# Propanc Biopharma, Inc.: Form 10-Q for the period ended Dec 31, 2014

- Company: [Propanc Biopharma, Inc.](/companies/ppcb.md) (CIK 1517681)
- Form: 10-Q
- Filed: 2015-02-17
- Accepted by EDGAR: Feb 17, 2015, 09:56 ET
- Period: 2014-12-31
- Accession: 0001144204-15-009533
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1517681/000114420415009533/v401132_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1517681/000114420415009533/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2014-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2014-10-01 to 2014-12-31 | $2.4k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2014-07-01 to 2014-12-31 | $6.3k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2014-10-01 to 2014-12-31 | −$249.4k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2014-07-01 to 2014-12-31 | −$487.6k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2014-10-01 to 2014-12-31 | $100.2k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2014-07-01 to 2014-12-31 | $648.7k | us-gaap:InterestExpense |
| Income tax | 3 months, 2014-10-01 to 2014-12-31 | −$82.4k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2014-07-01 to 2014-12-31 | −$82.4k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2014-10-01 to 2014-12-31 | −$345.5k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2014-07-01 to 2014-12-31 | −$1.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2014-10-01 to 2014-12-31 | $0.00 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 6 months, 2014-07-01 to 2014-12-31 | −$0.01 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 6 months, 2014-07-01 to 2014-12-31 | $272.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2014-07-01 to 2014-12-31 | $0 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2014-12-31 | $14.6k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2014-12-31 | $52.9k | us-gaap:AssetsCurrent |
| Total assets | at 2014-12-31 | $52.9k | us-gaap:Assets |
| Current liabilities | at 2014-12-31 | $1.9m | us-gaap:LiabilitiesCurrent |
| Short-term borrowings | at 2014-12-31 | $951.4k | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2014-12-31 | −$1.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 16,340 characters.

*The information set forth in this Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including, among others (i) expected changes in Propanc Health Group Corporation's (referred to herein as the "Company", or "Propanc", "we", "our", "ours" and "us") revenues and profitability, (ii) prospective business opportunities and (iii) our strategy for financing its business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as “believes”, “anticipates”, “intends” or “expects”. These forward-looking statements relate to our plans, liquidity, ability to complete financing and purchase capital expenditures, growth of our business including entering into future agreements with companies, and plans to successfully develop and obtain approval to market our product. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.*

*Although we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.*

*We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements.*

*You should read the following discussion and analysis in conjunction with the Financial Statements and Notes attached hereto, and the other financial data appearing elsewhere in this Quarterly Report.*

*Our revenues and results of operations could differ materially from those projected in the forward-looking statements as a result of numerous factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of the Company to insure against certain risks, inflationary and deflationary conditions and cycles, currency exchange rates, and changing government regulations domestically and internationally affecting our products and businesses.*

#### US Dollars are denoted herein by “USD”, "$" and "dollars".

### Overview

Propanc Health Group Corporation, formerly Propanc PTY Ltd., ("the Company", "we", "us", "our") was incorporated in Melbourne, Victoria Australia on October 15, 2007, and is based in Melbourne, Victoria Australia.

On November 23, 2010, Propanc Health Group Corporation was incorporated in the state of Delaware. In January 2011, Propanc Health Group Corporation acquired all of the outstanding shares of Propanc PTY Ltd. on a one-for-one basis making it a wholly-owned subsidiary.

We are a research and development company whose primary activity is to develop new treatments for chronic diseases, in particular cancer. We have generated very limited 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 develop our products.

### Critical Accounting Estimates

Below we will provide a discussion of our more subjective accounting estimation processes for purposes of (i) explaining 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 the employ of numerous assumptions that, if incorrect, could create a material adverse impact on our results of operations and financial condition.

*Foreign Currency Translation and Other Comprehensive Income (Loss):* Our functional currency is the Australian dollar (AUD). For financial reporting purposes, the Australian dollar has been translated into United States dollars ($) and/or USD as the 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 consolidated statement of operations and other comprehensive income (loss) as other income (expense).

*Accounting for Stock Based Compensation:* We record stock based compensation in accordance with ASC section 718, “Stock Compensation” and Staff Accounting Bulletin (SAB) No. 107 (SAB 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 505-50 "Equity-Based Payments to Non-Employees.

*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 don’t 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 our 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.

### Recent Accounting Pronouncements

Financial Accounting Standards Board, Accounting Standard Updates which are not effective until after December 31, 2014 are not expected to have a significant effect on our consolidated financial position or results of operations.

### Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this form 10-Q. The results discussed below are of the Company and its wholly-owned Australian subsidiary, Propanc Pty Ltd.

### For the three months ended December 31, 2014 as compared to the three months ended December 31, 2013

#### Revenue

For the three months ended December 31, 2014 and 2013, we generated no revenue because we are currently undertaking research and development activities for market approval and there were no sales generated in this period.

#### Administration Expenses

Administration expenses increased to $244,431 for the three months ended December 31, 2014 as compared with $222,671 for the three months ended December 31, 2013. This increase is primarily attributable to an increase in professional fees of approximately $41,000 offset by a decrease in stock based expenses of approximately $19,000 during the three months ended December 31, 2014 as compared to the three months ended December 31, 2013.

#### Occupancy Expenses

Occupancy expenses decreased by $216 to $2,567 for the three months ended December 31, 2014.

#### Research and Development

Research and development was $2,443 for the three months ended December 31, 2014 as compared with $0 for the three months ended December 31, 2013. Research and development expenditures have been minimal over the past twenty-four (24) months, including the last twelve (12) months, as we raise sufficient capital to undertake the next stage of development for our current programs. We continue to expend our efforts to continue creating value by completing our patent filings and publishing our scientific discoveries, and we are negotiating with third parties to assist with raising the capital needed to complete our planned research and development activities.

#### Interest Expense/Income

Interest expense increased to $100,176 for the three months ended December 31, 2014 as compared with $20,225 for the three months ended December 31, 2013. Interest expense is comprised of approximately $25,000 premium of a convertible note, $12,000 debt discount amortization, and $57,000 accretion of debt premium.

#### Net Income (Loss)

Net loss increased to $345,479 for the three months ended December 31, 2014 as compared with net income of $26,399 for the three months ended December 31, 2013. The increase is primarily attributable to an increase in interest expense of approximately $80,000, an increase in foreign currency loss of approximately $154,000, a decrease in change in fair value of derivative liability of approximately $220,000 and an increase in operating expenses of approximately $24,000 offset by an increase in gain on debt settlements of approximately $71,000 and an increase in income tax benefit of approximately $34,000.

### For the six months ended December 31, 2014 as compared to the six months ended December 31, 2013

#### Revenue

For the six months ended December 31, 2014 and 2013, we generated no revenue because we are currently undertaking research and development activities for market approval and there were no sales generated in this period.

#### Administration Expenses

Administration expenses decreased to $475,913 for the six months ended December 31, 2014 as compared with $528,496 for the six months ended December 31, 2013. This decrease is primarily attributable to a decrease in stock based expenses of approximately $172,000 offset by an increase in professional fees of approximately $120,000 during the six months ended December 31, 2014 as compared to the six months ended December 31, 2013.

#### Occupancy Expenses

Occupancy expense decreased by $184 to $5,344 for the six months ended December 31, 2014.

#### Research and Development

Research and development was $6,322 for the six months ended December 31, 2014 as compared with $0 for the six months ended December 31, 2013. Research and development expenditures have been minimal over the past twenty-four (24) months, including the last twelve (12) months, as we raise sufficient capital to undertake the next stage of development for our current programs. We continue to expend our efforts to continue creating value by completing our patent filings and publishing our scientific discoveries, and we are negotiating with third parties to assist with raising the capital needed to complete our planned research and development activities.

#### Interest Expense/Income

Interest expense increased to $648,655 for the six months ended December 31, 2014 as compared with $22,390 for the six months ended December 31, 2013. Interest expense is primarily comprised of $355,000 premium of the liability agreement, $25,000 premium of a convertible note, $12,000 face interest, $23,000 debt discount amortization, and $141,000 accretion of debt premium.

#### Net Income (Loss)

Net loss increased to $1,128,779 for the six months ended December 31, 2014 as compared with $545,112 for the six months ended December 31, 2013. The increase is primarily attributable to an increase in interest expense of approximately $626,000, an increase in foreign currency loss of approximately $177,000 and an increase in other expenses of approximately $50,000, offset by an increase in change in fair value of derivative liability of approximately $154,000, an increase in gain on debt settlements of approximately $35,000, a decrease in operating expenses of approximately $46,000 and an increase in income tax benefit of approximately $34,000.

### Liquidity and Capital Resources

|  | For the Six months Ended December 31, 2014 | 2013 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(271,996) | $(101,820) |
| Net cash used in investing activities | $- | $- |
| Net cash provided by financing activities | $99,000 | $90,859 |

Net cash used in operations was $271,996 for the six months ended December 31, 2014 compared to $101,820 for the six months ended December 31, 2013. This increase was primarily attributable to an increase in net loss offset by an increase in loss on settlement.

There were no cash transactions from investing activities in the six months ended December 31, 2014 or 2013.

Net cash provided by financing activities for the six months ended December 31, 2014 were $99,000 compared to $90,859 for the six months ended December 31, 2013. During the six months ended December 31, 2014, we had proceeds from convertible promissory notes of $90,000 and proceeds from issuance of common stock for cash of $29,000 offset by loan repayments to principal stockholder of $20,000.

We have substantial capital resource requirements and have incurred significant losses since inception. As of December 31, 2014, we had $14,588 in cash. Based upon our current business plans, we will need considerable cash investments to be successful. Such capital requirements are in excess of what we have in available cash and what we currently have commitment for. Therefore, we do not have enough available cash to meet our obligations over the next twelve (12) months.

### Related Party Transactions

Since inception, we have conducted transactions with directors and director related entities. These transactions included the following:

As of December 31, 2014 and June 30, 2014, we owed certain directors a total of $35,068 and $161,975 respectively, for money loaned to us in prior years. Subsequent to December 31, 2014, the balance was settled as part of a Debt Settlement Agreement.

As of December 31, 2014 and June 30, 2014, we owed two directors a total of $15,992 and $60,350, respectively, related to expenses paid on our behalf related to corporate startup costs and intellectual property. Subsequent to December 31, 2014, the balance was settled as part of a Debt Settlement Agreement.

### Going Concern Qualification

We 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 report for the fiscal years ended June 30, 2014 and 2013. In addition, we have negative working capital. The foregoing raises substantial doubt about our ability to continue as a going concern. Management's plans include seeking additional capital or debt financing. There is no guarantee that additional capital or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to us. 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.

## Controls and procedures

As filed, 1,794 characters.

### Disclosure Controls and Procedures

With the participation of our Chief Executive Officer and Chief Accounting Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Report. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer has concluded that, as of the end of such period, our disclosure controls and procedures were not effective due to the material weakness noted below, in ensuring that (i) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Material weakness: due to the small size of its staff, the Company did not have sufficient segregation of duties to support its internal control over financial reporting. We plan to rectify this weakness by hiring additional accounting personnel once we have the necessary resources to do so.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2014, that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

Filed Feb 17, 2015.
Source: SEC EDGAR, the filing index for accession 0001144204-15-009533. Last ingested by Listed: Oct 29, 2026, 17:01 ET. No prices; not investment advice.