Propanc Biopharma, Inc. — Form 10-Q Summary
Reporting period: Fiscal first quarter ended September 30, 2023; comparative period is the three months ended September 30, 2022. The interim financial statements are unaudited. The company is a development-stage biopharmaceutical company; its lead candidate, PRP, is a preclinical cancer treatment.
Financial performance and liquidity
| Metric | Quarter ended Sep. 30, 2023 | Quarter ended Sep. 30, 2022 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $417,219 | $572,830 |
| Operating loss | $417,219 | $572,830 |
| Net loss | $350,866 | $617,295 |
| Net loss available to common stockholders | $493,441 | $1,006,530 |
| Basic and diluted loss per share | $0.04 | $2.13 |
| Net cash used in operations | $333,457 | $509,315 |
| Net cash provided by financing | $350,347 | $494,219 |
At September 30, 2023, cash was $6,625, total current assets were $145,804, and current liabilities were $3,133,113, resulting in a working-capital deficit of $2,987,309. Total assets were $180,371, total liabilities were $3,169,630, and stockholders’ deficit was $2,989,259. The $116,169 refundable advance deposit was paid toward insurance for a prospective loan and is returnable if that transaction does not close; it is not cash available for immediate operating needs.
Administration expense fell to $393,828 from $465,132, and R&D expense fell to $16,242 from $101,325. Management attributed the R&D reduction to budget constraints. Interest expense increased to $178,234. A $303,929 non-cash gain from the fair-value change in derivative liabilities contributed to the lower reported net loss; the company says this reflected declining stock prices. No meaningful revenue or gross-margin trend is available because the company had no revenue.
Debt, financing and changes from the prior period
- The company funded operations primarily with debt and convertible securities. During the quarter it received $220,000 net proceeds from convertible notes, $120,000 from a promissory note, and $153,256 from a related-party loan, while repaying $142,909 of a convertible note.
- Current liabilities included accounts payable of $1,081,316, accrued expenses and other payables of $614,870, employee benefit liabilities of $579,083, convertible notes net of discounts and including put premiums of $397,443, and a note payable net of discount of $126,000.
- A $65,280 Crown Bridge loan was past due and in default, with $38,190 accrued interest at quarter-end. The company said it was discussing an extension with the noteholder. This is distinct from its statement that none of the outstanding convertible notes were in default.
- A related-party investor loaned $153,256 for three years at 10% interest and received 15 million immediately exercisable warrants with a $0.01 initial exercise price. The warrants were valued at $141,084 and recorded as a debt discount.
- Debt conversions and warrant exercises contributed to substantial share issuance. Common shares issued and outstanding rose from 6,031,250 at June 30 to 14,833,210 at September 30, after a 1-for-1,000 reverse split effective May 1, 2023. The filing reports 22,258,941 common shares outstanding as of November 14, 2023. It also reports 3,818,041,727 shares reserved for future issuance under lender reserve requirements.
Outlook, risks and other notable items
- Going concern: Management concluded that substantial doubt exists about the company’s ability to continue as a going concern for at least 12 months from the report’s issuance. It said available cash and current financing commitments are insufficient to meet obligations over the next 12 months and that continued operations depend on obtaining additional financing. The statements include no adjustments for the outcome of this uncertainty.
- Development outlook: Management said budget constraints reduced R&D spending while it prepares to advance PRP to a first-in-human study in advanced cancer patients in 2024. This is a plan, not a guaranteed timetable. A November 7, 2023 update described University of Jaén research indicating PRP enhanced chemotherapy sensitivity in resistant pancreatic tumor cells; these are research findings, not clinical evidence.
- Financing and dilution risks: Several notes have variable or discounted conversion prices, default-rate increases, prepayment premiums, share-reserve requirements and penalties for delayed share delivery. Further financing may dilute shareholders or impose restrictive terms. After quarter-end, the company reported additional convertible notes issued in October and further share conversions and warrant exercises.
- Controls: Management found disclosure controls ineffective as of September 30, 2023. Reported material weaknesses include lack of written control procedures, insufficient segregation of duties, no audit committee, and inadequate monitoring and U.S. GAAP expertise in financial reporting. Planned remediation depends partly on obtaining sufficient capital.
- Other obligations: The filing reports related-party office rent arrears of $107,430 and an accrued IRS penalty and interest related to late historical filings. It reports no material pending legal proceedings.
Important facts for investors to verify
- Whether the company obtained financing sufficient to meet near-term obligations, and whether the $116,169 advance deposit was returned or applied to a completed loan.
- The status, maturity and terms of the defaulted Crown Bridge loan, the August 2023 promissory note, and other outstanding debt, including any subsequent repayments or defaults.
- Updated cash, working capital, accounts payable and accrued liabilities after quarter-end, including related-party balances.
- Share-count changes from conversions, warrant exercises and lender reserves; assess potential dilution alongside the reported November 14 share count.
- Whether PRP’s preclinical development milestones and proposed 2024 first-in-human study remain achievable, and what evidence supports the reported research results.
- Whether management has addressed the disclosed material weaknesses and whether financing permits the planned control improvements.