 31, 2011 (unaudited)				June 30, 2010
Cash		$	54			$	528
Total assets		$	404,614			$	43,862
Total current liabilities		$	283,102			$	230,765
Deficit accumulated during development stage		$	(3,192,656	)		$	(1,694,363	)
Total stockholders’ equity (deficit)		$	121,512			$	(186,903	)

  

 

●	successful completion of the preclinical and clinical development of our products;

 

●	obtaining necessary regulatory approvals from the European Medicines Agency, or EMA, the U.S. Food and Drug Administration, or the FDA, or other regulatory authority;

●	establishing manufacturing, sales, and marketing arrangements, either alone or with third parties; and

●	raising sufficient funds to finance our activities.

If we need additional capital to fund our growing operations, we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.

Our independent registered accounting firm has expressed concerns about our ability to continue as a going concern indicating the possibility that we may not be able to operate in the future.

 

The report of our independent registered accounting firm expresses concern about our ability to continue as a going concern based on the absence of significant revenues, recurring losses from operations, and our need for additional financing.  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.

 

Our products may cause undesirable side effects that could limit their use, require their removal from the market or prevent further development.

 

Side effects that may be caused by our products could interrupt, delay or halt our development programs, including clinical trials, and could result in adverse regulatory action by the FDA or other regulatory authorities. More severe side effects associated with our products may be also observed in the future. Even if we are able to complete the development of a new product and obtain any required regulatory approval, undesirable side effects could prevent us from achieving or maintaining market acceptance of the product or could substantially increase the costs and expenses of commercializing the product. Negative publicity concerning our products, whether accurate or inaccurate, could also reduce market or regulatory acceptance of our products, which could result in decreased product demand, removal from the market or an increased number of product liability claims, whether or not such claims have merit.

●	delays in product development, clinical testing, or manufacturing;
●	unplanned expenditures in product development, clinical testing, or manufacturing;
●	unexpected scientific, non-clinical or clinical findings relating to safety and/or efficacy;
●	failure to receive regulatory approvals;
●	emergence of superior or equivalent products;
●	inability to manufacture our product candidates on a commercial scale on our own, or in collaboration with third parties; and
●	failure to achieve market acceptance.

 

 

We have conducted a variety of pre-clinical studies which have provided evidence supporting the potential therapeutic utility of our lead product candidates, PRP and PRP-DCM.  Studies include the in vitro assessment of these product’s key components on cell growth and differentiation, and in vitro combination assays identifying synergistic effects by optimizing the ratios between the key components.

 

In addition, we, together with our scientific founder, Dr Julian Kenyon, have undertaken a retrospective analysis of cancer patients treated with PRP under UK and Australian compassionate access schemes.  This review has generated clinical evidence supportive of the further development of PRP as a potential therapeutic for cancer.

 

●	inability to manufacture sufficient quantities of drug suitable for use in clinical trials;

●	failure to recruit a sufficient number of patients or slower than expected rates of recruitment;

●	modification by regulatory authorities or ethics committees of clinical trial protocols;

●	changes in regulatory requirements for obtaining drug approval;

●	lack of the anticipated effectiveness during clinical trials;

●	emergence of unforeseen safety issues in preclinical or clinical trials;

●	delays, suspension, or termination of clinical trials by the institutional review board responsible for overseeing the study at a particular study site; and

●	government or institutional review board or other regulatory delays or “clinical holds” requiring suspension or termination of the trials.

 

 

_________

●	restrictions on the products, manufacturers or manufacturing processes;
●	warning letters and untitled letters;
●	civil penalties and criminal prosecutions and penalties;
●	fines;
●	injunctions;
●	product seizures or detentions;
●	import or export bans or restrictions;
●	voluntary or mandatory product recalls and related publicity requirements;
●	suspension or withdrawal of regulatory approvals;
●	total or partial suspension of production; and
●	refusal to approve pending applications for marketing approval of new products or of supplements to approved applications.

 

●	perceptions by members of the health care community, including physicians, about the safety and effectiveness of our products;
●	cost-effectiveness of our products relative to competing products;
●	availability of reimbursement for our products from government or other healthcare payors; and
●	effective marketing and distribution efforts by us and our licensees and distributors, if any.

 

 

●		changes in general economic, social and political conditions;
●		adverse tax consequences;
●	the difficulty of enforcing agreements and collecting receivables through certain legal systems;
●		inadequate protection of intellectual property;
●		required compliance with a variety of laws and regulations of jurisdictions outside of Australia, including labor and tax laws;
●		customers outside of the United States may have longer payment cycles;
●		changes in laws and regulations of jurisdictions outside of Australia; and
●		terrorist acts and natural disasters.

We are highly dependent on our management team, specifically Dr. Julian Kenyon, Mr. James Nathanielsz and Dr. Douglas Mitchell. While we have a current employment agreement with our CEO, Mr. James Nathanielsz and while both Dr. Julian Kenyon and Dr. Douglas Mitchell each have letters of appointment, which outline their respective roles and responsibilities, such employment agreement with Mr. Nathanielsz, and each of the letters of appointment for Dr. Mitchell and Dr. Kenyon, permit the parties thereto to terminate such agreements upon notice. As such, each of these individuals may terminate their relationship with us upon notice. If we lose key employees, our business may suffer. Furthermore, our future success will also depend in part on the continued service of our key scientific and management personnel and our ability to identify, hire, and retain additional personnel. We do not carry “key-man” life insurance on the lives of any of our employees or advisors. We experience intense competition for qualified personnel and may be unable to attract and retain the personnel necessary for the development of our business. Because of this competition, our compensation costs may increase significantly.  

We do not have any independent directors and there is a potential conflict of interest

 

Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors, two of whom also serve as officers of the Company. Thus, there is an inherent conflict of interest.

 

 

 

In the event that less than the Maximum Shares are sold, we intend to reduce our investment of capital into our portfolio of earlier stage products, and to focus our capital investment on our lead products, PRP and PRP-DCM, with a view to progressing one or both of those products towards a value-adding event.

 

The following table summarizes our plans in respect of the development stage we expect to reach with the maximum proceeds being raised, and the stages we expect to reach if less than the proposed maximum amount of proceeds is obtained.

Percentage of monies raised	US$ Amount	Project	Anticipated milestone achieved
100%	7,500,000	PRP	One of the projects completed Phase I clinical trial
		PRP-DCM
		POP1	Development candidate identified
		PRP injection	Completed animal efficacy testing
50%	3,750,000	PRP	Project for initial development selected, and preclinical work completed, ready for Phase I
		PRP-DCM
		POP1	Not progressed until further capital raised
		PRP injection	Not progressed until further capital raised
25%	1,875,000	PRP	Project for initial development selected, major components of pre-clinical development completed
		PRP-DCM
		POP1	Not progressed until further capital raised
		PRP injection	Not progressed until further capital raised
10%	750,000	PRP	Completed major components of pre-clinical development
		PRP-DCM	Not progressed until further capital raised
		POP1	Not progressed until further capital raised
		PRP injection	Not progressed until further capital raised

 

		As of March 31, 2011 (unaudited)
Stockholders’ equity:
Common stock, $0.001 par value;		$	64,700
Additional paid-in capital			3,286,851
Accumulated other comprehensive income (loss)			(37,383)
Deficit accumulated during development stage			(3,192,656)
Total stockholders’ equity (deficit)		$	121,512

Offering ($1.50)
Public offering price per share of common stock						$	1.50
Net tangible book value per common share as of March 31, 2011		$	0.00
Increase in net tangible book value per share attributable to existing stockholders		$	0.11
Net tangible book value per share as adjusted after this offering						$	0.11
Dilution per share to new investors						$	1.39

 

Although our common stock is not currently listed on a public exchange, we will be filing to obtain a listing on the OTC Bulletin Board when the Registration Statement of which this prospectus forms a part is declared effective by the SEC. In order to be quoted on the OTC Bulletin Board, a market maker must file an application on our behalf in order to make a market for our common stock. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which operates the OTC Electronic Bulletin Board, nor can there be any assurance that such an application for quotation will be approved.  However, sales by a selling shareholder must be made at the fixed price of $1.50 until a market develops for the stock. In the event we are successful in our attempts to have a market maker quote our stock on the OTC Bulletin Board, we will need to comply with ongoing reporting requirements in order to insure that the market maker will continue to quote our stock.

 

		For the Nine Months Ended March 31, (unaudited)
		2011				2010
Net cash used in operating activities		$	(1,316,761)			$	(146,786)
Net cash used in investing activities		$	(28,528)			$	0
Net cash provided by financing activities		$	1,268,780			$	135,659

 

		For the Fiscal Year Ended June 30,
		2010				2009
Net cash used in operating activities		$	(191,509	)		$	(408,350	)
Net cash used in investing activities		$	0			$	0
Net cash provided by financing activities		$	180,810			$	280,178

 

In the near term, Propanc’s development target is patients with limited remaining therapeutic options for the treatment of solid tumors such as colorectal or pancreatic tumors.  The data generated to date suggests that Propanc’s lead product, PRP, is well tolerated, and hence in the longer term, Propanc will be targeting the development of its lead product as a treatment for earlier stage cancer, and also as a preventative for patients at high risk of developing cancer –eg. those diagnosed with precancerous diseases, or patients identified as being at high risk of developing cancer based on genetic analysis.

 

Company History

 

Propanc’s scientific roots date back almost 100 years to the work of Professor John Beard at the University of Edinburgh in the UK whose pioneering work on tumor cell biology and potential new approaches to treating cancer by targeting specific pathways which kill off cancer cells, but leave healthy cells alone.  In more recent times interest in the work of Professor Beard has re-emerged, driven by the insights into his work offered with modern day knowledge of tumor cell and molecular biology.

 

 

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 1 month to in excess of 17 months.  A retrospective patient history review was undertaken by Dr Kenyon, and this report was subject to review by Professor Klaus Kutz who, at the time of the review, was an independent consultant in clinical pharmacology and safety, specializing in oncology.  It should be noted that, as this was not a formally constituted clinical trial but a retrospective review of the patient notes and that the data is incomplete with some details not recorded in the patient notes, with some patients discontinuing treatment for a variety of reasons, and some patients being lost to follow up.  In addition, there were no predefined treatment or control groups, no formal end-points, and no statistical analysis was or could reasonably be conducted.  Of the approximately 50% of patients for whom there is sufficient data, 16 lived substantially longer than the treating clinician predicted, based on their clinical experience, at the time of commencing treatment with the proenzyme suppositories, and 6 more reached the expected survival time.  No patients were reported as living for a period less than that predicted by the treating clinician. Please see Table 1 below.

 

Table 1 – Tabulated listing from independent review by Professor Klaus Kutz of patients surviving longer than predicted by treating clinician.

 

Patient No.	Disease	Life expectation*	Survival*
1	Pancreas carcinoma	2	8
2	Bladder, Ovarian	4	11
5	Stomach cancer	2	8
6	Non-Hodgkin Lymphoma	2	9
7	Ovarian cancer	6	12**
9	Mesothelioma	3	9
10	Ovarian cancer	6	11
11	Prostate cancer	1	5
13	Breast cancer	6	9***
15	Neuro-endocrine tumor	10	17****
16	Colon rectal cancer	6	17****
19	NSCLC	3	5
28	Gastric cancer	3	7
29	Prostate cancer	12	14****
30	Prostate cancer	12	12****
43	Pancreas carcinoma	3	7****

 

Neither Propanc nor its founders have conducted any other clinical treatments or investigations with the proenzyme suppository formulation

 

Following the unpublished retrospective review of the patient histories of the 46 cancer patients, Dr. Kenyon, Dr. Mitchell and Mr. James Nathanielsz, Propanc’s Chief Executive Officer, developed a strategy to commercialize the newly developed proenzyme suppository formulation, now designated PRP.  Propanc Pty Ltd, our subsidiary, was established in Australia late 2007 to refine, develop and commercialize novel, patented proenzyme therapeutics for the treatment of cancer.

 

Important milestones over the years following the establishment of Propanc Pty Ltd include:

 

●	The establishment of a research collaborative partnership with Dr David Tosh from Bath University in early 2008 to investigate the molecular mechanisms by which the Propanc proenzyme formulation is acting.

●	The establishment in 2008 of a Scientific Advisory Board comprising Professor John Smyth (Edinburgh University), Professor Klaus Kutz (Bonn University) and Professor Karrar Khan (De Montfort University).

●	A meeting in 2008 with the MHRA (UK Health Authority) who advised that, based on the data presented, the pharmacology supported the clinical development of PRP, and that the conduct of a 28 day multiple ascending dose study in patients with advanced carcinoma (cancer) could be initiated.

●	In 2009, two provisional patents were filed covering novel formulations of proenzymes and their use in the treatment of cancer.

●

In 2009, additional scientific research was undertaken with Bath University and Granada University identifying anti-cancer effects of the proenzymes including triggering cell necrosis (cell death) and apoptosis (programmed cell death) and the induction of cell differentiation (i.e. inducing cancer cells to exhibit more normal cell behaviour). This provided an avenue for Propanc to increase its intellectual property base and patent new pharmaceutical compositions designed to enhance the effects of the proenzymes whilst maintaining their safety profile.

●

In 2010, the above work was supplemented with additional data showing further mechanisms of anticancer effects of proenzymes, including anti-angiogenic activity (preventing new blood vessel formation) in tumors, and anti-metastases (prevention of tumor spreading) by increasing adhesion between tumor cells.

●	In mid 2010 the identification of an enhanced formulation of PRP, designated PRP-DCM with greater ability to inhibit blood vessel formation in tumors compared to PRP.  Patents covering this additional formulation were filed in late 2010.

●	In late 2010, the establishment of Propanc Inc.

Propanc’s Technology

 

PRP

 

●	Increases survival rates and quality of life;

●	Does not cause substantial major side effects;

●	Is easily self-administered; and

●	May be effective against a range of common solid tumors

 

Most cancer treatments currently on the market suffer from limitations of excessive toxicity or the development of resistance, limiting the extent to which they can be used chronically to control cancer over the long term.  Whilst the clinical findings with PRP are early and subject to confirmation in future clinical trials, these data gathered to date, together with the observation that no evidence has been observed of the development of resistance by the cancer to PRP, suggest that PRP may be suitable for long term, chronic therapy.

 

PRP-DCM

 

Recent work undertaken by Propanc has focused on maximizing the potential of PRP as a drug suitable for long term maintenance by:

 

●	Enhancing the effects of the proenzyme formulation by selecting additional ingredients at non-toxic dose levels which can augment the anti-cancer activity; and

●	Building on Propanc’s knowledge of the mechanism of action of proenzymes in treating cancer to create additional patent opportunities to further protect Propanc’s competitive position in the field.

 

Scientific research has focused on developing a novel combination of anti-cancer agents working in combination with proenzymes which enhance PRP’s anti-cancer effects.  The enhanced proenzymes-based formulations combine PRP with at least one of two types of identified compounds considered on the basis PRP’s mechanism of action to synergistically enhance the anti-cancer effects of PRP.

 

In November 2010, in collaboration with Dr. Paul Clayton, an expert in cancer prevention and nutrition and former advisor to the Committee on Safety of Medicines (UK), we identified a novel formula comprising of specific anti-cancer agents in combination with PRP which enhance the ability of PRP to target cancerous cells with minimal side effects to healthy cells.  Experimental results conducted by Propanc researchers show the novel formulation, designated PRP-DCM, was superior to PRP in vitro.  As a result of the work undertaken in collaboration with Dr. Paul Clayton, an international patent application was filed late 2010 which is directed to enhanced proenzyme patent formulations and combination therapies comprising trypsinogen and chymotrypsin.  Dr. Clayton was awarded a success fee in the form of shares of our common stock representing 1% of the shares then currently issued and outstanding in recognition of his contribution to this research.

 

As is frequently seen in cancer research, animal cancer models using PRP-DCM have in some instances shown very encouraging results, with activity comparable to the approved drug Nexavar™, with less clear cut results in other animal models.  Propanc is working to understand which models are most appropriate, and how to further optimize the PRP-DCM formulation.

 

The research work being undertaken on PRP-DCM is being conducted by the University of Granada and the Australian companies vivoPharm who are undertaking the work under contract with Propanc and have no continuing financial interest in the development and commercialization of PRP-DCM.  Alternative suppliers of these research services have been identified, should such alternatives be required.  For completeness, it should be noted that the Managing Director of vivoPharm, Dr Ralf Brandt, is presently engaged as a member of the Propanc Scientific Advisory Board.

 

POP1

 

In order to maximize its proprietary knowledge on the use of proenzymes in the treatment of cancer, Propanc is presently undertaking research to identify the mechanism at the molecular level by which Propanc’s proenzyme formulation is acting to cause cancer cell death.  A research program has been established with Propanc’s collaborators at the University of Granada to investigate the changes in genetic and protein expression which occur in cancer cells as a consequence to being exposed to Propanc’s proenzyme formulation.  The objective of this work is to understand at the molecular level the targets of Propanc’s proenzyme formulation, thereby providing the opportunity for the identification of new, patentable drugs which can be further developed by Propanc, such as synthetic recombinant proteins designed to improve the quality, safety and performance of proenzymes used in the proposed formulations.

 

The POP1 research work is being conducted by the University of Granada which is undertaking the work under contract with Propanc and has no continuing financial interest in the development and commercialization of any outcomes from this project.

 

PRP Injection

 

The present focus of the development of PRP is to create an anti-cancer product that is effective in treating cancer, and which is sufficiently well tolerated to be suitable for chronic, long term use in patients with diagnosed cancer, and potentially in the longer term in patients at high risk of developing cancer.

 

An additional opportunity for PRP is in the treatment of solid tumor masses by the direct injection of PRP into those tumor masses.  In order to achieve this, Propanc is developing an injectable form of PRP which would be suitable for direct injection into tumor masses, the intention being to cause shrinkage of individual problematic tumor masses.

 

The development of the PRP Injection is still at the early stage, with the focus for Propanc being on the development of the PRP suppository.  Subject to the availability of sufficient capital, Propanc’s intention is to undertake the early development of the PRP Injection in parallel with the non-clinical and clinical development of PRP.  Should the data from this development work support the further development of the PRP Injection, Propanc may undertake the development of the PRP Injection as a follow on product to PRP, leveraging the data package which has been generated on PRP to progress the PRP Injection relatively rapidly through non-clinical development and into clinical studies.

 

No research organizations are currently under contract in respect of the research and development of PRP Injection.

 

The PRP Mechanism of Action

 

The mechanism by which proenzymes exert an anticancer effect is not fully known.

 

There is evidence showing that proenzymes are activated at the tumor site and tumor cell surface and that these in turn activate Protease Activated Receptors Type 2 (PAR2).  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 tight filamentous actin, which causes the cancer cell structure to collapse and induce cell death.  This reduces tumor volume and is often noticed in clinical practice.

 

Other mechanisms are thought to also contribute to the anticancer effects of proenzymes, including inactivation of growth factors which can often contribute to cancer cell growth.  Inactivation of growth factors is one of the mechanisms of action by which other anti cancer drugs work, eg. Avastin™ which blocks a growth factor called vascular endothelial growth factor, or VEGF, and inhibits the growth of blood vessels at the site of the tumor.  Data has been generated showing PRP also inhibits the growth of blood vessels, although the mechanism by which this is achieved is not fully known.

 

Additional effects which have been observed, although their mechanism is not fully understood, include triggering cell necrosis (cell death), induction of apoptosis (programmed cell death), the induction of cell differentiation (i.e. inducing cancer cells to exhibit more normal cell behavior), the inhibition of angiogenesis (preventing new blood vessel formation) in tumors, and anti-metastases (prevention of tumor spreading) by increasing adhesion between tumor cells.

 

The PRP Formulation

 

Oral 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.  Oral enzymes have also been investigated previously for the treatment of cancer and, whilst 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.

 

The patented PRP drug product is a mixture containing amylase and proenzymes that has been specifically formulated as suppositories suitable for rectal administration.  By administering a proenzyme mixture rectally, and by using a specific formulation, the normal digestion of the oral enzymes in the duodenum is avoided and the drug can be absorbed intact.  Recent scientific evidence suggests a rectally administered proenzyme formulation may dramatically reduce the dose required to achieve beneficial clinical results.

 

Target Indications

 

The management of cancer differs widely, with a multitude of factors impacting on 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.

●	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.

●	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, colorectal, lung and pancreatic cancer, surgery is frequently the first treatment option, frequently followed by first line chemotherapy +/- radiotherapy.  Whilst 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 of the tumor.  Sadly, in many such 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 larger scale clinical trials confirm the efficacy of Propanc’s PRP products, along with the excellent safety and tolerability profile suggested by experience to date, Propanc envisages PRP, and/or PRP-DCM, will potentially 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 the completion of their initial treatment, in order to prevent or delay recurrence

●	As an agent which can reduce the risk of the development of cancer in patients at high risk of developing cancer, e.g. Patients who have been diagnosed with pre-cancerous conditions, or those in whom genetic analysis identifies them as being at high risk of developing cancer.

 

Whilst the above constitute long term opportunities for PRP and/or PRP-DCM, they are not the initial targets for which Propanc plans to develop PRP and/or PRP-DCM.  In the first instance, Propanc plans to target patients with solid tumors, most likely colorectal and pancreatic tumors, 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 cancer.

 

Development Strategy

 

Propanc’s strategy for the development of its technology is to undertake early stage non-clinical and clinical development of its drug products through to a significant value inflexion point.  Such value inflexion points in the context of cancer drugs are typically at the point where formal, controlled clinical trials have demonstrated ‘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 Propanc’s intention to progress the development of its technology through to completion of a ‘proof of concept’ clinical trial, and then to seek a licensee for the further development beyond that point.

 

As part of that commercial strategy, Propanc will:

 

●	Continue research and development to build our existing intellectual property portfolio, and to seek new, patentable discoveries.

●	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 and Japan.

●	Aggressively pursue the protection of our technology through all means possible, including patents in all major jurisdictions, and potentially trade secrets

●

Acquire new targets:  We will investigate opportunities to acquire new targets which complement our future goals and expand our products and services within related healthcare fields.  Examples of potential acquisitions include research and development facilities, intellectual property to expand our pipeline, radiology clinics and pharmaceutical manufacturers.

 

Development Plan and Milestones

 

Propanc’s development plans for its existing product portfolio are summarized below.

 

PRP and PRP-DCM

 

As outlined earlier, Propanc has identified an enhanced version of PRP, designated PRP-DCM, which based on data to date, potentially offers improved efficacy compared to the existing lead product, PRP.  Propanc is presently undertaking additional preclinical studies investigating the potential of PRP-DCM and, based on the results of those studies, plans to select one of PRP or PRP-DCM to progress into formal non-clinical and clinical development.

 

Once the development candidate has been selected, Propanc plans to progress the selected candidate down a conventional non-clinical and early stage clinical development pathway.  Propanc plans to undertake its early clinical development in Germany, and thus the first step proposed is a meeting with the German regulatory authority, BfArM, to discuss Propanc’s non-clinical and clinical development plans.  Following that advice, the development program will be finalized, key aspects of which will be:

 

 

●	Finalisation of formulation

●	Development of manufacturing and manufacture of drug substance for non-clinical development

●	Conduct of non-clinical safety pharmacology, genotoxicity and toxicology studies

●	Finalise a regulatory submission to conduct a Phase I safety study in Germany, and submit to the German regulatory authority, BfArM, for approval.

●	Undertake a Phase I safety study in Germany – potentially in healthy volunteers and then late stage cancer patients – dependent on outcomes from non-clinical studies.

●	Undertake a Phase IIa proof of concept study in late stage solid tumor patients utilising surrogate efficacy markers and clinical end-points.

 

Anticipated timelines

 

2011

2012

2013

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Complete efficacy animal models on PRP-DCM

Select development candidate between PRP and PRP-DCM

X

Manufacturing, production of drug substance and product for preclinical and clinical trials

Non-clinical development

Obtain regulatory approval

X

Phase I

Phase II – Proof of Concept

 

POP1

 

As outlined previously, a research program has been established with Propanc’s collaborators at the University of Granada to investigate the changes in genetic and protein expression which occur in cancer cells as a consequence to being exposed to Propanc’s proenzyme formulation.  The objective of this work is to understand at the molecular level the targets of Propanc’s proenzyme formulation, thereby providing the opportunity for new, patentable drugs which can be further developed by Propanc.

 

Propanc anticipates results from this work flowing from early 2012.  Subject to the results from this work identifying the potential mechanism by which PRP is acting, Propanc plans to commence a targeted drug discovery program utilizing the identified molecular target to search for novel anticancer agents.

 

PRP Injection

 

Propanc’s initial focus will be on the selection of a PRP development candidate, and the progression of the selected candidate down a formal drug development pathway.  In parallel with that work, Propanc plans to investigate in animal models of cancer the potential efficacy and tolerability of injecting PRP directly into a solid tumor.  Subject to that work producing favorable results, Propanc plans to commence the formal non-clinical and clinical development of the injectable PRP formulation.  It is anticipated that the animal model studies will be completed by mid-2012, enabling a decision in respect of progressing PRP Injection at that time.

 

Budget

 

Propanc’s proposed expenditure for the program is outlined in Table 2 below.

 

Budget Allocation	Project	Activity to be Completed	Tasks	A$$ Cost
Research & Development	PRP	One lead project will be selected and taken to  completion of Phase I	Phase I	2,500,000
	PRP-DCM		Preclinical Development	1,500,000
			CMC	1,100,000
	POP1	Identification of  development candidate	Lead compound screening	320,000
			Molecular target identification	60,000
	PRP injection	Determination of in vivo efficacy of proenzymes via intra-tumoral injection	Pharmacology/in vivo efficacy in relevant tumor model	100,000
Intellectual property	PCT WO 2011/047434 A1	Completion of national phase entry	Filing of patent in individual countries	80,000
Overheads	-	-	-	1,800,000

 

Multiple factors, many of which are outside of Propanc’s control, can impact on the ability of Propanc to achieve its target objectives within the planned time and budgetary constraints.  Subject to these caveats, it is Propanc’s objective to achieve the following R&D milestones within the proposed budget:

 

●	One of PRP or PRP-DCM completed Phase I clinical trial

●	Development candidate identified from the POP1 program

●	PRP Injection completed animal efficacy testing

 

Corporate Strategy

 

Propanc operates as a ‘virtual’ company contracting services, skills and expertise as required to achieve its scientific and corporate objectives.  This out-sourcing 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.  Propanc anticipates continuing to utilize this model, thereby retaining the flexibility to contract in the appropriate resource as and when required.  Additional project management expertise is likely to be required, and Propanc anticipates a modest increase in employees in order to effectively manage its contractors as the project progress down the development pathway.

 

 

 

Key Highlights

 

In summary, the key highlights of this opportunity are:

 

●

A new treatment in oncology:  Cancer is the leading cause of death worldwide.  Global demand for effective, safe and easy to administer cancer treatments is increasing rapidly.  We believe our treatment will uniquely target many aggressive tumor types for which little or few treatment options exist.  We are ready to capitalize on the significant market opportunity which exists for an effective, well tolerated anti-cancer therapeutic.

●	Multiple mechanisms of action:  Unlike many products approved for the treatment of cancer, our treatment exerts multiple effects on cancerous cells which inhibits tumor growth and potentially stops it from spreading throughout the body.

●	Encouraging data from patient treatment:  Scientific research undertaken over the last 15 years and the clinical experience from treating patients in the UK and Australia has provided persuasive evidence that PRP is an effective treatment against cancer.

●

Unique intellectual property:  We are focusing on building a significant portfolio of intellectual property around our scientific understanding of the effects of proenzymes in cancer, identifying new formulations, new routes of administration and potential new therapeutic targets.  To date, we have filed two patent applications covering PRP, and one covering the novel product PRP-DCM.

Current Therapies/Drugs Available

§	Have significant toxic effects

§	Are highly expensive

§	Often have limited survival benefits

●

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 number of infection fighting white blood cell count (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:  Most common type is multi-targeted kinase inhibitors.  Common side effects include fatigue, rash, hand–foot reaction, diarrhea, hypertension and dyspnoea (shortness of breath).  Furthermore, the tyrosine kinases inhibited by these drugs appear to develop resistance to these inhibitors.  Whilst 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 which are most common include skin and gastro-intestinal toxicities.  For example, several serious side effects from Avastin, a leading 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 in some cases, 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.  These products, whilst they generally do not have the poor safety profile of standard therapeutic approaches, have rarely been particularly effective.  Whilst there are a number of therapeutic cancer vaccines currently in development, most are in the early stages of clinical development.  To date, only one therapeutic cancer vaccine has been approved by the US Food and Drug Administration.

●	Cancer currently affects 1 in 3 people: The most commonly occurring cancers are those of the lung, breast and colon and it is these tumors that we seek to treat. (IMS Health, The Challenge Goes Commercial, 2006)

 

●	Growth in cancer comparative to other medical segments:  Cancer is one of the largest and fastest growing markets in the pharmaceutical industry. (IMS Health, The Challenge Goes Commercial, 2006)

 

Global cancer innovatives market, 2003-2006

 

		2003				2004				2005				2006					2005-06
		(US$m)				(US$m)				(US$m)				(US$m)				growth
Monoclonal antibodies			2,942				4,781				7,091				10,480				47.8	%
Targeted therapies			1,640				2,518				3,394				4,924				45.1	%
Chemotherapeutics			1,856				2,936				4,266				4,846				13.6	%
Hormonals			567				876				1,186				1,504				26.8	%
Immunotherapy and vaccines			0				0				0				235				n/a
Total cancer innovatives market			7,005				11,110				15,937				21,989				38.0	%
n/a – not available

(© Business Insights Limited, 2007)

 

Demand for new cancer products can largely be attributed to a combination of a rapidly aging population in western countries and changing environmental factors, which together are resulting in rising cancer incidence rates. According to the World Health Organization, cancer is expected to increase from 7.6 million annual deaths in 2005 to 9 million annual deaths by 2015, exceeding 11 million annual deaths by 2030.  As such, global demand for new cancer treatments which are effective, safe and easy to administer is rapidly increasing.  Our treatment will potentially target many aggressive tumor types for which little or few treatment options exist.

 

In the first instance, Propanc plans to target patients with solid tumors, most likely colorectal and pancreatic tumors, for whom other treatment options have been exhausted.  It is reported by the World Health Organization that in 2008, globally these cancers resulted in over 600,000 and 260,000 deaths per year, respectively.  With such a high mortality rate, a substantial unmet medical need exists for new treatments which can extend survival.

 

For example, current standard treatment for colorectal cancer consists of cytotoxics, which are associated with high levels of toxicity.  Despite the relatively recent approval of Erbitux™ and Avastin™, both of which are monoclonal antibodies, for the treatment of colorectal cancer, significant treatment-related adverse effects continue to be problematic for patients with colorectal cancer.  The need exists for tolerable agents that will improve quality of life for patients as well as offering a potential cure (Datamonitor, 2004).

 

For pancreatic cancer, due to a lack of effective therapies on the market for pancreatic cancer, any newly approved agents with some efficacy are likely to see significant uptake once commercialized (Datamonitor, 2004). Targeted therapies may fulfill this need, although further intensive R&D is necessary.

 

Once the efficacy and safety of PRP has been demonstrated in late stage patient populations, Propanc plans to undertake exploration of the utility of the drug in earlier stage disease, together with investigation of the drug’s utility in other types of cancer.

License Agreements

Propanc previously sponsored a collaborative research project at the University of Bath to investigate the cellular and molecular mechanisms underlying the potential clinical application of Propanc’s proprietary pancreatic proenzyme formulation.  Under the terms of the contract in respect of that project (effective 18th July 2008) the University of Bath owns the intellectual property in the project results (with Propanc having certain rights to the same).  Ownership of intellectual property in Propanc’s proprietary application existing prior to the commencement of the research project remained unaffected.

 

At the completion of the research, Propanc and The University of Bath established an agreement regarding the proenzyme technology where Propanc retained the exclusive rights and license to commercialize the joint patents and any other original research IP.  The agreement enabled the two parties to agree to terms for the commercialization of the technology, specifying future income sharing, royalty rates and license payments.  Terms of the Agreement include:

 

●	Propanc shall pay to the University of Bath a royalty being two (2) per cent of any and all net revenues.

●	In addition to payment of the royalty, Propanc shall pay to the University of Bath an additional sum of five (5) per cent of each and every licensee payment.

●	Propanc can make an upfront payment to the University of Bath which would serve as a buyout option, which takes into account future royalty rates and additional sums in the future to the University of Bath.

●	Unless terminated earlier, the agreement between the University of Bath and Propanc will continue until the date on which all of the patents worldwide have been held invalid or abandoned, or the date of expiration of the last patent.

●	Propanc has the exclusive right to prepare, file, prosecute, maintain, re-examine and reissue the patents, at Propanc’s sole cost and expense.

●

Following both successful completion of a Phase I clinical trial in man and commencement of a Phase IIa (Proof of Concept) clinical trial in man, in both cases involving the administration of a product or materials within a claim of any of the patents, the University of Bath shall assign its entire right, title and interest in and to the patents to Propanc.

●	Title:  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 Glycolysis Reduction Agent

●	Date filed: 22nd October 2010

●

Jurisdiction:  The Patent Cooperation Treaty or PCT is an international agreement for filing patent applications having effect in up to 117 countries.  Under the PCT, an inventor can file a single international patent application in one language with one patent office in order to simultaneously seek protection for an invention in up to 117 countries.

●	Application Status:  Pending

●	Patent costs:  To be paid by Propanc.

●	Expiration date:  Not applicable.

 

The Company is currently undergoing the 30-month national phase filing deadline for this international PCT application, which is on the 22nd of April 2012.  This date is the deadline for entering the national phase in each country.  We have allocated expenses for costs related to intellectual property in the amount of $80,000.

 

●	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 a broad class of compounds based on the compounds identified.

●	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.

 

●	The development of a PRP treatment for late stage colorectal or pancreatic cancer, with development for earlier stage disease to follow.

 

●

Conduct clinical trials in Central Europe, possibly through the German Health Authorities who have experience with enzyme therapy and its use in oncology.  This approach should help facilitate a path to approval in Europe through the European Medicines Agency and eventually US Food and Drug Administration approval.

 

Name		Age		Position
Dr. Douglas Mitchell		72		President and Chairman of the Board
James Nathanielsz		37		Chief Executive Officer, Secretary, Treasurer and Director
Dr. Julian Kenyon		64		Director

 

●	The identification, assessment, evaluation, selection, conduct and management of research projects, both those which are under review and are in progress;
●	Intellectual property;
●	Commercialization;

●	Professor John Smyth
●	Professor Klaus Kutz (Acting Chief Medical Officer, Propanc Health Group)
●	Professor Karrar Khan
●	Dr. Ralf Brandt

 

Name and Principal Position (a)		Year (b)		Salary ($)(c)				All Other  Compensation ($)(i)(2)				Total ($)(j)
James Nathanielsz (1)		2010			96,293				9,523				105,816
Chief Executive Officer		2009			98,580				9,750				108,330

(1)	Under an employment agreement dated August 15, 2010, Mr. Nathanielsz receives a gross annual salary of $150,000 AUD per year.

(2)	Represents contributions of 9% of Mr. Nathanielsz’s base salary to a pension fund of which he is the beneficiary.

 

Title of Class		Name and Address of Beneficial Owner		Amount and Nature of Beneficial Owner(1)				Percent of Class (1)
Common Stock		James Nathanielsz 576 Swan Street Richmond, VIC, 3121, Australia (2)			10,032,261				13.9%
Common Stock		Dr. Douglas Mitchell 145 Male Street Brighton 3186, Australia (3)			32,938,614				45.8%
Common Stock		Dr. Julian Kenyon Beechwood, Embley Lane East Wellow, Near Romsey, Hampshire, SO51 6DN, United Kingdom (4)			10,834,064				15.1%
Common Stock		All directors and executive officers as a group (3 persons)			53,804,939				74.8%
5% Shareholders:
Common Stock		Ostrowski Properties Pty Ltd 33 Allambee Avenue Elsternwick, VIC, 3185, Australia (5)			6,300,395				8.8%

(1)	Applicable percentages are based on 71,915,889 shares outstanding, adjusted as required by rules of the SEC.  Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person.  Unless otherwise indicated in the footnotes to this table, Propanc believes that each of the shareholders named in the table has sole voting and investment power with respect to the shares of common stock indicated as beneficially owned by them.
(2)	Mr. Nathanielsz is a director and executive officer.  Represents shares of common stock held by North Horizon Investments Pty Ltd ATF Nathanielsz Family Trust.  Mr. Nathanielsz has voting and investment power over these shares.
(3)	Dr. Mitchell is a director and executive officer.  Shares are held by Putney Consultants Ltd., an entity controlled by Dr. Mitchell.
(4)	Dr. Kenyon is a director.  Represents shares of common stock.
(5)	Mr. Jan Ostrowski and Mrs. Ywonna Ostrowski, Mr. Nathanielsz’s father-in-law and mother-in-law, have voting power and investment power over these shares.

From inception, we borrowed approximately $370,000, which including interest, totaled $534,856 from three directors, one of whom is also an officer, where the loans had no specific repayment terms and bore interest at a rate of 30% per annum. The loans were to be convertible into shares of common stock at $0.16 per share.  On May 13, 2010 loans and accrued interest due to directors was converted into 3,305,615 shares of common stock.

 

●	The transaction is approved by the corporation’s Board prior to the date the shareholder became an interested shareholder;
●	Upon closing of the transaction which resulted in the shareholder becoming an interested shareholder, the shareholder owned at least 85% of the shares of stock entitled to vote generally in the election of directors of the corporation outstanding excluding those shares owned by persons who are both directors and officers and specified types of employee stock plans; or
●	On or after such date, the business combination is approved by the Board and at least 66 2/3% of outstanding voting stock not owned by the interested shareholder.