Business Context and Reporting Period
Propanc Biopharma, Inc. filed this Form 8-K on June 14, 2018, reporting the entry into a Material Definitive Agreement. The Company is incorporated in Delaware with principal executive offices in Camberwell, Australia.
Key Financial Metrics and Transaction Details
The Company entered into a securities purchase agreement with Eagle Equities, LLC for a convertible promissory note. Key terms include:
- Principal Amount: $105,000.00
- Net Proceeds: $100,000.00 (after a $5,000.00 deduction for legal expenses)
- Interest Rate: 8% per annum, payable in shares of common stock upon conversion.
- Maturity Date: June 14, 2019
- Closing Date: June 19, 2018
- Use of Proceeds: General working capital purposes.
Material Changes and Terms
This filing represents a new debt obligation and potential equity dilution. The Note contains aggressive conversion and penalty terms:
- Conversion Price: 60% of the lowest closing bid price of the prior ten trading days. This drops to 50% if the stock is restricted by the Depository Trust Company.
- Prepayment Penalties: Prepayment premiums range from 130% to 150% of the face amount plus accrued interest, depending on the timing of prepayment (within 60, 60-120, or 120-180 days).
- Default Interest: Increases to 24% per annum upon an event of default.
- Liquidated Damages: $250 per day for days 4-9 of failure to issue shares, increasing to $500 per day thereafter.
- Principal Increase Triggers: The principal increases by 20% if the Company loses its bid price, and by 50% if the stock is delisted, trading is suspended for more than ten days, or the Company fails reporting obligations.
Guidance, Risks, and Contingencies
The filing does not provide forward-looking financial guidance or management commentary regarding future performance. Significant risks identified include:
- Dilution Risk: The 60% conversion discount and potential 50% discount create significant dilution for existing shareholders.
- Liquidity Risk: High prepayment penalties and potential principal increases upon default or delisting could severely impact the Company's cash position.
- Compliance Risk: Failure to maintain reporting obligations or stock listing status triggers immediate financial penalties and increased debt principal.
- Conversion Restrictions: Eagle Equities is restricted from converting if it would exceed 4.99% of outstanding shares.
Investor Verification Checklist
- Verify the current trading status and bid price of Propanc Biopharma, Inc. on the OTC Markets Group to assess immediate conversion value.
- Confirm the Company's compliance status with SEC reporting obligations to avoid the 50% principal increase penalty.
- Review the Company's cash reserves to determine the ability to service the 8% interest or meet potential prepayment penalties.
- Check the number of authorized but unissued shares to ensure the Company can meet the requirement of maintaining a reserve of shares at least four times the number issuable upon conversion.