SUBSEQUENT EVENTS |
3 Months Ended |
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Sep. 30, 2022 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS |
NOTE 12 – SUBSEQUENT EVENTS
Shares issued for conversion of convertible debt
Between October 2022 and November 2022, the Company issued an aggregate of shares of its common stock at a contractual conversion price of $0.001, as a result of the conversion of principal of $57,400 underlying certain outstanding convertible notes converted during such period. The Company reclassified $30,908 from put premium liabilities to additional paid in capital following conversions.
Red Road Holdings Securities Purchase Agreement
On October 6, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Red Road Holdings Corporation, a Virginia corporation (“Red Road”), pursuant to which Red Road purchased a convertible promissory note (the “Note”) from the Company in the aggregate principal amount of $53,750, such principal and the interest thereon convertible into shares of the Company’s common stock at the option of Red Road. The transaction contemplated by the Purchase Agreement closed on October 12, 2022. The Company intends to use the net proceeds ($50,000) from the Note for general working capital purposes. The maturity date of the Note is October 6, 2023 (the “Maturity Date”). The Note shall bear interest at a rate of 8% per annum, which interest may be paid by the Company to Red Road in shares of common stock, but shall not be payable until the Note becomes payable, whether at the Maturity Date or upon acceleration or by prepayment, as described below. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of 22% per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions. Red Road has the option to convert all or any amount of the principal face amount of the Note, beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined below), each in respect of the remaining outstanding amount of this Note, to convert all or any part of the outstanding and unpaid amount of this Note into common stock at the then-applicable conversion price. Pursuant to the terms of the Purchase Agreement, the Company paid Red Road’s legal fees and due diligence expenses in the aggregate amount of $3,750.
The conversion price for the Note shall be equal to the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 65% multiplied by the Market Price (as defined herein) (representing a discount rate of 35%). “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for the common stock during the ten (10) trading days prior to the conversion date. Notwithstanding the foregoing, Red Road shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Red Road and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock. This note is treated as stock settled debt under ASC 480 and accordingly the Company recorded a total of $28,942 put premium.
PROPANC BIOPHARMA, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2022 (Unaudited)
The Note may be prepaid until 180 days from the issuance date. If the Note is prepaid within 60 days of the issuance date, then the prepayment premium shall be 110% of the face amount plus any accrued interest, if prepaid after 60 days from the issuance date, but less than 91 days from the issuance date, then the prepayment premium shall be 115% of the face amount plus any accrued interest, if prepaid after 90 days from the issuance date, but less than 121 days from the issuance date, then the prepayment premium shall be 120% of the face amount plus any accrued interest, if prepaid after 120 days from the issuance date, but less than 151 days from the issuance date, then the prepayment premium shall be 125% of the face amount plus any accrued interest, and if prepaid after 150 days from the issuance date, but less than 181 days from the issuance date, then the prepayment premium shall be 129% of the face amount plus any accrued interest. So long as the Note is outstanding, the Company covenants not to, without prior written consent from Red Road, sell, lease or otherwise dispose of all or substantially all of its assets outside the ordinary course of business which would render the Company a “shell company” as such term is defined in Rule 144.
In the event that the Company fails to deliver to Red Road shares of common stock issuable upon conversion of principal or interest under the Note within three business days of a notice of conversion by Red Road, the Company shall incur a penalty of $1,000 per day, provided, however, that such fee shall not be due if the failure to deliver the shares is a result of a third party such as the transfer agent. Upon the occurrence and during the continuation of certain events of default, the Note will become immediately due and payable and the Company will pay Red Road in full satisfaction of its obligations in the Note an amount equal to 150% of an amount equal to the then outstanding principal amount of the Note plus any interest accrued upon such event of default or prior events of default.
Shares issued for exercise of warrants
In October 2022, the Company issued shares of common stock from the alternate cashless exercise of 168 Series A warrants. The Company recognized the value of the effect of a down round feature in such warrants when triggered. Upon the occurrence of the triggering event that resulted in a reduction of the strike price, the Company measured the value of the effect of the feature as the difference between the fair value of the warrants without the down round feature or before the strike price reduction and the fair value of the warrants with a strike price corresponding to the reduced strike price upon the down round feature being triggered. Accordingly, the Company recognized deemed dividend of $19,322 and a corresponding reduction of income available to common stockholders upon the alternate cashless exercise of these warrants
In October 2022, the Company received aggregate gross proceeds of $50,000 from the exercise of 1,250 Series B Warrants and issued shares of common stock.
Shares issued for services
In October 2022, the Company issued shares of the Company’s common stock to a consultant for services rendered in October 2022. The Company valued these shares based on quoted trading prices on the date of grant at $ per share or $5,500 which was recorded as stock based consulting expense.
Amended and Restated Employment Agreement
On October 26, 2022, the Company entered into an Amended and Restated Employment Agreement (the “Amended Agreement”) with James Nathanielsz, the Company’s Chief Executive Officer and Chief Financial Officer (the “Executive”), effective as of July 1, 2022, (the “Effective Date”).
The Amended Agreement provides the Executive with a base salary of $600,000 AUD ($414,900 USD) per annum. The Company has also agreed to pay Executive an annual discretionary bonus in an amount up to 100% of his annual base salary, reduced from 200%, which bonus shall be determined by the Board and based upon the performance of the Company. The Amended Agreement has a term of three (3) years from the Effective Date, with automatic one-year renewal periods unless either party elects not to renew. Mr. Nathanielsz is entitled to 20 days of annual leave and 10 days of paid sick leave. Mr. Nathanielsz is also entitled to participate in employee benefits plans, fringe benefits and perquisites maintained by the Company to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company.
In the event that the Company provides notice of non-renewal of Executive’s Amended Agreement, the Company terminates Executive without cause (as defined in the Amended Agreement) or Mr. Nathanielsz terminates his employment for good reason (as defined in the Amended Agreement), the Company has agreed to pay Executive a severance payment in an amount equal to Executive’s base salary for the year of termination in addition to accrued but unpaid salary, reimbursement of expenses, and certain other employee benefits as determined under the terms of the applicable plans (“Accrued Amounts”). In the event that Executive provides notice of non-renewal of the Amended Agreement, the Company terminates Mr. Nathanielsz for cause (as defined in the Amended Agreement) or Executive terminates his employment without good reason, Executive is only entitled to the Accrued Amounts.
The Company has agreed to indemnify Executive for any liabilities, costs and expenses incurred in the event that Executive is made a party to a proceeding due to his roles with the Company, other than any proceeding initiated by Executive or the Company relating to any dispute with respect to the Amended Agreement or Executive’s employment. Under the terms of the Amended Agreement, the Executive is also subject to certain restrictive covenants, including a one-year non-compete.
Increase in Authorized Shares
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.
PROPANC BIOPHARMA, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2022 (Unaudited)
Common Stock Purchase Agreement
On November 3, 2022, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Coventry Enterprises, LLC, a Delaware limited company, (“Coventry”), providing for an equity financing facility (the “Equity Line”). The Purchase Agreement provides that upon the terms and subject to the conditions in the Purchase Agreement, Coventry is committed to purchase up to Five Million Dollars ($5,000,000) of shares of the Company’s common stock (the “Common Stock”), over the 36 month term of the Purchase Agreement (the “Total Commitment”).
Under the terms of the Purchase Agreement, Coventry will not be obligated to purchase shares of Common Stock unless and until certain conditions are met, including but not limited to a Registration Statement on Form S-1 (the “Registration Statement”) becoming effective which registers Coventry’s resale of any Common Stock purchased by Coventry under the Equity Line. From time to time over the 36-month term of the Purchase Agreement, commencing on the trading day immediately following the date on which the Registration Statement becomes effective, the Company, in our sole discretion, may provide Coventry with a draw down notice (each, a “Draw Down Notice”), to purchase a specified number of shares of Common Stock (each, a “Draw Down Amount Requested”), subject to the limitations discussed below. The actual amount of proceeds the Company will receive pursuant to each Draw Down Notice (each, a “Draw Down Amount”) is to be determined by multiplying the Draw Down Amount Requested by the applicable purchase price. The purchase price of each share of Common Stock equals 80% of the lowest volume weighted average price of the Common Stock during the 10 business days immediately preceding the Drawdown Notice date.
The maximum number of shares of Common Stock requested to be purchased pursuant to any single Draw Down Notice cannot exceed the lesser of (i) 200% of the average daily traded value of the Common Stock during the 10 business days immediately preceding the Draw Down Notice or (ii) an aggregate value of $250,000 or iii) beneficial ownership limitation which is equivalent to 9.99% of the outstanding number of shares of common stock immediately after giving effect to the issuance of the Draw Down Notice.
Coventry Enterprises, LLC Securities Purchase Agreement
On November 3, 2022, the Company entered into a securities purchase agreement with Coventry Enterprises, LLC pursuant to which Coventry purchased a promissory note from the Company in the aggregate principal amount of $125,000, such principal and the interest thereon convertible into shares of the Company’s common stock following an event of default. The Coventry note contains a $25,000 original issue discount. The Company intends to use the net proceeds $100,000 from the Coventry note for general working capital purposes.
The Coventry note shall bear interest at a rate of 10% per annum, a $12,500 guaranteed interest. The principal amount and the guaranteed interest shall be due and payable in seven equal monthly payments (each, a “Monthly Payment”) of $19,643, commencing on March 24, 2023 and continuing on the 24th day of each month thereafter (each, a “Monthly Payment Date”) until paid in full not later than October 24, 2023 (the “Maturity Date”), or such earlier date as this note is required or permitted to be repaid as provided hereunder, and to pay such other interest to the Holder on the aggregate unconverted and then outstanding principal amount of this note in accordance with the provisions hereof. Any or all of the Principal Amount and Guaranteed Interest may be pre-paid at any time and from time to time, in each case without penalty or premium.
Additionally, in the event that while this note has been outstanding for four months, there is a REG A effective, then the Investor may choose to convert any amount up to the entire balance of the note including guaranteed interest into shares at the REG A offering price.
At any time following an event of default under 7(a)(i), this note shall become convertible, in whole or in part, into shares of Common Stock at the option of the holder, at any time and from time to time thereafter (subject to the beneficial ownership limitations set forth in Section 5d). The conversion price of this note is ninety percent (90%) per share of the lowest per-share VWAP during the twenty (20) trading day period before the conversion (each, a “Calculated Conversion Price”). In the event that, within 30 calendar days either before or after any conversion, the conversion price of which is based upon a Calculated Conversion Price, the Company consummates (in whole or in part) any financing (whether such financing is equity, equity-equivalent, or debt or any combination thereof ) or for any other reason issues any shares of its Common Stock or any Common Stock Equivalents at a price less than the such most recent Calculated Conversion Price (the “Alternative Conversion Price”), regardless of when that note or instrument was originated, then, in respect of such conversion and at the option of the Holder, (i) if the conversion shall not then have yet occurred, then the Alternative Conversion Price shall be substituted for the Calculated Conversion Price and (ii) if the conversion shall already have occurred, then, within two Trading Days following the written request from the Holder therefor, the Company shall issue to the Holder that number of shares of Common Stock equivalent to the difference between the number of shares of Common Stock that had been issued using the Calculated Conversion Price and the number of shares of Common Stock that would have been issued using the Alternative Conversion Price.
Upon the occurrence and during the continuation of certain events of default, interest shall accrue at a default interest rate which shall be equal to the lesser of i) 18% per annum or ii) the maximum rate permitted by law. Subject to the beneficial ownership limitation as set forth in Section 5(d), if any event of default occurs, then the outstanding principal amount of this note, the outstanding guaranteed interest amount of this note, plus accrued but unpaid default rate interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable at the holder’s option, in cash or in shares of Common Stock, at the mandatory default amount which payment is equal to 120% of the outstanding principal amount of this note and accrued and unpaid interest hereon, in addition to the payment of all other amounts, costs, expenses, and liquidated damages due in respect of this note. In the event that the Company fails to deliver to Coventry shares of Common Stock issuable upon conversion of principal or interest, the Company shall pay in cash which is equivalent to the amount in excess of the sales value of the shares of common stock that Coventry would be entitled to receive from the conversion over the principal amount and interest of the attempted conversion.
As an additional inducement to the Coventry purchasing this note, the Company shall, as of the Original Issue Date and for no additional consideration, issue to the holder an aggregate of shares of the Company’s Common Stock and shall be valued based on the quoted trading price on date of grant of $ or $60,000 which shall be recognized as debt discount to be amortized over the term of this note.
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