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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2023

 

or

 

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

 

For the transition period from ___________ to ___________

 

Commission File Number: 000-54878

 

PROPANC BIOPHARMA, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   33-0662986

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

302, 6 Butler Street

Camberwell, VIC, 3124 Australia

(Address of principal executive offices) (Zip Code)

 

+61-03- 9882-0780

(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. Yes ☒ No ☐

 

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

 

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

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

 

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

 

As of November 14, 2023, there were 22,258,941 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 8
Item 4. Controls and Procedures 8
     
PART II - OTHER INFORMATION  
     
Item 1. Legal Proceedings 9
Item 1A. Risk Factors 9
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 9
Item 3. Defaults Upon Senior Securities 10
Item 4. Mine Safety Disclosures 10
Item 5. Other Information 10
Item 6. Exhibits 10
  Signatures 11

 

 2 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

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

 

INDEX TO FINANCIAL STATEMENTS

 

  Page
Condensed Consolidated Balance Sheets at September 30, 2023 (unaudited) and June 30, 2023 F-2
   
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended September 30, 2023 and 2022 (unaudited) F-3
   
Condensed Consolidated Statements of Changes in Stockholders’ Deficit for each of the three months in the periods ended September 30, 2023 and 2022 (unaudited) F-4
   
Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2023 and 2022 (unaudited) F-6
   
Notes to the Condensed Consolidated Financial Statements (unaudited) F-7

 

 F-1 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30, 2023   June 30, 2023 
   (Unaudited)     
ASSETS          
           
CURRENT ASSETS:          
Cash  $6,625   $10,047 
GST tax receivable   2,634    2,867 
Prepaid expenses and other current assets   20,376    6,125 
Refundable advance deposit   116,169    - 
           
TOTAL CURRENT ASSETS   145,804    19,039 
           
Security deposit - related party   1,928    1,999 
Operating lease right-of-use assets, net - related party   32,479    38,988 
Property and equipment, net   160    302 
           
TOTAL ASSETS  $180,371   $60,328 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
CURRENT LIABILITIES:          
Accounts payable  $1,081,316   $966,718 
Accrued expenses and other payables   614,870    579,707 
Accrued interest   52,743    44,709 
Loan payable   65,280    65,280 
Note payable, net of discount   126,000    - 
Convertible notes, net of discounts and including put premiums   397,443    390,539 
Operating lease liability - related party, current portion   21,161    21,505 
Embedded conversion option liabilities   119,069    423,209 
Due to former director - related party   28,581    29,630 
Loan from former director - related party   47,567    49,314 
Employee benefit liability   579,083    587,618 
           
TOTAL CURRENT LIABILITIES   3,133,113    3,158,229 
           
NON-CURRENT LIABILITIES:          
Loan payable - long-term - related party, net of discount   23,371    - 
Operating lease liability - long-term portion - related party   13,146    19,278 
           
TOTAL NON-CURRENT LIABILITIES   36,517    19,278 
           
TOTAL LIABILITIES  $3,169,630   $3,177,507 
           
Commitments and Contingencies (See Note 8)   -     -  
           
STOCKHOLDERS’ DEFICIT:          
Preferred stock, 1,500,005 shares authorized, $0.01 par value:          
Series A preferred stock, $0.01 par value; 500,000 shares previously authorized; 0 shares issued and outstanding as of September 30, 2023 and June 30, 2023  $-   $- 
Series B preferred stock, $0.01 par value; 5 shares authorized; 1 share issued and outstanding as of September 30, 2023 and June 30, 2023   -    - 
Common stock, $0.001 par value; 10,000,000,000 shares authorized; 14,833,210 and 6,031,250 shares issued and outstanding as of September 30, 2023 and June 30, 2023, respectively   14,833    6,031 
Common stock issuable (626,229 and 1,621,653 shares as of September 30, 2023 and June 30, 2023, respectively)   626    1,621 
Additional paid-in capital   60,851,382    60,311,502 
Accumulated other comprehensive income   1,368,550    1,294,876 
Accumulated deficit   (65,178,173)   (64,684,732)
Treasury stock (0.001 share)   (46,477)   (46,477)
           
TOTAL STOCKHOLDERS’ DEFICIT   (2,989,259)   (3,117,179)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $180,371   $60,328 

 

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)

 

   2023   2022 
   For the three months ended September 30, 
   2023   2022 
         
REVENUE          
Revenue  $-   $- 
           
OPERATING EXPENSES          
Administration expenses   393,828    465,132 
Occupancy expenses - related party   7,149    6,373 
Research and development   16,242    101,325 
TOTAL OPERATING EXPENSES   417,219    572,830 
           
LOSS FROM OPERATIONS   (417,219)   (572,830)
           
OTHER INCOME (EXPENSE)          
Interest expense   (178,234)   (162,752)
Interest income   17    2 
Derivative expense   (77,721)   - 
Change in fair value of derivative liabilities   303,929    65,173 
Gain from settlement of accounts payable   -    17,499 
Gain (loss) on extinguishment of debt, net   34,310    (610)
Foreign currency transaction gain (loss)   (15,948)   36,223 
TOTAL OTHER INCOME (EXPENSE), NET   66,353    (44,465)
           
LOSS BEFORE TAXES   (350,866)   (617,295)
           
Tax benefit   -    - 
           
NET LOSS  $(350,866)  $(617,295)
           
Deemed Dividend   (142,575)   (389,235)
           
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS  $(493,441)  $(1,006,530)
           
BASIC AND DILUTED NET LOSS PER SHARE AVAILABLE TO COMMON STOCKHOLDERS  $(0.04)  $(2.13)
           
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   10,989,681    473,589 
           
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS  $(493,441)  $(1,006,530)
           
OTHER COMPREHENSIVE INCOME (LOSS)          
Unrealized foreign currency translation gain (loss)   73,674    126,396 
           
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)   73,674    126,396 
           
TOTAL COMPREHENSIVE LOSS  $(419,767)  $(880,134)

 

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, 2023 AND 2022

(Unaudited)

 

   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
 
   Preferred Stock                                       
   Series A   Series B   Common Stock   Common Stock Issuable   Additional          Accumulated
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   500,000   $5,000    1   $-    220,351   $220              19,598   $20   $57,364,690   $(23,758)  $(61,557,893)  $1,234,549   $(46,477)  $     (3,023,649)
                                                                       
Issuance of common stock for cash   -    -    -    -    14,337    14    -    -    24,697    23,758    -    -    -    48,469 
                                                                       
Issuance of common stock for conversion of convertible debt, conversion fee and accrued interest   -    -    -    -    264,493    264    -    -    456,675    -    -    -    -    456,939 
                                                                       
Issuance of common stock for issuable shares   -    -    -    -    19,597    20    (19,598)   (20)   -    -    -    -    -    - 
                                                                       
Issuance of common stock for exercise of warrants   -    -    -    -    1    -    1    -    100,000    -    -    -    -    100,000 
                                                                       
Issuance of common stock for alternate cashless exercise of warrants   -    -    -    -    158,399    158    -    -    (158)   -    -    -    -    - 
                                                                       
Reclassification of put premium upon debt conversion   -    -    -    -    -    -    -    -    133,646    -    -    -    -    133,646 
                                                                       
Stock based compensation in connection with stock warrant grant   -    -    -    -    -    -    -    -    2,408    -    -    -    -    2,408 
                                                                       
Warrant grant for settlement of accounts payable   -    -    -    -    -    -    -    -    5,551    -    -    -    -    5,551 
                                                                       
Foreign currency translation gain   -    -    -    -    -    -    -    -    -    -    -    126,396    -    126,396 
                                                                       
Deemed dividend upon alternate cashless exercise of warrants   -    -    -    -    -    -    -    -    389,235    -    (389,235)   -    -    - 
                                                                       
Net loss for the three months ended September 30, 2022   -    -    -    -    -    -    -    -    -    -    (617,295)   -    -    (617,295)
                                                                       
Balance at September 30, 2022   500,000   $5,000    1   $-    677,178   $677    1   $(0)  $58,476,743   $-   $(62,564,423)  $1,360,945   $(46,477)  $(2,767,535)

 

 F-4 

 

   Preferred Stock                                       
   Series A   Series B   Common Stock   Common Stock Issuable   Additional          Accumulated
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, 2023   -   $-    1   $-    6,031,250   $6,031    1,621,653   $1,621   $60,311,502   $-   $(64,684,732)  $1,294,876   $(46,477)  $      (3,117,179)
                                                                       
Issuance of common stock for conversion of convertible debt, conversion fee and accrued interest   -    -    -    -    4,898,307    4,899    626,229    626    223,665    -    -    -    -    229,190 
                                                                       
Issuance of common stock for alternate cashless exercise of warrants   -    -    -    -    2,282,000    2,282    -    -    (2,282)   -    -    -    -    - 
                                                                       
Issuance of common stock for issuable shares   -    -    -    -    1,621,653    1,621    (1,621,653)   (1,621)   -    -    -    -    -    - 
                                                                       
Reclassification of put premium upon debt conversion   -    -    -    -    -    -    -    -    34,838    -    -    -    -    34,838 
                                                                       
Relative fair value of warrant granted in connection with a loan payable - related party   -    -    -    -    -    -    -    -    141,084    -    -    -    -    141,084 
                                                                       
Foreign currency translation gain   -    -    -    -    -    -    -    -    -    -    -    73,674    -    73,674 
                                                                       
Deemed dividend upon alternate cashless exercise of warrants   -    -    -    -    -    -    -    -    142,575    -    (142,575)   -    -    - 
                                                                       
Net loss for the three months ended September 30, 2023   -    -    -    -    -    -    -    -    -    -    (350,866)   -    -    (350,866)
                                                                       
Balance at September 30, 2023   -   $-    1   $-    14,833,210   $14,833    626,229   $626   $60,851,382   $-   $(65,178,173)  $1,368,550   $(46,477)  $(2,989,259)

 

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

 

 F-5 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   2023   2022 
   For the three months ended September 30, 
   2023   2022 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(350,866)  $(617,295)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:          
Stock option, stock warrants and restricted stock expense   -    2,408 
Foreign currency transaction (gain) loss   15,948    (36,223)
Depreciation expense   134    473 
Amortization of debt discounts   69,457    31,275 
Amortization of right-of-use assets   5,128    5,131 
Change in fair value of derivative liabilities   (303,929)   (65,173)
Derivative expense   77,721    - 
(Gain) loss on extinguishment of debt, net   (34,310)   610 
Gain from settlement of accounts payable   -    (17,499)
Non-cash interest expense   1,437    - 
Accretion of put premium   88,846    115,769 
Changes in Assets and Liabilities:          
GST receivable   132    (523)
Prepaid expenses and other assets   (14,468)   (7,747)
Refundable advance deposit   (116,169)   - 
Accounts payable   148,834    45,121 
Employee benefit liability   12,275    10,415 
Accrued expenses and other payables   55,693    15,162 
Accrued interest   15,712    13,430 
Operating lease liability   (5,032)   (4,649)
NET CASH USED IN OPERATING ACTIVITIES   (333,457)   (509,315)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from convertible promissory notes, net of original issue discounts and issue costs   220,000    345,750 
Repayment of convertible note   (142,909)   - 
Proceeds from the sale of common stock   -    24,711 
Proceeds from note payable   120,000    - 
Proceeds from loan payable - related party   153,256    - 
Collection of subscription receivable   -    23,758 
Proceeds from the exercise of warrants   -    100,000 
NET CASH PROVIDED BY FINANCING ACTIVITIES   350,347    494,219 
           
Effect of exchange rate changes on cash   (20,312)   30,425 
           
NET INCREASE (DECREASE) IN CASH   (3,422)   15,329 
           
CASH AT BEGINNING OF PERIOD   10,047    4,067 
CASH AT END OF PERIOD  $6,625   $19,396 
           
Supplemental Disclosure of Cash Flow Information          
           
Cash paid during the period:          
Interest  $2,713   $2,277 
Income Tax  $-   $- 
           
Supplemental Disclosure of Non-Cash Investing and Financing Activities          
           
Reduction of put premium related to conversions of convertible notes  $34,838   $133,646 
Conversion of convertible notes and accrued interest to common stock  $114,131   $349,530 
Debt discounts related to derivative liability  $70,000   $93,668 
Relative fair value of warrant granted in connection with a loan payable - related party  $141,084   $- 
Warrant grant for settlement of accounts payable  $-   $23,050 
Warrants issued for accrued services  $-   $5,551 
Deemed dividend upon alternate cashless exercise of warrants  $142,575   $389,235 

 

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

 

 F-6 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(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”) is 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.

 

The Company was originally formed in Melbourne, Victoria, Australia on October 15, 2007 as Propanc PTY LTD. On November 23, 2010, Propanc Health Group Corporation was incorporated in the State of Delaware, and in January 2011, to reorganize the Company, all of the outstanding shares of Propanc PTY LTD were acquired on a one-for-one basis by Propanc Health Group Corporation, with Propanc PTY LTD becoming a wholly-owned subsidiary of the Company.

 

On July 22, 2016, the Company formed another wholly-owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the purpose of submitting an orphan drug application to the European Medicines Agency as a small and medium-sized enterprise. As of June 30, 2023, there has been no activity within this entity.

 

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

 

In July 2020, a world-first patent was granted in Australia for the cancer treatment method patent family. Presently, there are 62 granted, allowed, or accepted patents and 14 patents filed, or under examination in key global jurisdictions relating to the use of proenzymes against solid tumors, covering the lead product candidate PRP.

 

On May 1, 2023, the Company filed a certificate of amendment to its certificate of incorporation, as amended, to effect a one-for-one thousand (1:1,000) Reverse Stock Split (the “Reverse Stock Split”), effective as of May 1, 2023. Proportional adjustments for the Reverse Stock Split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts have been retroactively adjusted as of the earliest period presented in the consolidated financial statements to reflect the Reverse Stock Split.

 

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.

 

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, 2023 and 2022 and cash flows for the three months ended September 30, 2023 and 2022 and our consolidated financial position at September 30, 2023 have been made. The Company’s results of operations for the three months ended September 30, 2023 are not necessarily indicative of the operating results to be expected for the full fiscal year ending June 30, 2024.

 

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, 2023. The June 30, 2023 balance sheet is derived from those statements.

 

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, 2023.

 

Use of Estimates

 

The preparation of financial statements in conformity with 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.

 

 F-7 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

 

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, 2023 and 2022, the Company recognized a cumulative exchange gain (loss) of approximately $669,000 and $1,226,000, respectively, on intercompany loans made by the parent to the subsidiary that have not been repaid as of September 30, 2023, which is included as component of accumulated other comprehensive income on the accompanying consolidated balance sheet.

 

As of September 30, 2023 and June 30, 2023, 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, 2023   June 30, 2023 
Exchange rate on balance sheet dates          
USD : AUD exchange rate   0.6428    0.6664 
           
Average exchange rate for the period          
USD : AUD exchange rate   0.6546    0.6732 

 

The change in Accumulated Other Comprehensive Income by component during the three months ended September 30, 2023 was as follows:

 

   Foreign
Currency Items:
 
Balance, June 30, 2023  $1,294,876 
Unrealized foreign currency translation gain   73,674 
Ending balance, September 30, 2023  $1,368,550 

 

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).

 

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.

 

 F-8 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

 

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 no cash equivalents as of September 30, 2023 or June 30, 2023.

 

Refundable Advance Deposit

 

Refundable advance deposit of $116,169 and $0 at September 30, 2023 and June 30, 2023, respectively, consists primarily of deposit paid to a potential lender to be used as payment for a loan insurance premium related to a future loan transaction with the Company. In the event, the future loan transaction does not close, the potential lender shall return the refundable advance deposit. The Company and the potential lender are currently undergoing the loan process.

 

Property and Equipment

 

Property and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals, and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the declining balance method. The depreciable amount is the cost less its residual value.

 

The estimated useful lives are as follows:

 

Machinery and equipment   - 5 years
Furniture   - 7 years

 

Patents

 

Patents are stated at cost and 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, 2023 were expensed immediately. This practice of expensing patent costs immediately ends when a product receives market authorization from a government regulatory agency.