UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ___________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
n/a
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | None | None |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 11, 2022, there were shares of the registrant’s common stock, $0.001 par value per share, issued and outstanding.
PROPANC BIOPHARMA INC.
Table of Contents
| Page | ||
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | F-1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 3 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 7 |
| Item 4. | Controls and Procedures | 7 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 8 |
| Item 1A. | Risk Factors | 8 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 8 |
| Item 3. | Defaults Upon Senior Securities | 9 |
| Item 4. | Mine Safety Disclosures | 9 |
| Item 5. | Other Information | 9 |
| Item 6. | Exhibits | 9 |
| Signatures | 10 | |
| 2 |
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
The following unaudited interim condensed consolidated financial statements of Propanc Biopharma, Inc. are included in this Quarterly Report on Form 10-Q:
INDEX TO FINANCIAL STATEMENTS
| F-1 |
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2022 | June 30, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| GST tax receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Security deposit - related party | ||||||||
| Operating lease right-of-use assets, net - related party | ||||||||
| Property and equipment, net | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other payables | ||||||||
| Convertible notes and related accrued interest, net of discounts and premiums | ||||||||
| Operating lease liability - related party, current portion | ||||||||
| Embedded conversion option liabilities | ||||||||
| Due to former director - related party | ||||||||
| Loan from former director - related party | ||||||||
| Employee benefit liability | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Operating lease liability - long-term portion - related party | ||||||||
| TOTAL NON-CURRENT LIABILITIES | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| Commitments and Contingencies (See Note 8) | ||||||||
| STOCKHOLDERS’ DEFICIT: | ||||||||
| Preferred stock, shares authorized, $ par value: | ||||||||
| Series A preferred stock, $ par value; shares authorized; shares issued and outstanding as of September 30, 2022 and June 30, 2022 | $ | $ | ||||||
| Series B preferred stock, $ par value; shares authorized; share issued and outstanding as of September 30, 2022 and June 30, 2022 | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding as of September 30, 2022 and June 30, 2022, respectively | ||||||||
| Common stock issuable ( and shares as of September 30, 2022 and June 30, 2022, respectively) | ||||||||
| Additional paid-in capital | ||||||||
| Subscription receivable | ( | ) | ||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock ( share) | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
| F-2 |
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| For the three months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| REVENUE | ||||||||
| Revenue | $ | $ | ||||||
| OPERATING EXPENSES | ||||||||
| Administration expenses | ||||||||
| Occupancy expenses - related party | ||||||||
| Research and development | ||||||||
| TOTAL OPERATING EXPENSES | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Gain from settlement of accounts payable | ||||||||
| Loss on extinguishment of debt, net | ( | ) | ||||||
| Foreign currency transaction gain | ||||||||
| TOTAL OTHER EXPENSE, NET | ( | ) | ( | ) | ||||
| LOSS BEFORE TAXES | ( | ) | ( | ) | ||||
| Tax benefit | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| Deemed Dividend | ( | ) | ( | ) | ||||
| NET LOSS AVAILABLE TO COMMON STOCKHOLDERS | $ | ( | ) | $ | ( | ) | ||
| BASIC AND DILUTED NET LOSS PER SHARE AVAILABLE TO COMMON STOCKHOLDERS | $ | ( | ) | $ | ( | ) | ||
| BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||
| NET LOSS AVAILABLE TO COMMON STOCKHOLDERS | $ | ( | ) | $ | ( | ) | ||
| OTHER COMPREHENSIVE INCOME | ||||||||
| Unrealized foreign currency translation gain | ||||||||
| TOTAL OTHER COMPREHENSIVE INCOME | ||||||||
| TOTAL COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | ||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
| F-3 |
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(Unaudited)
| Preferred Stock | Common Stock | Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Common Stock | Issuable | Additional | Other | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| No. of Shares | Value | No. of Shares | Value | No. of Shares | Value | No. of Shares | Value | Paid-in Capital | Subscription Receivable | Accumulated Deficit | Comprehensive Income | Treasury Stock | Stockholders’ Deficit | |||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of convertible debt, conversion fee and accrued interest | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services and accrued expenses | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for exercise of warrants | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for alternate cashless exercise of warrants | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of put premium upon debt conversion | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation in connection with stock option grants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation gain | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend upon alternate cashless exercise of warrants | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the three months ended September 30, 2021 | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Common Stock | Issuable | Additional | Other | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| No. of Shares | Value | No. of Shares | Value | No. of Shares | Value | No. of Shares | Value | Paid-in Capital | Subscription Receivable | Accumulated Deficit | Comprehensive Income | Treasury Stock | Stockholders’ Deficit | |||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for cash | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of convertible debt, conversion fee and accrued interest | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for issuable shares | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for exercise of warrants | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for alternate cashless exercise of warrants | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of put premium upon debt conversion | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation in connection with stock warrant grant | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock warrant grant for settlement of accounts payable | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation gain | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend upon alternate cashless exercise of warrants | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the three months ended September 30, 2022 | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
| F-4 |
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the three months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||||||||
| Issuance and amortization of common stock for services | ||||||||
| Foreign currency transaction gain | ( | ) | ( | ) | ||||
| Depreciation expense | ||||||||
| Amortization of debt discounts | ||||||||
| Amortization of right-of-use assets | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Loss on extinguishment of debt, net | ||||||||
| Gain from settlement of accounts payable | ( | ) | ||||||
| Stock option, stock warrants and restricted stock expense | ||||||||
| Non-cash interest expense | ||||||||
| Accretion of put premium | ||||||||
| Changes in Assets and Liabilities: | ||||||||
| GST receivable | ( | ) | ||||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Employee benefit liability | ||||||||
| Accrued expenses and other payables | ( | ) | ||||||
| Accrued interest | ||||||||
| Operating lease liability | ( | ) | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible promissory notes, net of original issue discounts and issue costs | ||||||||
| Proceeds from the sale of common stock | ||||||||
| Collection of subscription receivable | ||||||||
| Proceeds from the exercise of warrants | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| Effect of exchange rate changes on cash | ||||||||
| NET INCREASE IN CASH | ||||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Cash paid during the period: | ||||||||
| Interest | $ | $ | ||||||
| Income Tax | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Subscription receivable | $ | $ | ||||||
| Reduction of put premium related to conversions of convertible notes | $ | $ | ||||||
| Conversion of convertible notes and accrued interest to common stock | $ | $ | ||||||
| Discounts related to derivative liability | $ | $ | ||||||
| Stock warrant grant for settlement of accounts payable | $ | $ | ||||||
| Common stock issued for accrued services | $ | $ | ||||||
| Warrants issued for accrued services | $ | $ | ||||||
| Deemed dividend upon alternate cashless exercise of warrants | $ | $ | ||||||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
| F-5 |
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Nature of Operations
Propanc Biopharma, Inc. (the “Company,” “we,” “us” or “our”) was originally incorporated in Melbourne, Victoria Australia on October 15, 2007 as Propanc PTY LTD, and continues to be based in Camberwell, Victoria Australia. Since its inception, substantially all of the operations of the Company have been focused on the development of new cancer treatments targeting high-risk patients, particularly cancer survivors, who need a follow-up, non-toxic, long-term therapy designed to prevent the cancer from returning and spreading. The Company anticipates establishing global markets for its technologies. Our lead product candidate, which we refer to as PRP, is an enhanced pro-enzyme formulation designed to enhance the anti-cancer effects of multiple enzymes acting synergistically. It is currently in the preclinical phase of development.
On November 23, 2010, the Company was incorporated in the state of Delaware as Propanc Health Group Corporation. In January 2011, to reorganize the Company, we acquired all of the outstanding shares of Propanc PTY LTD on a one-for-one basis making it a wholly-owned subsidiary of the Company.
On July 22, 2016, the Company formed a wholly owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the purpose of submitting an orphan drug application to the European Medicines Agency as a small and medium-sized enterprise. As of September 30, 2022, there has been no activity within this entity.
Effective April 20, 2017, the Company changed its name to “Propanc Biopharma, Inc.” to better reflect the Company’s stage of operations and development.
In July 2020, a world first patent was granted in Australia for the cancer treatment method patent family. Presently, there are 45 granted, allowed, or accepted patents and 20 patents filed, or under examination in key global jurisdictions relating to the use of proenzymes against solid tumors, covering the lead product candidate PRP.
The Company hopes to capture and protect additional patentable subject matter based on the Company’s field of technology relating to pharmaceutical compositions of proenzymes for treating cancer by filing additional patent applications as it advances its lead product candidate, PRP, through various stages of development.
On May 18, 2022, the board of directors of the Company approved and authorized, and the holders of a majority in interest of the Company’s voting capital stock approved by written consent, in accordance with Section 228 of the Delaware General Corporation Law, for the Company to file a Certificate of Amendment to its Certificate of Incorporation (the “Certificate”) with the Secretary of State of the State of Delaware, which increased the Company’s authorized capital stock. The Certificate increased the number of authorized shares of the Company’s common stock, par value $ per share, from to . The number of authorized shares of preferred stock remains at , such that the total number of shares of all classes and series the Company is authorized to issue is shares. The Certificate was filed and became effective on July 6, 2022.
On September 21, 2022, the board of directors of the Company approved and authorized, and the holders of a majority in interest of the Company’s voting capital stock approved by written consent, in accordance with Section 228 of the Delaware General Corporation Law, for the Company to file a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware, which increased the Company’s authorized capital stock. The Certificate increased the number of authorized shares of the Company’s common stock, par value $ per share, from to . The number of authorized shares of preferred stock remains at , such that the total number of shares of all classes and series the Company is authorized to issue is shares. The Certificate was filed and became effective on November 4, 2022. This increase is presented retroactively on the condensed consolidated balance sheet.
Basis of Presentation
The Company’s interim unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our consolidated results of operations for the three months ended September 30, 2022 and 2021 and cash flows for the three months ended September 30, 2022 and 2021 and our consolidated financial position at September 30, 2022 have been made. The Company’s results of operations for the three months ended September 30, 2022 are not necessarily indicative of the operating results to be expected for the full fiscal year ending June 30, 2023.
Certain information and disclosures normally included in the notes to the Company’s annual audited consolidated financial statements have been condensed or omitted from the Company’s interim unaudited condensed consolidated financial statements included in this Quarterly Report. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2022. The June 30, 2022 balance sheet is derived from those statements.
| F-6 |
PROPANC BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of Propanc Biopharma, Inc., the parent entity, and its wholly-owned subsidiary, Propanc PTY LTD. All inter-company balances and transactions have been eliminated in consolidation. Propanc (UK) Limited was an inactive wholly-owned subsidiary through September 30, 2022.
Use of Estimates
The preparation of financial statements in conformity with the accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates in the accompanying consolidated financial statements include the estimates of useful lives for depreciation, valuation of the operating lease liability and related right-of-use asset, valuation of derivatives, allowance for uncollectable receivables, valuation of equity based instruments issued for other than cash, the valuation allowance on deferred tax assets and foreign currency translation due to certain average exchange rates applied in lieu of spot rates on transaction dates.
Foreign Currency Translation and Other Comprehensive Income (Loss)
The Company’s wholly owned subsidiary’s functional currency is the Australian dollar (AUD). For financial reporting purposes, the Australian dollar has been translated into the Company’s reporting currency which is the United States dollar ($) and/or (USD). Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss).” Gains and losses resulting from foreign currency transactions are included in the statements of operations and comprehensive income (loss) as a component of other comprehensive income (loss). There have been no significant fluctuations in the exchange rate for the conversion of Australian dollars to USD after the balance sheet date.
Other Comprehensive Income (Loss) for all periods presented includes only foreign currency translation gains (losses).
Assets
and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at
the consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency included in the consolidated results of operations as incurred.
Effective fiscal year 2021, the parent company determined that the intercompany loans will not be repaid in the foreseeable future
and thus, per ASC 830-20-35-3, gains and losses from measuring the intercompany balances are recorded within cumulative translation
adjustment, a component of accumulated other comprehensive income (loss). Prior to July 1, 2020, the Company recorded the foreign
currency transaction gains and losses from measuring the intercompany balances as a component of other income (expenses) titled
foreign currency transaction gain (loss). As of September 30, 2022 and 2021, the Company recognized a cumulative exchange gain of
approximately $
As of September 30, 2022 and June 30, 2022, the exchange rates used to translate amounts in Australian dollars into USD for the purposes of preparing the consolidated financial statements were as follows:
| September 30, 2022 | June 30, 2022 | |||||||
| Exchange rate on balance sheet dates | ||||||||
| USD : AUD exchange rate | ||||||||
| Average exchange rate for the period | ||||||||
| USD : AUD exchange rate | ||||||||
The change in Accumulated Other Comprehensive Income by component during the three months ended September 30, 2022 was as follows:
| Foreign Currency Items: | ||||
| Balance, June 30, 2022 | $ | |||
| Unrealized foreign currency translation gain | ||||
| Ending balance, September 30, 2022 | $ | |||
Fair Value of Financial Instruments and Fair Value Measurements
The Company measures its financial assets and liabilities in accordance with US GAAP. For certain financial instruments, including cash and cash equivalents, receivables, accounts payable and accrued liabilities, the carrying amounts approximate fair value due to their short maturities. Amounts recorded for notes payable, net of discount, and loans payable also approximate fair value because current interest rates available for debt with similar terms and maturities are substantially the same.
The Company follows accounting guidance for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).
| F-7 |
PROPANC BIOPHARMA, INC. AND
SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.
Also see Note 11 - Derivative Financial Instruments and Fair Value Measurements.
Cash and Cash Equivalents
Cash
and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less with financial
institutions, and bank overdrafts. Bank overdrafts are reflected as a current liability on the balance sheets. There were
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals, and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the declining balance method. The depreciable amount is the cost less its residual value.
The estimated useful lives are as follows:
| Machinery and equipment | -
|
| Furniture | -
|
Patents
Patents are stated at cost and amortized on a straight-line basis over the estimated future periods if and once the patent has been granted by a regulatory agency. However, the Company will expense any patent costs as long as we are in the startup stage. Accordingly, as the Company’s products are not currently approved for market, all patent costs incurred from 2013 through September 30, 2022 were expensed immediately. This practice of expensing patent costs immediately ends when a product receives market authorization from a government regulatory agency.
Impairment of Long-Lived Assets
In accordance with ASC 360-10, “Long-lived assets,” which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.
Employee Benefit Liability
Liabilities arising in respect of wages and salaries, accumulated annual leave, accumulated long service leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured based on the employee’s remuneration rates applicable at the reporting date. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. All employee liabilities are owed within the next twelve months.
Australian Goods and Services Tax (“GST”)
Revenues, expenses and balance sheet items are recognized net of the amount of GST, except payable and receivable balances which are shown inclusive of GST. The GST incurred is payable on revenues to, and recoverable on purchases from, the Australian Taxation Office.
Cash flows are presented in the statements of cash flow on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.
As
of September 30, 2022, and June 30, 2022, the Company was owed $
| F-8 |
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Derivative Instruments
ASC Topic 815, Derivatives and Hedging (“ASC Topic 815”), establishes accounting and reporting standards for derivative instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings. On the date of conversion or payoff of debt, the Company records the fair value of the conversion shares, removes the fair value of the related derivative liability, removes any discounts and records a net gain or loss on debt extinguishment. On July 1, 2019 the Company adopted ASU 2017-11 under which down-round Features in Financial Instruments will no longer cause derivative treatment. The Company applied the modified prospective method of adoption. There were no cumulative effects on adoption.
Convertible Notes With Variable Conversion Options
The Company has entered into convertible notes, some of which contain variable conversion options, whereby the outstanding principal and accrued interest may be converted, by the holder, into common shares at a fixed discount to the price of the common stock at or around the time of conversion. The Company treats these convertible notes as stock settled debt under ASC 480, “Distinguishing Liabilities from Equity” and measures the fair value of the notes at the time of issuance, which is the result of the share price discount at the time of conversion and records the put premium as interest expense.
Income Taxes
The Company is governed by Australia and United States income tax laws, which are administered by the Australian Taxation Office and the United States Internal Revenue Service, respectively. The Company follows ASC 740 “Accounting for Income Taxes,” when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.
The Company follows ASC 740, Sections 25 through 60, “Accounting for Uncertainty in Income Taxes.” These sections provide detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of ASC 740 and in subsequent periods.
Research and Development Costs and Tax Credits
In
accordance with ASC 730-10, “Research and Development-Overall,” research and development costs are expensed when incurred.
Total research and development costs for the three months ended September 30, 2022 and 2021 were $
The Company may apply for research and development tax concessions with the Australian Taxation Office on an annual basis. Although the amount is possible to estimate at year end, the Australian Taxation Office may reject or materially alter the claim amount. Accordingly, the Company does not recognize the benefit of the claim amount until cash receipt since collectability is not certain until such time. The tax concession is a refundable credit. If the Company has net income, then the Company can receive the credit which reduces its income tax liability. If the Company has net losses, then the Company may still receive a cash payment for the credit, however, the Company’s net operating loss carryforwards are reduced by the gross equivalent loss that would produce the credit amount when the income tax rate is applied to that gross amount. The concession is recognized as tax benefit, in operations, upon receipt.
During
each of the three months ended September 30, 2022 and 2021, the Company applied for, and received from the Australian Taxation Office,
a research and development tax credit in the amount of $
The Company records stock-based compensation in accordance with ASC 718, “Stock Compensation”. ASC 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the shorter of the service period or the vesting period. The Company values employee and non-employee stock-based compensation at fair value using the Black-Scholes Option Pricing Model.
The Company adopted ASU 2018-07 and accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective method of adoption.
Revenue Recognition
The Company applies ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. Subject to these criteria, the Company intends to recognize revenue relating to royalties on product sales in the period in which the sale occurs and the royalty term has begun.
| F-9 |
PROPANC BIOPHARMA, INC. AND
SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Legal Expenses
All legal costs for litigation are charged to expense as incurred.
Leases
The Company follows ASC Topic 842, Leases (Topic 842) and applies the package of practical expedients, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. Operating lease right of use assets (“ROU”) represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses.
Basic
net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period.
Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding for
the period and, if dilutive, potential common shares outstanding during the period. Potentially dilutive securities consist of the incremental
common shares issuable upon exercise of common stock equivalents such as stock options, warrants and convertible debt instruments. Potentially
dilutive securities are excluded from the computation if their effect is anti-dilutive. As a result, the basic and diluted per share
amounts for all periods presented are identical.
| September 30, 2022 | September 30, 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Stock Options | ||||||||
| Stock Warrants with no designations | ||||||||
| Series A Warrants as if converted at alternate cashless exercise price | ||||||||
| Series B Warrants | ||||||||
| Series C Warrants as if converted at alternate cashless exercise price* | ||||||||
| Unvested restricted stock | ||||||||
| Convertible Debt | ||||||||
| Total | ||||||||
| * |
Recent Accounting Pronouncements
We have reviewed the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. We have carefully considered the new pronouncements that alter previous generally accepted accounting principles and do not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of the Company’s financial management.
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40), which eliminates the beneficial conversion and cash conversion accounting models for convertible instruments, amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions, and modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS calculation. The standard is effective for annual periods beginning after December 15, 2023 for smaller reporting companies, and interim periods within those reporting periods. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those reporting periods. The Company is currently assessing the impact the new guidance will have on our consolidated financial statements.
NOTE 2 – GOING CONCERN
The
accompanying unaudited condensed consolidated financial statements have been prepared in conformity with US GAAP, which contemplate continuation
of the Company as a going concern. For the three months ended September 30, 2022, the Company had no revenues, had a net loss of $
The unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.
Successful completion of the Company’s development program and, ultimately, the attainment of profitable operations are dependent upon future events, including obtaining adequate financing to fulfill its development activities, acceptance of the Company’s patent applications, obtaining additional sources of suitable and adequate financing and ultimately achieving a level of sales adequate to support the Company’s cost structure and business plan. The Company’s ability to continue as a going concern is also dependent on its ability to further develop and execute on its business plan. However, there can be no assurances that any or all of these endeavors will be successful.
| F-10 |
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
In March 2020, the outbreak of COVID-19 (coronavirus) caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States, Europe and Australia, including in each of the areas in which the Company operates. The COVID-19 (coronavirus) outbreak has had a notable impact on general economic conditions, including but not limited to the temporary closures of many businesses, “shelter in place” and other governmental regulations, reduced business and consumer spending due to both job losses, reduced investing activity and M&A transactions, among many other effects attributable to the COVID-19 (coronavirus), and there continue to be many unknowns. While to date the Company has not been required to stop operating, management is evaluating its use of its office space, virtual meetings and the like. The Company continues to monitor the impact of the COVID-19 (coronavirus) outbreak closely. The extent to which the COVID-19 (coronavirus) outbreak will impact our operations, ability to obtain financing or future financial results is uncertain.
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following As of September 30, 2022 and June 30, 2022.
| September 30, 2022 | June 30, 2022 | |||||||
| (Unaudited) | ||||||||
| Office equipment at cost | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Total property, plant, and equipment | $ | $ | ||||||
Depreciation
expense for the three months ended September 30, 2022 and 2021 were $
NOTE 4 – DUE TO FORMER DIRECTOR - RELATED PARTY
Due
to former director - related party represents unsecured advances made primarily by a former director for operating expenses on behalf
of the Company such as intellectual property and formation expenses. The expenses were paid for on behalf of the Company and are due
upon demand. The Company is currently not being charged interest under these advances. The total amount owed the former director at September
30, 2022 and June 30, 2022 were $
NOTE 5 – LOAN FROM FORMER DIRECTOR – RELATED PARTY
Loan from Former Director - Related Party
Loan
from the Company’s former director at September 30, 2022 and June 30, 2022 was $
NOTE 6 – CONVERTIBLE NOTES
The Company’s convertible notes outstanding at September 30, 2022 and June 30, 2022 were as follows:
| September 30, 2022 | June 30, 2022 | |||||||
| (Unaudited) | ||||||||
| Convertible notes and debenture | $ | $ | ||||||
| Unamortized discounts | ( | ) | ( | ) | ||||
| Accrued interest | ||||||||
| Premium, net | ||||||||
| Convertible notes, net | $ | $ | ||||||
| F-11 |
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Convertible Note Issued with Consulting Agreement
August 10, 2017 Consulting Agreement
On
August 10, 2017, the Company entered into a consulting agreement, retroactive to May 16, 2017, with a certain consultant, pursuant to
which the consultant agreed to provide certain consulting and business advisory services in exchange for a $
On
March 15, 2021, the Company entered into a Settlement and Mutual Release Agreement (the “Settlement Agreement”) with the
consultant whereby both parties agreed to settle all claims and liabilities under the August 10, 2017 Convertible note for a total of
$
The
total principal and accrued interest outstanding under the August 10, 2017 Convertible Note was $
The
total principal and accrued interest outstanding under the August 10, 2017 Convertible Note was $
Crown Bridge Securities Purchase Agreements
Effective
October 3, 2019, the Company entered into a securities purchase agreement with Crown Bridge Partners, pursuant to which Crown Bridge
purchased a convertible promissory note (the “October 3, 2019 Crown Bridge Note”) from the Company in the aggregate principal
amount of $
Additionally,
Crown Bridge has the option to convert all or any amount of the principal face amount of the October 3, 2019 Crown Bridge Note at any
time from the date of issuance and ending on the later of the maturity date or the date the Default Amount is paid if an event of default
occurs, which is an amount between
The
October 3, 2019 Crown Bridge Note contain certain events of default, upon which principal and accrued interest will become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate
of
The
total principal amount outstanding under the above Crown Bridge financing agreement was $
There
were unissued shares which were considered issuable for accounting purposes during the 1st quarter of fiscal 2021 related
to a conversion notice dated and received on September 16, 2020. In November 2020, the Company was notified by the note holder of the
cancellation of this conversion notice as a result of the reverse stock split and as such the Company reversed the effects of this transaction
thereby increasing the principal balance by $
The
total principal amount outstanding under the above Crown Bridge financing agreement was $
| F-12 |
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
1800 Diagonal Lending (formerly known as Sixth Street Lending) Securities Purchase Agreements
October 21, 2021 Securities Purchase Agreement
Effective
October 21, 2021, the Company entered into a securities purchase agreement with Sixth Street Lending LLC (“Sixth Street”),
pursuant to which Sixth Street purchased a convertible promissory note (the “October 21, 2021 Sixth Street”) from the Company
in the aggregate principal amount of $
November 26, 2021 Securities Purchase Agreement
Effective
November 26, 2021, the Company entered into a securities purchase agreement with Sixth Street Lending LLC pursuant to which Sixth Street
purchased a convertible promissory note (the “November 26, 2021 Sixth Street”) from the Company in the aggregate principal
amount of $
January 4, 2022 Securities Purchase Agreement
Additionally,
effective January 4, 2022, the Company entered into a securities purchase agreement with Sixth Street Lending LLC pursuant to which Sixth
Street purchased a convertible promissory note (the “January 4, 2022 Sixth Street”) from the Company in the aggregate principal
amount of $
March 7, 2022 Securities Purchase Agreement
Additionally,
effective March 7, 2022, the Company entered into a securities purchase agreement with Sixth Street Lending LLC pursuant to which
Sixth Street purchased a convertible promissory note (the “March 7, 2022 Sixth Street”) from the Company in the
aggregate principal amount of $
April 12, 2022 Securities Purchase Agreement
Effective
April 12, 2022, the Company entered into a securities purchase agreement with Sixth Street Lending LLC, pursuant to which Sixth Street
purchased a convertible promissory note (the “April 12, 2022 Sixth Street”) from the Company in the aggregate principal amount
of $
May 12, 2022 Securities Purchase Agreement
Effective
May 12, 2022, the Company entered into a securities purchase agreement with 1800 Diagonal Lending LLC (“1800 Diagonal”),
pursuant to which 1800 Diagonal purchased a convertible promissory note (the “May 12, 2022 1800 Diagonal Note”) from the
Company in the aggregate principal amount of $
| F-13 |
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
June 30, 2022 Securities Purchase Agreement
On
June 30, 2022, the Company entered into a securities purchase agreement with 1800 Diagonal Lending LLC, which closed on July 11, 2022,
pursuant to which 1800 Diagonal purchased a convertible promissory note (the “July 11, 2022 1800 Diagonal Note”) from the
Company in the aggregate principal amount of $
The following terms shall apply to all the above 1800 Diagonal notes:
During
the first 60 to 180 days following the date of the above listed notes, the Company has the right to prepay the principal and accrued
but unpaid interest due under the above notes issued, together with any other amounts that the Company may owe the holder under the terms
of the note, at a premium ranging from
The
above 1800 Diagonal notes contain certain events of default, upon which principal and accrued interest will become immediately due and
payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of
Other than as described above, the above 1800 Diagonal notes contain certain events of default, including failure to timely issue shares upon receipt of a notice of conversion, as well as certain customary events of default, including, among others, breach of covenants, representations or warranties, insolvency, bankruptcy, liquidation and failure by the Company to pay the principal and interest due under the Note. Additional events of default shall include, among others: (i) failure to reserve at least five times the number of shares issuable upon full conversion of the Note; (ii) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company or any subsidiary of the Company; provided, that in the event such event is triggered without the Company’s consent, the Company shall have sixty (60) days after such event is triggered to discharge such event, (iii) the Company’s failure to maintain the listing of the common stock on at least one of the OTC markets (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq Small Cap Market, the New York Stock Exchange, or the American Stock Exchange, (iv) The restatement of any financial statements filed by the Company with the SEC at any time after 180 days after the issuance date for any date or period until this note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have reasonably constituted a material adverse effect on the rights of 1800 Diagonal with respect to this note or the Purchase Agreement, and (v) the Company’s failure to comply with its reporting requirements of the Securities and Exchange Act of 1934 (the “Exchange Act”), and/or the Company ceases to be subject to the reporting requirements of the Exchange Act.
In
the event that the Company fails to deliver the shares of common stock issuable upon conversion of principal or interest under the above
1800 Diagonal notes within three business days of a notice of conversion by 1800 Diagonal, the Company shall incur a penalty of $
Upon the occurrence and during the continuation of certain events of default, the above 1800 Diagonal notes will become immediately due and payable and the Company will pay 1800 Diagonal in full satisfaction of its obligations in the amount equal to % of an amount equal to the then outstanding principal amount of the above 1800 Diagonal notes plus any interest accrued upon such event of default or prior events of default (the “Default Amount”). Further upon the occurrence and during the continuation of any event of default specified in section 3.2 as defined in the 1800 Diagonal note agreements and relates to the failure to issue shares of the Company’s common stock upon the conversion of 1800 Diagonal notes, such above 1800 Diagonal notes shall become immediately due and payable in an amount equal to the Default Amount multiplied by two.
The
total principal amount outstanding under the above 1800 Diagonal financing agreements were $
The
total principal amount outstanding under the above 1800 Diagonal financing agreements were $
| F-14 |
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
ONE44 Capital Securities Purchase Agreements
December 7, 2021 Securities Purchase Agreement
Effective
December 7, 2021, the Company entered into a securities purchase agreement with ONE44 Capital LLC (“ONE44”), pursuant to
which ONE44 purchased a convertible promissory note (the “December 7, 2021 ONE44”) from the Company in the aggregate principal
amount of $
March 29, 2022 Securities Purchase Agreement
Effective
March 29, 2022, the Company entered into a securities purchase agreement with ONE44 Capital LLC, pursuant to which ONE44 purchased a
convertible promissory note (the “March 29, 2022 ONE44”) from the Company in the aggregate principal amount of $
August 15, 2022 Securities Purchase Agreement
On
August 15, 2022, the Company entered into a securities purchase agreement with ONE44 Capital LLC, pursuant to which ONE44 Capital purchased
a convertible redeemable note (the “August 15, 2022 ONE44 Note”) from the Company in the aggregate principal amount of $
The following terms shall apply to all the above ONE44 notes:
During
the first 60 to 180 days following the date of these notes, the Company has the right to prepay the principal and accrued but unpaid
interest due under the above notes issued to ONE44, together with any other amounts that the Company may owe the holder under the terms
of the note, at a premium ranging from