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

- Company: [Propanc Biopharma, Inc.](/companies/ppcb.md) (CIK 1517681)
- Form: 10-Q
- Filed: 2014-05-20
- Accepted by EDGAR: May 20, 2014, 09:02 ET
- Period: 2014-03-31
- Accession: 0001354488-14-002818
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1517681/000135448814002818/ppch_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1517681/000135448814002818/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2014-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2014-01-01 to 2014-03-31 | −$104.3k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2013-07-01 to 2014-03-31 | −$638.3k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2014-01-01 to 2014-03-31 | $19.9k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2013-07-01 to 2014-03-31 | $42.3k | us-gaap:InterestExpense |
| Income tax | 9 months, 2013-07-01 to 2014-03-31 | −$48.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2014-01-01 to 2014-03-31 | −$66.9k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2013-07-01 to 2014-03-31 | −$612.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2014-01-01 to 2014-03-31 | $0.00 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 9 months, 2013-07-01 to 2014-03-31 | −$0.01 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 9 months, 2013-07-01 to 2014-03-31 | −$137.7k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2014-03-31 | $40 | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2014-03-31 | $40 | us-gaap:AssetsCurrent |
| Total assets | at 2014-03-31 | $40 | us-gaap:Assets |
| Current liabilities | at 2014-03-31 | $1.2m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2014-03-31 | −$1.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 12,448 characters.

### Special Note Regarding Forward-Looking Statements

The following discussion should be read in conjunction with our unaudited consolidated financial statements, which are included elsewhere in this Quarterly Report on Form 10-Q (this “Report”). Certain statements in this Report concerning our business prospects or future financial performance, anticipated revenues, expenses, profitability or other financial items, estimates as to size, growth in or projected revenues, developments in industry regulations and the application of such regulations, expected outcomes of pending or potential litigation and regulatory actions, and our strategies, plans and objectives, together with other statements that are not historical facts, are "forward-looking statements" as that term is defined under the federal securities laws. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. All of these forward-looking statements are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. You should carefully review the risks described herein and in other documents we file from time to time with the Securities and Exchange Commission (“SEC”), including our Final Prospectus on Form 424b filed on December 16, 2011, particularly in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

### Company Overview

We are a research and development company whose primary activity is to develop new treatments for chronic diseases, in particular cancer. Since inception, substantially all of the efforts of the Company have been the development of new cancer treatments targeting high risk patients who need a follow-up, non-toxic, long-term therapy which prevents the cancer from returning and spreading. The Company is a development stage enterprise and has begun raising capital, financial planning, establishing sources of supply, and acquiring property and equipment. We have generated no 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.

Propanc Pty Ltd was incorporated in Melbourne, Victoria Australia on October 15, 2007. 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.

### Critical Accounting Estimates

Below the Company will provide a discussion of its 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 the Company’s financial condition. Estimates are founded upon assumptions that, if incorrect, could have a material adverse impact on the Company’s results of operations and financial condition.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. Significant estimates in the accompanying unaudited consolidated financial statements include, without limitation, those involving depreciable lives and valuation of property and equipment and intangible assets, allowance for uncollectable receivables, valuation of derrivatives, valuation of benificial conversion feature in convertible debt, valuation of equity based instruments issued for other than cash and the valuation allowance on deferred tax assets and foreign currency translation due to the application of certain average exchange rates in lieu of spot rates on translation dates.

#### Foreign Currency Translation and Comprehensive Income (Loss)

The Company’s 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 statement of operations and comprehensive loss as other income (expense).

#### Research and Development Tax Credits

The Company may apply for research and development tax concessions with the Australian Taxation Office on an annual basis. Although the application amount is possible to estimate at year end, the Australian Taxation Office may reject or materially alter the amount. Accordingly, the Company does not recognize the benefit of the application amount until cash receipt, since collectability is not certain until such time. The tax concession is a refundable credit. If the Company has net income then the Company can receive the credit which reduces its income tax liability. If the Company has net losses then the Company may still receive a cash payment in respect to the credit; provided, however, the Company’s net operating loss carryforwards 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.

### Results of Operations for the Three Months Ended March 31, 2014 Compared to the Three Months Ended March 31, 2013

*Revenue.* For the three month periods ended March 31, 2014 and 2013, we did not generate revenues.

*Gross Profit.* Since we did not record or achieve any revenues for the three month periods ended March 31, 2014 and 2013, we did not have any costs associated with sales; and therefore we had no gross profits to report.

*Operating Expenses.* Our total operating expenses were $104,315 for the three months ended March 31, 2014, compared to $229,367 for the same period in 2013. The decrease is mainly related to less expense in 2014 associated with the amortization of prepaid shares issued for services.

*Provision for Income Taxes.* There was no provision of tax liability for the three month period ending March 31, 2014 due to the Company's historical losses.

*Net Earnings (loss).* We generated net losses of $66,865 for the three months ended March 31, 2014 compared to approximately $337,672 for the same period in 2013.

### Results of Operations for the Nine Months Ended March 31, 2014 Compared to the Nine Months Ended March 31, 2013

*Revenue.* For the nine month periods ended March 31, 2014 and 2013, we did not generate revenues.

*Gross Profit.* Since we did not record or achieve any revenues for the nine month periods ended March 31, 2014 and 2013, we did not have any costs associated with sales; and therefore we had no gross profits to report.

*Operating Expenses.* Our total operating expenses were $638,338 for the nine months ended March 31, 2014, compared to $1,172,127 for the same period in 2013. The decrease is mainly related to less expense in 2014 associated with the amortization of prepaid shares issued for services.

*Provision for Income Taxes.* There was no provision of tax liability for the period ending March 31, 2014, due to the Company's historical losses, however, we did record an income tax benefit relating to Research and Development tax concessions received of $367,421 since inception.

*Net Earnings (Loss).* We generated net losses of $611,977 for the nine months ended March 31, 2014, compared to $1,217,990 for the same period in 2013.

### Research and Development

In accordance with ASC 730-10, research and development expenditures for the Company's products are expensed when incurred, and are included in operating expenses. The Company recognized research and development costs of $0 and $1,744 for the nine months ended March 31, 2014 and 2013, respectively.

### Liquidity and Capital Resources

*General*. At March 31, 2014 we had a cash balance of $40. We have historically met our cash needs through a combination of proceeds from private placements of our securities and from loans. Our cash requirements are generally for operating activities. We need additional funding to sustain operations and efforts are now underway for additional capital through the sale of registered securities and related party advances. However, there can be no assurance that we will secure the necessary funding or otherwise be able to meet our working capital needs.

Our operating activities used cash in operations of $137,667 for the nine months ended March 31, 2014, and we used cash in operations of $96,701 for the same period in 2013. The principal elements of cash flow from operations for the nine months ended March 31, 2014, included a net loss of $611,977, offset by shares issued for services of $237,833, income from the change in warrant derivative liabilty of $27,016, amortization of debt discounts of $30,434, a decrease in operating working capital elements of approximately $230,000, depreciation expense of $538, and amoratization of stock based prepaid expenses of $6,667.

Cash used in investing activities during the nine months ended March 31, 2014, was $0 and $0 during the same period in 2013.

Cash received in our financing activities was $136,745 for the nine months ended March 31, 2014, compared to cash received of $98,992 during the same period in 2013. The majority of 2014 funding related to the issuance of a convertible promissory note.

The Company estimates that, depending on the progress of its research and development activities, it will require approximately $7,500,000 to adequately fund operating activities and execute its development program in the next twelve to eighteen months. Presently, we do not have enough cash to continue operations for the next twelve months. If we are unable to obtain additional funds on favorable terms or at all, we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs, or to cease or reduce our operating activities.

### Going Concern

As reflected in the accompanying unaudited consolidated financial statements, for the nine months ended March 31, 2014, the Company was in the development stage, had no revenues and had a net loss of $611,977 and net cash used in operations of $137,667. Additionally, as of March 31, 2014, the Company had a negative cash balance and a working capital deficit of $1,165,194, loans in default and a deficit accumulated during development stage of $17,335,330. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on successful completion of the Company’s development program and, ultimately, the attainment of profitable operations. We can provide no assurance that we will be able to generate a sufficient amount of revenue, if any, from our business in order to achieve profitability. The unaudited consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

### Off-Balance Sheet Arrangements

As of March 31, 2014, we had no off-balance sheet arrangements.

## Controls and procedures

As filed, 1,791 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 March 31, 2014, that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

Filed May 20, 2014.
Source: SEC EDGAR, the filing index for accession 0001354488-14-002818. Last ingested by Listed: Oct 29, 2026, 17:01 ET. No prices; not investment advice.