Business Context and Reporting Period
Propanc Biopharma, Inc. filed this Form 8-K on April 13, 2018, to report the entry into a Material Definitive Agreement with GS Capital Partners, LLC. The Company is a Delaware corporation with principal executive offices in Camberwell, Australia.
Key Financial Metrics and Transaction Details
- Transaction Type: Issuance of two 8% unsecured convertible promissory notes with an aggregate principal amount of $300,000.
- First Note Funding: $150,000 principal paid in cash on April 19, 2018. Net proceeds to the Company were $142,500 after transaction expenses.
- Back End Note Funding: $150,000 principal initially funded via an offsetting collateralized secured note issued by GS Capital to the Company. Cash funding is required by December 13, 2018, subject to stock price and volume conditions.
- Interest Rate: 8% per annum on both notes. Interest on the First Note is payable in shares of common stock upon conversion.
- Conversion Terms: Convertible at the option of GS Capital at 61% of the lowest closing bid price over the ten prior trading days (reduced to 51% during a DTC "chill").
- Share Reserve: The Company reserved 7,684,000 shares for conversions under the First Note.
- Use of Proceeds: General working capital purposes.
Material Changes and Contractual Obligations
The filing details significant new debt obligations and potential equity dilution not present in prior periods. Key contractual features include:
- Prepayment Penalties: The First Note may be prepaid within 180 days with penalties of 115% (within 90 days) or 128% (after 90 days) of the face amount plus accrued interest.
- Default Interest: Upon an event of default, interest accrues at 24% per annum.
- Liquidated Damages: Principal increases by 20% if the stock loses its "bid" price and by 50% if delisted. A 10% increase applies if the note is not paid on the maturity date (April 13, 2019).
- Conversion Penalties: Failure to issue shares within three business days of a conversion notice incurs a penalty of $250 per day, increasing to $500 per day after the tenth day.
- Legal Fee Deduction: GS Capital may deduct $7,500 from principal payments for legal fees.
Guidance, Risks, and Contingencies
The filing does not provide forward-looking financial guidance or management commentary on operational outlook. However, it outlines significant risks and contingencies:
- Conversion Restrictions: GS Capital is restricted from converting if it would exceed 4.99% of outstanding shares (increasable to 9.9% with notice).
- Back End Note Conditions: Cash funding of the Back End Note is contingent on the stock price remaining above $0.045 and trading volume exceeding $40,000 for five consecutive days prior to funding.
- Events of Default: Include insolvency, bankruptcy, judgments exceeding $250,000, failure to maintain share reserves, and failure to file periodic reports.
- Delinquency Risk: If the Company is delinquent in filings after October 13, 2018, GS Capital may use the lowest closing bid price during the delinquency period as the conversion base price.
Investor Verification Checklist
- Verify the current trading price and volume of Propanc Biopharma common stock to assess the likelihood of the Back End Note cash funding conditions being met.
- Confirm the Company's ability to maintain the required share reserve of 2.5 times the conversion amount to avoid increased conversion discounts.
- Review the Company's cash position to determine if it can meet the 115% or 128% prepayment penalties if it chooses to redeem the First Note early.
- Monitor the Company's compliance with periodic filing requirements to prevent the use of depressed stock prices for conversion calculations.
- Assess the potential dilution impact of the 61% conversion discount on existing shareholders.