# Propanc Biopharma, Inc.: Form 10-Q for the period ended Dec 31, 2020

- Company: [Propanc Biopharma, Inc.](/companies/ppcb.md) (CIK 1517681)
- Form: 10-Q
- Filed: 2021-02-12
- Accepted by EDGAR: Feb 12, 2021, 15:12 ET
- Period: 2020-12-31
- Accession: 0001493152-21-003609
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1517681/000149315221003609/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1517681/000149315221003609/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2020-10-01 to 2020-12-31 | $50.2k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2020-07-01 to 2020-12-31 | $101.0k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2020-10-01 to 2020-12-31 | −$274.1k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2020-07-01 to 2020-12-31 | −$657.3k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2020-10-01 to 2020-12-31 | $157.8k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2020-07-01 to 2020-12-31 | $317.1k | us-gaap:InterestExpense |
| Net income | 3 months, 2020-10-01 to 2020-12-31 | −$403.6k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2020-07-01 to 2020-12-31 | −$829.2k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2020-10-01 to 2020-12-31 | −$0.45 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 6 months, 2020-07-01 to 2020-12-31 | −$1.13 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 6 months, 2020-07-01 to 2020-12-31 | −$441.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2020-12-31 | $21.2k | us-gaap:Cash |
| Current assets | at 2020-12-31 | $23.2k | us-gaap:AssetsCurrent |
| Total assets | at 2020-12-31 | $40.6k | us-gaap:Assets |
| Current liabilities | at 2020-12-31 | $3.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2020-12-31 | $3.6m | us-gaap:Liabilities |
| Long-term debt | at 2020-12-31 | $1.2m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2020-12-31 | −$3.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 40,645 characters.

### Special Note Regarding Forward-Looking Information

*The following discussion and analysis of the results of operations and financial condition of Propanc Biopharma, Inc., and its wholly-owned Australian subsidiary, Propanc PTY LTD (“Propanc” or the “Company”) as of December 31, 2020 for the six months ended December 31, 2020 and 2019 should be read in conjunction with our unaudited financial statements and the notes to those unaudited financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to Propanc. This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risks and uncertainties set forth under Item 1A. Risk Factors in the Company’s section captioned “Risk Factors” of our Registration Statement on Form S-1, filed with the United States Securities and Exchange Commission (“SEC”) on November 3, 2020, and matters described in this Quarterly Report generally.*

### COVID-19

*At Propanc, our highest priority remains the safety, health and well-being of our employees, their families and our communities and we remain committed to serving the needs of our customers. The COVID-19 pandemic is a highly fluid situation and it is not currently possible for us to reasonably estimate the impact it may have on our financial and operating results. We will continue to evaluate the impact of the COVID-19 pandemic on our business as we learn more and the impact of COVID-19 on our industry becomes clearer. We are complying health guidelines regarding safety procedures, including, but are not limited to, social distancing, remote working, and teleconferencing. The extent of the future impact of the COVID-19 pandemic on our business is uncertain and difficult to predict. Adverse global economic and market conditions as a result of COVID-19 could also adversely affect our business. If the pandemic continues to cause significant negative impacts to economic conditions, our results of operations, financial condition and liquidity could be adversely impacted. (See Part II, Item 1A – “Risk Factors”).*

### Overview

We were incorporated in the state of Delaware as Propanc Health Group Corporation on November 23, 2010. In January 2011, to reorganize our Company, we acquired all of the outstanding shares of Propanc PTY LTD, an Australian corporation, on a one-for-one basis and Propanc PTY LTD became our wholly-owned subsidiary. Effective April 20, 2017, we changed our name to “Propanc Biopharma, Inc.” to better reflect our current stage of operations and development.

We are a development-stage healthcare company that is currently focused on developing new cancer treatments for patients suffering from pancreatic, ovarian and colorectal cancer. Utilizing our scientific and oncology consultants, we have developed a rational, composite formulation of anti-cancer compounds, which together exert a number of effects designed to control or prevent tumors from recurring and spreading through the body. Our lead product candidate, PRP, is a variation upon our novel formulation and involves pro-enzymes, the inactive precursors of enzymes.

As a result of positive early indications of the anti-cancer effects of our technology, over the last 24 months we have conducted successful pre-clinical studies on PRP. Subject to us receiving sufficient financing, we plan to begin our Investigational Medicinal Product Dossier, study proposal and Investigator’s Brochure in the 2021 calendar year. Our plan is to then commence our study preparation process with the contract research organization, analytical lab and trial site(s) selection and to begin our clinical trial application for PRP (“CTA”) compilation in the first calendar quarter of 2021, and complete the CTA compilation and submit the CTA in the second calendar quarter of 2021. In the third quarter of 2021, we plan to begin the preparation of logistics and trial site initiation visits. Subject to raising additional sufficient capital, we subsequently plan to commence a First-In-Human (FIH), Phase Ib study in patients with advanced solid tumors, evaluating the safety, pharmacokinetics and anti-tumor efficacy of PRP in the fourth calendar quarter of 2021, which study we hope to complete within twelve months thereafter. We intend to develop our PRP to treat early-stage cancer and pre-cancerous diseases and as a preventative measure for patients at risk of developing cancer based on genetic screening.

To date, we have generated no revenue, have no cancer treatment products available to market and have no products which have reached the clinical trial stage. We require substantial additional financing to continue to test and commercialize PRP.

### Products and Products in Development

### Lead Product Candidate - PRP

PRP is a pharmaceutical composition consisting of two pancreatic proenzymes trypsinogen and chymotrypsinogen for treating cancer. PRP is a novel approach to prevent recurrence and metastasis of solid tumors by using pancreatic proenzymes that target and eradicate cancer stem cells in patients suffering from pancreatic, ovarian and colorectal cancers. PRP is a novel therapy based on the science that enzymes stimulate biological reactions in the body, especially enzymes secreted by the pancreas and could represent the body’s primary defense against cancer.

To date, preclinical development has been completed for PRP, including pharmacology and safety toxicology studies, process development activities and bioanalytical method development. The full-scale GMP (Good Manufacturing Practice) finished product manufacture of PRP will be completed in preparation for the FIH Phase Ib study. Validation of the bioanalytical method will also be completed prior to lodging our first clinical trial application (CTA) which we plan to undertake at the Peter Mac Cancer Center in Melbourne, Victoria, Australia’s biggest cancer hospital. Propanc Biopharma is currently collaborating with contract research organizations, manufacturing partners and its consultants to complete the activities prior to preparing the CTA for the Phase Ib study.

Recently, the Company received expressions of interest to evaluate proenzyme therapy as a method to prevent recurrence and metastasis of solid tumors in pancreatic and ovarian cancers. The letters of interest were confirmed by Drs. Natalia Luque Caro and Fernando Gálvez Montosa, medical oncologists specializing in pancreatic and ovarian cancers, respectively, from the University Hospital of Jaén, in Granada, Spain. The evaluation will most likely be conducted as separate Phase IIa proof of concept (POC), multi-trial center studies for each target indication. The expressions of interest were confirmed after their evaluation of Propanc’s scientific literature supporting the use of proenzymes in pancreatic and ovarian cancers. The Phase IIa POC studies will be conducted after the Phase Ib dose escalation study investigating the tolerability and activity of proenzyme therapy in patients with advanced solid tumors is completed at the Peter Mac Cancer Center.

### Joint Research and Drug Discovery Program – POP1

The POP1 joint research and drug discovery program is designed to produce a backup clinical compound to the lead product candidate, PRP. With the aim of producing large quantities of trypsinogen and chymotrypsinogen for commercial use, exhibiting minimal variation between lots and without sourcing the proenzymes from animals, Propanc Biopharma is undertaking a challenging research project in collaboration with the Universities of Jaén and Granada, led by research scientists Mr. Aitor González M.Sc. and Ms Belen Toledo M.Sc., supported by Prof. Macarena Perán, Ph.D., Prof. Juan Marchal M.D. and Dr. Julian Kenyon, M.D. as joint supervisors, representing the Universities and Propanc, respectively.

Propanc Biopharma entered into a second two-year joint research and collaboration agreement with the University of Jaén who are undertaking the research activities for the POP1 program.

One specific objective of the project will be to synthesize by an in vivo system both proenzymes to produce crystalized proteins that could be maintained for long periods without suffering degradation, even in absence of refrigeration. This will be particularly useful for a longer shelf life as well as global distribution of the drug product, particularly in warmer climates and developing regions where refrigeration may not be available.

The POP1 joint research and drug discovery program has produced synthetic recombinant versions of the two proenzymes, trypsinogen and chymotrypsinogen. Propanc Biopharma’s joint scientific researchers developed a novel expression system and are in the process of optimizing conditions to achieve high titers of recombinant trypsinogen and chymotrypsinogen. Further, the anticancer effects of the synthetic versions will be tested against the naturally derived proenzymes from bovine origin.

To date, both proenzymes were synthesized and purified in the laboratory. Once purified, the proenzymes were lyophilized (freeze dried) and each formed a stable, dry white powder. The sequence of proteins of each proenzyme were then determined by mass spectrometry. Larger quantities of the proenzymes were produced with the objective of establishing their combined anti-cancer effects against pancreatic and colorectal cancers. In addition, research activities were transferred to the MEDINA Foundation Research Center to scale up production. MEDINA is a Non-Profit Research Organization established in 2008 through a public-private alliance between the Regional Government of Andalusia, Spain, the pharmaceutical company Merck Sharp & Dohme de España S.A. (MSD), and the University of Granada. Medina’s scientific platforms support the development of multidisciplinary research programs in Microbiology, Natural Product Chemistry and Screening & Target Validation.

Recently, Ms. Belen Toledo MSc., a biotechnologist specializing in cell regenerative medicine was appointed to evaluate the impact of proenzyme therapy on the tumor microenvironment. Ms. Toledo’s work will be part of the joint research and drug discovery program. Ms. Toledo, will elucidate the molecular pathways involved in the proenzymes anti-tumor efficacy and study how proenzymes interact with the pre-metastatic tumor niche, focusing on the interaction and suppression of tumor associated cells, like cancer-associated fibroblasts and macrophages. A pre-metastatic tumor niche is an environment in a secondary organ conducive to the metastasis (spreading) of a primary tumor. Such a niche provides favorable conditions for growth, and eventually metastasis, in an otherwise foreign and hostile environment for the primary tumor cells. Metastasis remains the main cause of patient death from solid tumors for cancer sufferers.

To achieve this, Ms. Toledo will use integrated tumor models in a microfluidics chip by obtaining 3-dimensional bio-impression samples from patients with advanced solid tumors, developed at the Centre for Biomedical Research, University of Granada, Granada, Spain, led by Prof. Juan Marchal M.D. As well as explaining the mechanism of action by which proenzymes exert their anti-cancer effects, it also confirms whether proenzymes penetrate into the tumor microenvironment and exert their effects. At the same time, it confirms the selectivity of the drug on solid tumors, by targeting cancer cells and leaving healthy cells alone.

### Intellectual Property Portfolio

Propanc Biopharma’s intellectual property portfolio consists of four patent families and sixty-five patents either in force, or pending. The portfolio covers important discoveries regarding the use of proenzymes and their anti-cancer effects against solid tumors. Another two patent applications are in preparation covering composition of matter and method of use claims.

The portfolio covers pharmaceutical compositions for treating cancer comprising trypsinogen and/or chymotrypsinogen and a cancer treatment method for eradicating cancer stem cells. In 2018, three patent families entered national phase in key global jurisdictions, which means the application is under control of the national or regional patent offices for examination as the final step towards receiving a granted patent in that jurisdiction.

In July 2020, a world first patent was granted in Australia for the cancer treatment method patent family. Presently, there are 29 granted patents and 36 patents 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.

### Recent Developments

On October 1, 2020, entered into a two-year collaboration agreement with the University of Jaén (the “University”) to provide certain research services to the Company. In consideration of such services, the Company agreed to pay the University approximately 30,000 Euros ($35,145 USD) which shall be paid in four installment payments of 5,000 Euros in November 2020, 5,000 Euros ($5,858) in March 2021, 10,000 Euros ($11,715) in December 2021 and 10,000 Euros ($11,715) in September 2022. Additionally, the University shall hire and train a doctoral student for this project and as such the Company shall pay the University 25,837 Euros ($30,268 USD). In exchange for full ownership of the intellectual property, the Company agreed to pay royalties of 2% of net revenues to the University.

On November 17, 2020, the Company effected a one-for-one thousand (1:1,000) reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). 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 unaudited condensed consolidated financial statements to reflect the Reverse Stock Split.

### Results of Operations

The following discussion should be read in conjunction with the Company’s unaudited consolidated financial statements and notes thereto included elsewhere in this Report. The results discussed below are of the Company and its wholly-owned Australian subsidiary, Propanc PTY LTD.

### Three and Six Months Ended December 31, 2020, as compared to the Three and Six Months Ended December 31, 2019

### Revenue

For the three and six months ended December 31, 2020 and 2019, we generated no revenue because we are currently undertaking research and development activities for market approval and no sales were generated in this period.

### Administration Expense

Administration expense decreased to $216,179 for the three months ended December 31, 2020 as compared to $1,375,971 for the three months ended December 31, 2019. This decrease of approximately $1,160,000 is primarily attributable to a decrease of approximately $1,060,000 in stock-based expenses for services, decrease of approximately $23,000 in capital raising costs, decrease in general consulting, legal and investor relation fees of approximately $46,000, decrease in insurance expense of approximately $32,000, decrease of approximately $7,000 in marketing and market research expense, decrease of approximately $12,000 of other general and administrative expenses and, offset by increase of approximately $4,000 in employee remuneration expense and increase in accounting fees of approximately $16,000.

Administration expense decreased to $539,290 for the six months ended December 31, 2020 as compared to $2,209,385 for the six months ended December 31, 2019. This decrease of approximately $1,670,000 is primarily attributable to a decrease of approximately $1,154,000 in stock-based expenses for services, decrease of approximately $130,000 in capital raising costs, decrease in general consulting, legal, and investor relation fees of approximately $250,000, decrease in insurance expense of approximately $69,000, decrease of approximately $58,000 in marketing and market research expense, decrease in travel expenses of approximately $26,000, decrease of approximately $4,000 of other general and administrative expenses and, offset by increase of approximately $21,000 in employee remuneration expense.

### Occupancy Expense

Occupancy expense increased by approximately $160 to $7,750 for the three months ended December 31, 2020.

Occupancy expense decreased by approximately $1,270 to $16,954 for the six months ended December 31, 2020. The decrease primarily relates to exchange rate movements over the period when compared to the same period in 2019.

### Research and Development Expenses

Research and development expenses were $50,165 for the three months ended December 31, 2020, as compared to $37 for the three months ended December 31, 2019. Research and development expenses were $101,011 for the six months ended December 31, 2020, as compared to $65,409 for the six months ended December 31, 2019. The decrease in research and development expenses is primarily attributable to completion of process development activities and preparation for commencement of the engineering run and subsequent full scale GMP manufacture of PRP for clinical trials, with the process, preparation and small-scale manufacture having been completed in the period ended December 31, 2017, which the clinical trials we hope to commence in 2021 calendar year, if we raise sufficient proceeds by raising additional capital. Completed activities include raw material purification and stabilization process development, development of analytical quality assurance and control methods, reproduction runs for raw materials, and preparation of raw materials and finished product specifications for future full scale GMP manufacture of PRP.

### Interest Expense/Income

Interest expense decreased to $157,835 for the three months ended December 31, 2020, as compared to $446,082 for the three months ended December 31, 2019. Interest expense decreased to $317,116 for the six months ended December 31, 2020, as compared to $1,121,307 for the six months ended December 31, 2019. Interest expense is primarily comprised of approximately $134,000 and $256,000 of debt discount amortization and accretion of put premium for the three and six months ended December 31, 2020, respectively, and interest expense from conversion fees, prepayment penalty fees and accrual of interest expense for a total of approximately $24,000 and $61,000 for the three and six months ended December 31, 2020, respectively.

This decrease is primarily attributable to a decrease in the issuance of convertible notes and was further reduced due to the conversion and repayment of convertible notes during the six months ended December 31, 2020 which resulted to a decrease in accretion of put premium of approximately $30,000 and $569,000 during the three and six months ended December 31, 2020, respectively, and the decrease in amortization of debt discount of approximately $198,000 and $181,000 during the three and six months ended December 31, 2020. Additionally, interest expense from prepayment penalty fees decreased by approximately $82,000 and $99,000 offset by increase in conversion fees and accrual of interest expense for a total of $22,000 and $45,000 during the three and six months ended December 31, 2020, respectively.

### Change in Fair Value of Derivative Liabilities

Change in fair value of derivative liabilities changed by $658,074, to a loss of $16,950 for the three months ended December 31, 2020, as compared to a loss of $675,024 for the three months ended December 31, 2019. Change in fair value of derivative liabilities changed by $204,070, to a gain of $48,002 for the six months ended December 31, 2020, as compared to a loss of $156,068 for the six months ended December 31, 2019. This change is primarily attributable to a decrease in convertible notes with bifurcated embedded conversion option derivatives due to notes conversion and repayment during the six months ended December 31, 2020.

### Gain (loss) on Extinguishment of Debt, net

During the three months ended December 31, 2020, there were no notes converted which contained bifurcated embedded conversion option derivatives as compared to a gain of $20,176 during the three months ended December 31, 2019.

During the six months ended December 31, 2020, notes were converted with principal amounts totaling $75,000 and accrued interest of $3,000 and contained bifurcated embedded conversion option derivatives. Accordingly, the fair market value of the shares issued was $134,155 resulting in a loss on extinguishment at the time of conversion of $56,155 and $106,140 of derivative fair value was recorded as a gain on extinguishment at the time of conversion.

### Foreign Currency Transaction Gain (Loss)

Foreign currency transaction decreased to a gain of $45,235 for the three months ended December 31, 2020 as compared with a gain of $617,561 for the three months ended December 31, 2019. Foreign currency transaction decreased to a gain of $47,195 for the six months ended December 31, 2020 as compared with a gain of $82,411 for the six months ended December 31, 2019.

The decrease in foreign currency transaction gain is primarily attributable to the increase in exchange rates during the three and six months ended December 31, 2020, as compared to during the three and six months ended December 31, 2019. Additionally, effective fiscal year 2021, the parent company determined that 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 other comprehensive income.

### Benefit (provision) for taxes

During the three months ended December 31, 2020 and 2019, the Company had provision for tax in the amount of $0 and $143, respectively. During the six months ended December 31, 2020 and 2019, the Company applied for and received from the Australian Taxation Office a research and development tax credit in the amount of $0 and $108,751, respectively.

### Net loss

Net loss decreased to $403,643 for the three months ended December 31, 2020 as compared to a net loss of $1,867,109 for the three months ended December 31, 2019. The change relates to the factors discussed above. Net loss decreased to $829,188 for the six months ended December 31, 2020 as compared to a net loss of $3,359,049 for the six months ended December 31, 2019. The change relates to the factors discussed above.

### Liquidity and Capital Resources

#### Current Financial Condition

As of December 31, 2020, we had total assets of $40,616, comprised primarily of cash of $21,243, GST tax receivable of $1,940, property and equipment, net, of $5,422 and operating lease right of use asset, net, $9,699. As compared to June 30, 2020, we had total assets of $98,518, comprised primarily of cash of $67,007, GST tax receivable of $2,015, property and equipment, net, of $5,747 and operating lease right of use asset, net, $21,682.

We had current liabilities of $3,648,657, primarily comprised of net convertible debt of $1,209,186, accounts payable and accrued expenses of $1,890,086 and embedded conversion option liabilities of $22,867 as of December 31, 2020. As compared to June 30, 2020, we had current liabilities of $3,739,943, primarily comprised of net convertible debt of $1,557,734, accounts payable and accrued expenses of $1,544,387 and embedded conversion option liabilities of $354,109.

We have funded our operations primarily through the issuance of equity and/or convertible securities for cash. The cash was used primarily for payments for research and development, administration expenses, occupancy expenses, professional fees, consultants and travel.

During the six months ended December 31, 2020 we received proceeds from exercise of warrants of $201,044 and proceeds from issuance of convertible notes of $200,000.

We have substantial capital resource requirements and have incurred significant losses since inception. As of December 31, 2020, we had $21,243 in cash. We depend upon debt and/or equity financing to fund our ongoing operations and to execute our current business plan. Such capital requirements are in excess of what we have in available cash and for which we currently have commitments. Therefore, we presently do not have enough available cash to meet our obligations over the next 12 months. If continued funding and capital resources are unavailable at reasonable terms, we may curtail our plan of operations. We will be required to obtain alternative or additional financing from financial institutions, investors or otherwise, in order to maintain and expand our existing operations. The failure by us to obtain such financing would have a material adverse effect upon our business, financial condition and results of operations, and adversely affecting our ability to complete ongoing activities in connection with our research and development programs.

#### Sources and Uses of Cash

|  | For the Six Months Ended December 31, 2020 | 2019 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(440,975) | $(1,142,877) |
| Net cash used in investing activities | $- | $- |
| Net cash provided by financing activities | $358,044 | $1,130,000 |
| Effect of exchange rate changes on cash | $37,167 | $22,505 |

#### Net Cash Flow from Operating Activities

Net cash used in operating activities was $440,975 for the six months ended December 31, 2020, due to our net loss of $829,188 offset primarily by non-cash charges of amortization of debt discount of $126,299, stock-based compensation of $41,436, non-cash interest expense of $8,250, accretion of put premium of $129,333 addback foreign currency transaction gain of $47,195, $48,002 of change in fair value of derivatives and $49,985 gain on extinguishment of debt. Net changes in operating assets and liabilities totaled $227,133, which is primarily attributable to increase in accounts payable of $77,749, employee benefit liability of $24,497, accrued expenses of $85,297, and accrued interest of $38,027.

Net cash used in operating activities was $1,142,877 for the six months ended December 31, 2019, due to our net loss of $3,359,049 offset primarily by non-cash charges of amortization of debt discount of $307,085, stock-based compensation of $1,174,818, accretion of put premium of $698,307, $156,068 of change in fair value of derivatives addback foreign currency transaction gain of $82,411, and gain on extinguishment of debt of $20,176. Net changes in operating assets and liabilities totaled $(18,789), which is primarily attributable to decreases in accounts payable of $93,233, accrued expenses of $134,768, prepaid expenses and other assets of $76,990 and offset by increase in employee benefit liability of $15,829, and accrued interest of $111,448.

#### Net Cash Flow from Financing Activities

Cash flows provided by financing activities for the six months ended December 31, 2020 were $358,044 as compared to $1,130,000 for the six months ended December 31, 2019. During the six months ended December 31, 2020 we received proceeds from the exercise of warrants of $201,044 and proceeds from issuance of convertible notes of $200,000 offset by repayments of convertible notes of $43,000. During the six months ended December 31, 2019, we received proceeds from the sale of convertible promissory notes of $1,130,000.

#### Effect of Exchange Rate

The effect of the exchange rate on cash resulted in a $37,167 positive adjustment to cash flows in the six months ended December 31, 2020 as compared to a positive adjustment of $22,505 to cash flows in the six months ended December 31, 2019. The reason for the fluctuation is due to the application of currency translation rates throughout the cash flow statement, the volume of transactions within each period and the daily fluctuation in exchange rates.

### Critical Accounting Estimates

Below is a discussion of our more subjective accounting estimation processes for purposes of explaining (i) the methodology used in calculating the estimates, (ii) the inherent uncertainties pertaining to such estimates, and (iii) the possible effects of a significant variance in actual experience, from that of the estimate, on our financial condition. Estimates involve numerous assumptions that, if incorrect, could create a material adverse impact on the Company’s results of operations and financial condition.

Reference is frequently made herein to the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”). This is the source of authoritative US GAAP recognized by the FASB to be applied to non-governmental entities. Each ASC reference in this filing is presented with a three-digit number, which represents its Topic. As necessary for explanation and as applicable, an ASC topic may be followed with a two-digit subtopic, a two-digit section or a two-or-three-digit paragraph.

*Foreign Currency Translation and Comprehensive Income (Loss)*: The Company’s wholly owned subsidiary’s functional currency is the AUD. For financial reporting purposes, the Australian Dollar (“AUD”) has been translated into USD as the Company’s reporting currency. 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 statement of operations and comprehensive loss as other income (expense). Effective fiscal year 2021, the parent company determined that 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 other comprehensive income.

*Accounting for Income Taxes:* We are governed by Australian and United States income tax laws, which are administered by the Australian Taxation Office and the United States Internal Revenue Service, respectively. We follow ASC 740, “*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 adopted provisions of 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.

*Accounting for Stock Based Compensation*: We record stock-based compensation in accordance with ASC 718, “*Stock Compensation”* and Staff Accounting Bulletin No. 107 issued by the SEC in March 2005 regarding its interpretation of ASC 718. ASC 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the related requisite service period. The statement also requires the recognition of compensation expense for the fair value of any unvested stock option awards outstanding at the date of adoption. We value any employee or non-employee stock-based compensation at fair value using the Black-Scholes Option Pricing Model.

We account for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718.

*Derivative Instruments:* ASC 815, “*Derivatives and Hedging,”* 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, we record the fair value of the conversion shares, remove the fair value of the related derivative liability, remove any discounts and record a net gain or loss on debt extinguishment.

*Convertible Notes with Variable Conversion Options*: We have 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 or around a fixed discount to the price of the common stock at the time of conversion. We treat these convertible notes as stock settled debt under ASC 480 and measure 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 record the put premium as accretion to interest expense.

*Research and Development Tax Credits*: We 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, we do 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 we have net income then we can receive the credit which reduces its income tax liability. If we have net losses, then we may still receive a cash payment for the credit, however, our net operating loss carry forwards 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 an income tax benefit, in operations, upon receipt.

*Leases:* In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, *Leases* (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018. The Company adopted this guidance effective July 1, 2019.

On July 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases and; (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.

Operating lease ROU assets 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 use 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 in the condensed consolidated statements of operations.

### Recent Accounting Pronouncements

Please see section captioned “Recent Accounting Pronouncements” in Note 1 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of recently issued and adopted accounting pronouncements.

### Going Concern Qualification

We did not generate any revenue for the six months ended December 31, 2020 and 2019 and have incurred significant losses and cash used in operations, and such losses and use of cash are expected to continue. Our independent registered public accounting firm has included a “Going Concern Qualification” in their audit report for each of the fiscal years ended June 30, 2020 and 2019. In addition, we have negative working capital and convertible debt that is past maturity that we are currently negotiating with lenders in order to amend the maturity dates. The foregoing raises substantial doubt about our ability to continue as a going concern for a period of 12 months from the issue date of this report. Our ability to continue as a going concern is dependent on our ability to execute our strategy and on our ability to raise additional funds and/or to consummate a public offering. Management is currently seeking additional funds, primarily through the issuance of equity and/or debt securities for cash to operate our business. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case of equity and/or convertible debt financing. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The “Going Concern Qualification” might make it substantially more difficult to raise capital.

### Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

## Market risk

As filed, 567 characters.

As of December 31, 2020, we were in default under certain convertible promissory note issued to certain noteholders on August 10, 2017, August 30, 2019, October 1, 2019 and October 3, 2019 for failure to pay an aggregate of $320,423 of principal and accrued interest as of December 31, 2020, subsequent to their maturity dates. We are currently in discussions with such noteholders to extend such maturity dates. See Note 6 – Convertible Notes to our unaudited condensed consolidated financial statements in Part I of this Quarterly Report for additional information.

## Controls and procedures

As filed, 6,767 characters.

### Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that are designed to reasonably ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

At the end of the period covered by this Quarterly Report, we conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, the disclosure controls and procedures of our Company were not effective to ensure that the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis because of the material weaknesses in internal control over financial reporting described below.

### Material Weaknesses and Corrective Actions

In connection with the audits of our financial statements for the fiscal years ended June 30, 2020 and 2019, we identified certain deficiencies relating to our internal control over financial reporting that constitute a material weakness under standards established by the Public Company Accounting Oversight Board (the “PCAOB”). The PCAOB defines a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

The following material weaknesses in our internal control over financial reporting continued to exist at December 31, 2020:

- we do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);
- we do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our limited size and early-stage nature of operations, segregation of all conflicting duties may not always be possible and may not be economically feasible; however, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals;
- lack of audit committee of our board of directors; and
- insufficient monitoring and review controls over the financial reporting closing process, including the lack of individuals with current knowledge of U.S. GAAP.

We believe that these material weaknesses primarily relate, in part, to our lack of sufficient staff with appropriate training in U.S. GAAP and SEC rules and regulations with respect to financial reporting functions, and the lack of robust accounting systems, as well as the lack of sufficient resources to hire such staff and implement these accounting systems.

Subject to raising sufficient additional capital, we plan to take a number of actions in the future to correct these material weaknesses including, but not limited to, establishing an audit committee of our board of directors comprised of at least two independent directors, adding experienced accounting and financial personnel and retaining third-party consultants to review our internal controls and recommend improvements. We will need to take additional measures to fully mitigate these issues, and the measures we have taken, and expect to take, to improve our internal controls may not be sufficient to (1) address the issues identified, (2) ensure that our internal controls are effective or (3) ensure that the identified material weakness or other material weaknesses will not result in a material misstatement of our annual or interim financial statements. In addition, other material weaknesses may be identified in the future. If we are unable to correct deficiencies in internal controls in a timely manner, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC will be adversely affected. This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and generally materially and adversely impact our business and financial condition.

### Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

### Changes in Internal Controls over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 1,729 characters.

In addition to the other information set forth in this Quarterly Report as discussed below, you should carefully consider the factors discussed in the section captioned “Risk Factors” of our Registration Statement on Form S-1, filed with the SEC on November 3, 2020. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this Quarterly Report.

### COVID-19

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 we operate. 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 we have not been required to stop operating, management is evaluating its use of its office space, virtual meetings and the like. We continue 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.

Filed Feb 12, 2021.
Source: SEC EDGAR, the filing index for accession 0001493152-21-003609. Last ingested by Listed: Oct 29, 2026, 17:01 ET. No prices; not investment advice.