Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS??? DEFICIT

v3.22.4
STOCKHOLDERS’ DEFICIT
6 Months Ended
Dec. 31, 2022
Equity [Abstract]  
STOCKHOLDERS’ DEFICIT

NOTE 7 – STOCKHOLDERS’ DEFICIT

 

Increase in Authorized Shares of Common Stock and Reverse Stock Split

 

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 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 $0.001 per share, from 1,000,000,000 to 3,000,000,000. The number of authorized shares of preferred stock remains at 1,500,005, such that the total number of shares of all classes and series the Company was authorized to issue became 3,001,500,005 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 $0.001 per share, from 3,000,000,000 to 10,000,000,000. The number of authorized shares of preferred stock remains at 1,500,005, such that the total number of shares of all classes and series the Company is authorized to issue is 10,001,500,005 shares. The Certificate was filed and became effective on November 4, 2022.

 

Preferred Stock

 

The total number of shares of preferred stock that the Company is authorized to issue is 1,500,005, $0.01 par value per share. These preferred shares have no rights to dividends, profit sharing or liquidation preferences.

 

Of the total preferred shares authorized, 500,000 have been designated as Series A Preferred Stock (“Series A Preferred Stock”), pursuant to the Certificate of Designation filed with the Secretary of State of the State of Delaware on December 9, 2014. James Nathanielsz, the Company’s Chief Executive Officer and Chief Financial Officer, beneficially owns all of the outstanding shares of Series A Preferred Stock via North Horizon Pty Ltd., which entitles him, as a holder of Series A Preferred Stock, to vote on all matters submitted or required to be submitted to a vote of the Company’s stockholders, except election and removal of directors, and each share of Series A Preferred Stock entitles him to two votes per share of Series A Preferred Stock. North Horizon Pty Ltd. is a Nathanielsz Family Trust. Mr. James Nathanielsz, the Chief Executive Officer, Chief Financial Officer and a director of our Company, has voting and investment power over these shares. 500,000 shares of Series A Preferred Stock are issued and outstanding as of December 31, 2022 and June 30, 2022.

 

Of the total preferred shares authorized, pursuant to the Certificate of Designation filed with the Secretary of State of the State of Delaware on June 16, 2015, up to five shares have been designated as Series B Preferred Stock (“Series B Preferred Stock”). Each holder of outstanding shares of Series B Preferred Stock is entitled to voting power equivalent to the number of votes equal to the total number of shares of common stock outstanding as of the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company and entitled to vote on all matters submitted or required to be submitted to a vote of the stockholders of the Company. One share of Series B Preferred Stock is issued and outstanding as of December 31, 2022 and June 30, 2022. Mr. Nathanielsz directly beneficially owns such one share of Series B Preferred Stock.

 

No additional shares of Series A Preferred Stock or Series B Preferred Stock were issued during the six months ended December 31, 2022 and fiscal year 2022.

 

Common Stock:

 

Shares issued for Common Stock Purchase Agreement

 

Dutchess Capital Growth Fund LP

 

On November 30, 2021, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Dutchess Capital Growth Fund LP, a Delaware limited partnership (“Dutchess”), 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, Dutchess is committed to purchase up to Five Million Dollars ($5,000,000) of shares of the Company’s Common Stock, over the 36-month term of the Purchase Agreement (the “Total Commitment”).

 

Under the terms of the Purchase Agreement, Dutchess 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 Dutchess’ resale of any Common Stock purchased by Dutchess 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 its sole discretion, may provide Dutchess 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 92% of the lowest trading price of the Common Stock during the five (5) business days prior to the Closing Date. Closing Date shall mean the five business days after the Clearing Date. Clearing Date shall mean the first business day that the Selling Shareholder holds the Draw Down Amount in its brokerage account and is eligible to trade the shares.

 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

(Unaudited)

 

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) 300% of the average daily share volume of the Common Stock in the five trading days immediately preceding the Draw Down Notice or (ii) an aggregate value of $250,000.

 

On July 13, 2022, the Company issued 14,336,712 shares of its common stock at an average price per share of approximately $0.002, as a result of delivering one draw down notice to Dutchess. Consequently, the Company received gross aggregate proceeds of $24,711 from such draw down notice. The Company received $23,758 of a previously recorded subscription receivable during the six months ended December 31, 2022.

 

Coventry Enterprises, LLC

 

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 its 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. During the six months ended December 31, 2022, the Company has not received a draw down notice from Coventry.

 

Shares issued for conversion of convertible debt

 

As of June 30, 2022, there were 7,326,007 shares of Common Stock issuable from the conversion of debt during fiscal 2022. Such shares were issued on July 12, 2022.

 

From July 1, 2022 through September 14, 2022, the Company issued an aggregate of 264,492,661 shares of its common stock at an average contractual conversion price of $0.001 as a result of the conversion of principal of $327,200, and accrued interest of $22,330 underlying certain outstanding convertible notes converted during such period. The total recorded to equity was $456,939.

 

From October 17, 2022 through December 27, 2022, the Company issued an aggregate of 380,506,070 shares of its common stock at an average contractual conversion price of $0.001 as a result of the conversion of principal of $158,500, and accrued interest of $7,191 underlying certain outstanding convertible notes converted during such period. The total recorded to equity was $165,691.

 

The Company reclassified $218,992 from put premium liabilities to additional paid in capital following conversions during the six months ended December 31, 2022.

 

During the six months ended December 31, 2022, converted notes – principal of $79,000 and accrued interest of $9,543 containing bifurcated embedded conversion option derivatives. Accordingly, the fair market value of the shares issued upon conversion was $195,952 resulting in a loss on extinguishment at the time of conversion of $107,409 and $106,799 of derivative fair value was recorded as a gain on extinguishment at the time of conversion, resulting in a net loss of $610.

 

The Company has 3,835,337,946 shares of its Common Stock reserved for future issuances based on lender reserve requirements pursuant to underlying financing agreements at December 31, 2022.

 

Shares issued for services and accrued expenses

 

As of June 30, 2022, there was common stock issuable of 12,270,958 for services rendered during fiscal 2022. The common stock issuable of 12,270,958 were issued on July 1, 2022.

 

On October 25, 2022, the Company issued 6,111,112 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 $0.0009 per share or $5,500 which was recorded as stock-based consulting expense.

 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

(Unaudited)

 

On November 16, 2022, the Company issued 73,301,020 shares of the Company’s Common Stock to a consultant for services rendered from July 2022 to November 2022. Those shares were valued at approximately $0.00007 per share or $51,311, being the closing price of the stock on the date of grant to such consultant. The Company recorded stock-based compensation of $51,311 during the six months ended December 31, 2022.

 

Shares issued for exercise of warrants

 

Between July 29, 2022 and December 6, 2022, the Company received gross proceeds of $200,000 from the exercise of 5,000 Series B Warrants and issued 5,000 shares of its Common Stock.

 

During the six months ended December 31, 2022, the Company issued 191,999,040 shares of its Common Stock from the alternate cashless exercise of 960 Series A warrants with an original exercise price of $200 and alternate cashless exercise price of $0.001. The Alternate Cashless Exercise provision, for a cashless conversion at the holder’s option, is available should the trading price of the Company’s Common Stock fall below $200 per share calculated based on the difference between the exercise price of the Series A Warrant and 70% of the market price. 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 a deemed dividend of $19,322 and $408,557 during the three and six months ended December 31, 2022, respectively, and a corresponding increase in loss available to common stockholders upon the alternate cashless exercise of these warrants.

 

Shares issued in connection with a note payable

 

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 (see Note 5). As an additional inducement to the Coventry purchasing the note, the Company, as of the original issue date and for no additional consideration, issued to Coventry an aggregate of 75,000,000 shares of the Company’s Common Stock, which were valued using the relative fair value method at $37,500 and recognized as debt discount to be amortized over the term of the note.

 

Restricted Stock Units

 

Pursuant to employment agreements dated in May 2019, the Company granted an aggregate of 78 and 39 restricted stock units to the Company’s Chief Executive Officer and Chief Scientific Officer, respectively. The total 117 restricted stock units are subject to vesting terms as defined in the employment agreements. The 117 restricted stock units were valued at the fair value of $4,250 per unit or $497,240 based on the quoted trading price on the date of grant. There were $248,620 unrecognized restricted stock units expense as of December 31, 2022 and June 30, 2022. There are 59 unvested restricted stock units which are subject to various performance conditions which have not yet been met and such restricted stock units have not yet vested as of December 31, 2022 and June 30, 2022 to which the $248,620 relates.

 

Warrants:

 

The following table summarizes warrant activity for the six months ended December 31, 2022:

          Weighted  
    Number of     Average  
    Shares     Price Per Share  
Outstanding at June 30, 2022     105,420     $ 200.27  
Granted     3,305,000       0.01  
Exercised     (5,960 )     65.77  
Forfeited     (1,000 )     2,000.00  
Expired     -       -  
Outstanding at December 31, 2022     3,403,460 *   $ 5.51  
                 
Exercisable at December 31, 2022     3,379,711     $ 5.55  
Outstanding and Exercisable:                
                 
Weighted average remaining contractual term     2.58          
Aggregate intrinsic value
  $ -          

 

* The total warrants of 3,403,460 above consisted of the following:

 

    Number of Warrants     Exercisable  
Series A warrants     9,986       9,986  
Series B warrants     23,750       23,750  
Series C warrants     63,749       40,000  
Warrants with no class designation     3,305,975       3,305,975  
Total     3,403,460       3,379,711  

 

 

PROPANC BIOPHARMA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

(Unaudited)

 

On August 16, 2022, the Company entered into an agreement with a certain consultant to provide services over a three-month period in exchange for 1,000,000 warrants to purchase the Company’s common stock at $0.01 per share with an expiry date of August 16, 2025. The fair market value of the warrants was $2,408 on the date of grant as calculated under the Black Scholes Option Pricing model with the following assumptions: stock price at valuation date of $0.0026 based on quoted trading price on date of grant, exercise price of $0.01, dividend yield of zero, years to maturity of 3.00, a risk-free rate of 3.19%, and expected volatility 236%. The Company recorded $2,408 of stock-based compensation expenses with respect to the grant of such warrants during the six months ended December 31, 2022.

 

On August 16, 2022, the Company and a third-party investor relations consultant agreed to settle an outstanding payable of $23,050 in exchange for 2,305,000 warrants to purchase the Company’s common stock at $0.01 per share with an expiry date of August 16, 2025. The fair market value of the warrants was $5,551 on the date of grant as calculated under the Black Scholes Option Pricing model with the following assumptions: stock price at valuation date of $0.0026 based on quoted trading price on date of grant, exercise price of $0.01, dividend yield of zero, years to maturity of 3.00, a risk-free rate of 3.19%, and expected volatility 236%. Accordingly, the Company recognized gain from settlement of debt of $17,499 during the six months ended December 31, 2022 as reflected in the accompanying condensed consolidated statements of operations.

 

Options:

 

A summary of the Company’s option activity during the six months ended December 31, 2022 is presented below:

 

          Weighted  
    Number of     Average Exercise  
  Shares     Price Per Share  
Outstanding at June 30, 2022     59     $ 4,533  
Granted     -       -  
Exercised     -       -  
Forfeited     -       -  
Expired     -       -  
Outstanding at December 31, 2022     59     $ 4,533  
                 
Exercisable at December 31, 2022     59     $ 4,533  
Outstanding and Exercisable:                
                 
Weighted average remaining contractual term     6.37          
Weighted average fair value of options granted during the period   $ -          
Aggregate intrinsic value   $ -          

 

On the Effective Date, the Company’s board of directors approved and adopted the Company’s 2019 Equity Incentive Plan (the “2019 Plan”), which reserves a total of 234 shares of the Company’s common stock for issuance under the 2019 Plan. Incentive awards authorized under the 2019 Plan include, but are not limited to, incentive stock options, non-qualified stock options, restricted stock awards and restricted stock units.

 

During the six months ended December 31, 2022 and 2021, the Company recognized stock-based compensation of $0 and $41,436, respectively related to vested stock options. There was $0 of unvested stock options expense as of December 31, 2022. No stock options were granted during the six months ended December 31, 2022.