Business context and reporting period
Propanc Biopharma, Inc. is a development-stage biopharmaceutical company focused on cancer treatments. Its lead candidate, PRP, is in preclinical development; the company has no marketed products and has generated no revenue. This filing covers the three months ended September 30, 2020—the first quarter of fiscal 2021, not calendar-year 2020 Q1. The financial statements are unaudited.
Key financial metrics
| Metric | Quarter ended September 30, 2020 | Comparable 2019 quarter |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $383,161 | $909,418 |
| Net loss | $425,545 | $1,491,940 |
| Net cash used in operations | $179,949 | $726,331 |
| Cash at period end | $51,218 | $96,123 |
- Operating expenses included $323,111 of administration, $50,846 of R&D, and $9,204 of occupancy expense. No meaningful revenue or profit margins were reported.
- At September 30, 2020, total assets were $77,554 and current liabilities were $3,313,023, including $1,029,688 of net convertible notes and accrued interest. Working-capital deficit was $3,258,953; stockholders’ deficit was $3,235,469.
- Financing activities provided $158,044: $201,044 from warrant exercises, partly offset by $43,000 of convertible-note repayments. No investing cash flows were reported.
- Debt declined from $1,557,734 at June 30, 2020 to $1,029,688 at September 30, primarily amid conversions and repayments. The filing describes certain notes as past due or in default.
Material changes versus the prior comparable period
- Net loss narrowed by about $1.07 million, while operating expenses fell about $526,000. Administration expense declined by approximately $510,000, principally due to lower stock-based, fundraising, consulting, accounting, investor-relations, insurance, marketing, and travel costs.
- Interest expense fell to $159,281 from $675,225, and the foreign-currency transaction line moved to a $1,960 gain from a $535,150 loss. The company also reported a $64,952 derivative fair-value gain and a $49,985 gain on debt extinguishment.
- The prior-year quarter included a $108,894 Australian R&D tax benefit; none was recorded in the current quarter. The reported improvement in net loss therefore reflects financing-related and foreign-exchange items as well as lower operating costs.
- Cash fell $15,789 during the quarter. Common shares issued and issuable rose from about 258.1 million at June 30 to about 715.6 million at September 30, largely from debt conversions; 442.0 million shares were issued or issuable for debt conversions during the quarter.
Outlook, risks, contingencies and unusual items
- Management states that available cash is insufficient for obligations over the next 12 months and that substantial additional financing is required. The filing identifies substantial doubt about the company’s ability to continue as a going concern; no assurance is given that financing will be available on acceptable terms.
- Subject to adequate funding, management planned to compile and submit a PRP clinical-trial application in 2021 and to begin a Phase Ib first-in-human study in the third quarter of 2021. These are conditional plans, not assured milestones.
- COVID-19’s future effect on operations, financing access, and results was uncertain. Management said it had not been required to stop operating.
- Variable-price convertible notes, conversion discounts, default provisions, and potential further share issuance create financing, repayment, and dilution risks. The filing reports a $8,500 principal balance and accrued interest on a 2017 note as past due/defaulted; it also describes other notes as past due or discusses maturity extensions.
- Contingencies include former counsel’s claim for $151,031.50 plus interest and costs, and Regal Consulting’s demands for approximately $400,000, 60,000 shares, and note-related penalties. The company disputes the claims; the filing says the Regal loss contingency cannot be estimated. An IRS penalty of $30,000 plus interest is accrued, with a payment plan under discussion.
- Management concluded disclosure controls were ineffective and reported continuing material weaknesses, including lack of documented controls, limited segregation of duties, no audit committee, and insufficient financial-reporting review and U.S. GAAP expertise.
- After quarter-end, the company entered a two-year University of Jaén research collaboration, with stated payments of approximately €30,000 plus €25,837 for doctoral-student support, and agreed to 2% royalties on net revenues in exchange for intellectual-property ownership.
Most important facts for investors to verify
- Near-term financing needs, cash runway, going-concern disclosures, and status of negotiations to extend or settle past-due debt.
- Conversion-note terms, remaining share reserves, potential dilution, and reconciliation of share counts: the filing reports about 715.6 million shares issued and issuable at September 30, but 691,170,618 common shares outstanding as of November 12.
- Actual progress and funding for PRP manufacturing, clinical-trial application preparation, and the proposed first-in-human study.
- Status and potential financial exposure of the Foley Shechter, Regal Consulting, and IRS matters.
- Resolution of the filing’s inconsistent liability description: the balance-sheet table reports $5,916 of embedded conversion-option liabilities and $378,990 of employee-benefit liabilities, while the MD&A appears to label $354,109 as embedded conversion-option liabilities.