Propanc Biopharma, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Special Note Regarding Forward-Looking Information The following discussion and analysis of the results of operations and financial condition of Propanc Biopharma, Inc., and its wholly-owned Australian subsidiary, Propanc PTY LTD (collectively, “Propanc” or the “Company”) as of September 30, 2025 and for the three months ended September 30, 2025 and 2024 should be read in conjunction with our unaudited financial statements and the notes to those unaudited financial statements that are included elsewhere in this Quarterly Report on Form 10-Q for the period ended September 30, 2025 (this “Quarterly Report”). References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “us”, “we”, “our” and similar terms refer to Propanc. This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “aim”, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “feel”, “forecast”, “intend”, “may,”, “outlook”, “plan”, “potential”, “predict”, “project,”, “seek”, “should”, “will”, “would” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. Except as required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise. U.S. Dollars are denoted herein by “USD,” “$” and “dollars”. Overview The Company was originally formed in Melbourne, Victoria, Australia on October 15, 2007, as Propanc PTY LTD. On November 23, 2010, Propanc Health Group Corporation was incorporated in the State of Delaware and in January 2011; to reorganize our Company, we acquired all the outstanding shares of Propanc PTY LTD on a one-for-one basis, whereby Propanc PTY LTD became our wholly owned subsidiary. Effective April 20, 2017, we changed our name to “Propanc Biopharma, Inc.” to better reflect our current stage of operations and development. We are a development-stage healthcare company that is currently focused on developing new cancer treatments for patients suffering from pancreatic, ovarian and colorectal cancer. Utilizing our scientific and oncology consultants, we have developed a rational, composite formulation of anti-cancer compounds, which together exert several effects designed to control or prevent tumors from recurring and spreading through the body. Our lead product candidate, PRP, is a variation upon our novel formulation and involves pro-enzymes, the inactive precursors of enzymes. Recent Developments On August 14, 2025, we closed an underwritten public offering of 1,000,000 shares of our common stock, par value $0.001 per share, at a price of $4.00 per share. The shares of common stock commenced trading on the Nasdaq Capital Market on August 15, 2025, under the ticker symbol, “PPCB”. The Company received aggregate gross proceeds of $4 Million from the offering, before deducting underwriting discounts and other related expenses. On September 17, 2025, a certificate of grant for the Company’s “proenzyme composition” patent was received from the US Patent & Trademark Office (USPTO). The patent specifically captures a future clinical dose of the Company’s lead asset, PRP. This is the fourth US patent granted in this key strategic jurisdiction. Currently, the Company’s intellectual property portfolio consists of 90 patents filed in major jurisdictions relating to the use of PRP against solid tumors. Results of Operations The following discussion should be read in conjunction with the Company’s unaudited consolidated financial statements and notes thereto included elsewhere in this Report. The results discussed below are of the Company and its wholly-owned Australian subsidiary, Propanc PTY LTD. For the Three months ended September 30, 2025, as compared to the Three months ended September 30, 2024. Revenue For the three months ended September 30, 2025 and 2024, we generated no revenue because we are currently undertaking research and development activities for market approval and no sales were generated in this period. Administration Expense Administration expense increased to $4,598,574 for the three months ended September 30, 2025 as compared to $220,759 for the three months ended September 30, 2024. This increase of approximately $4,378,000 is primarily attributable to the increase in stock-based consulting expenses of approximately $3,743,000 to various consultants, general consulting, legal and investor relation fees of approximately $487,000, increase in accounting fees of approximately $30,000, increase of approximately $8,000 in employee remuneration expense, and increase in other general and administrative expenses of approximately $92,000 related to increase public company expenses and increase in marketing expense of approximately $18,000. 3 Occupancy Expense – Relates Party Occupancy expenses increased to $14,789 for the three months ended September 30, 2025 as compared to $8,317 for the three months ended September 30, 2024. This increase of approximately $6,000 is primarily attributable to the increase of monthly rental fees as a result of the lease renewal with the related party lessor in May 2025. Research and Development Expenses Research and development expenses were decreased to $60,201 for the three months ended September 30, 2025 as compared to $61,714 for the three months ended September 30, 2024, a slight decrease in research and development expenses of approximately $1,500. Such research and development expenses are related to the two-year collaboration agreement with University of Jaén, which was executed in October 2020 to provide certain research services to the Company ending on October 2022, relating to the investigation of a fully synthetic recombinant version of PRP. Additionally, on July 27, 2022, the Company entered into another two-year research agreement with the University of Jaén to provide certain research and experiment services to the Company relating to the investigation of the effects of pancreatic proenzymes against the tumor microenvironment. Additionally, we also allocate a portion of the management’s salary to research and development expenses. The overall decrease in research and development expenses is primarily related to our cost-cutting measures due to lack of working capital funding. Further research and development collaborations are currently under negotiation with the University of Jaén and other contract research organizations in preparation for upcoming available working capital for future research and development expenses. Interest Expense Interest expense increased to $305,649 for the three months ended September 30, 2025, as compared to $86,230 for the three months ended September 30, 2024. Interest expense is primarily comprised of approximately $151,000 of debt discount amortization, accretion of put premium of approximately $37,000, default and prepayment penalty fees of approximately $53,000 and interest expense from accrual of interest expense and other financing fees for a total of approximately $65,000 for the for the three months ended September 30, 2025. This increase in interest expense of approximately $219,000 is primarily attributable to the increase in amortization of debt discount of approximately $94,000, increase in accretion of put premium of approximately $37,000, increase in default and prepayment penalty fees of approximately $53,000 and increase of approximately $35,000 in interest expense from accrual of interest expense and other financing fee. Derivative Expense Derivative expense decreased to $0 for the three months ended September 30, 2025 as compared to $27,182 for the three months ended September 30, 2024. This decrease is primarily attributable to the decrease in issuance of convertible notes which initial value was bifurcated from the embedded conversion option and was recorded as derivative expense. Change in Fair Value of Derivative Liabilities Change in fair value of derivative liabilities were increased to a loss of $19,706 for the three months ended September 30, 2025 as compared to a gain of $52,787 for the three months ended September 30, 2024. This increase in loss of approximately $72,000 is primarily attributable to an increase in fair value of the principal amount of convertible notes with bifurcated embedded conversion option derivatives as a result of the increase in stock prices during the three months ended September 30, 2025 as compared to the prior three month period. Gain (Loss) on Extinguishment of Debt, net During the three months ended September 30, 2025, notes with principal amounts totaling $69,650, accrued interest of $10,519 and conversion fees of $1,406 containing bifurcated embedded conversion option derivatives were converted into common stock. Accordingly, the fair market value of the shares issued upon conversion was $178,884, resulting in a loss on extinguishment at the time of conversion of $97,309 and $255,720 of derivative liability fair value was recorded as a gain on extinguishment at the time of conversion, resulting in a net gain of $158,411. Additionally, following the repayment in full of principal balance of a certain convertible note dated in July 2025, $37,450 of the put premium was recorded into gain on extinguishment of debt during the three months ended September 30, 2025 which is included in gain (loss) on extinguishment of debt in the accompanying condensed consolidated statements of operations. During the three months ended September 30, 2024, notes with principal amounts totaling $30,800, accrued interest of $2,212 and conversion fees of $798 containing bifurcated embedded conversion option derivatives were converted into common stock. Accordingly, the fair market value of the shares issued upon conversion was $79,176, resulting in a loss on extinguishment at the time of conversion of $45,365 and $34,046 of derivative liability fair value was recorded as a gain on extinguishment at the time of conversion, resulting in a net loss of $11,319 which is included in gain (loss) on extinguishment of debt in the accompanying condensed consolidated statements of operations. Foreign Currency Transaction Gain (Loss) Foreign currency transaction gain (loss) increased to a loss of ($34,699) for the three months ended September 30, 2025 as compared to a gain of $8,423 for the three months ended September 30, 2024. This increase of approximately $43,000 is partially attributable to the increase in exchange rates during the three months ended September 30, 2025. 4 Net loss Net loss increased to $4,837,738 for the three months ended September 30, 2025 as compared to a net loss of $354,310 for the three months ended September 30, 2024. The change relates to the factors discussed above. Liquidity and Capital Resources Current Financial Condition As of September 30, 2025, we had total assets of $17,975,681, comprised primarily of cash of $602,737, GST tax receivable of $8,383, prepaid expenses – current portion of $8,143,532, other current assets of $8,828, security deposit of $1,986, deferred offering cost of $15,000, operating lease ROU asset, net of $56,279,prepaid expenses – long-term of $9,136,572 and fixed assets of $2,364. As compared to June 30, 2025, we had total assets of $19,631,808, comprised primarily of cash of $12,088, GST tax receivable of $5,302, prepaid expenses – current portion of $8,334,046, other current assets of $1,380, security deposit of $1,971, deferred offering cost of $291,773, operating lease ROU asset, net of $59,413 and prepaid expenses – long-term of $10,925,835. We had current liabilities of $3,454,964, primarily comprised of net convertible debt of $106,968, accounts payable, accrued expenses and accrued interest of $2,064,705, employee benefit liability of $686,863, loans payable of $65,280, loans payable – related party of $342,770, embedded conversion option liabilities of $167,878 and operating lease liability of $20,500 as of September 30, 2025. As compared to June 30, 2025, $5,578,240, primarily comprised of net convertible debt of $537,921, accounts payable and accrued expenses of $2,926,941, employee benefit liability of $667,901, loans payable of $65,280, loans payable – related party of $415,329, note payable, net of $543,312, embedded conversion option liabilities of $403,892 and operating lease liability of $17,664. We have funded our operations primarily through the issuance of equity and/or convertible securities for cash. The cash was used primarily for repayment of debt and payments for research and development, administration expenses, occupancy expenses, professional and consulting fees, and travel. During the three months ended September 30, 2025 we received proceeds from the sale of our common stock for approximately $3.3 million and proceeds from issuance of notes of $175,000 and proceeds from issuance of loan payable from related parties of $78,249. We have substantial capital resource requirements and have incurred significant losses since inception. As of September 30, 2025, we had $602,737 in cash. We depend upon debt and/or equity financing to fund our ongoing operations and to execute our current business plan. Such capital requirements are in excess of what we have in available cash and for which we currently have commitments. Therefore, we presently do not have enough available cash to meet our obligations over the next 12 months. If continued funding and capital resources are unavailable at reasonable terms, we may curtail our plan of operations. We will be required to obtain alternative or additional financing from financial institutions, investors or otherwise, in order to maintain and expand our existing operations. The failure by us to obtain such financing would have a material adverse effect upon our business, financial condition and results of operations, and adversely affecting our ability to complete ongoing activities in connection with our research and development programs. Sources and Uses of Cash For the Three months ended September 30, 2025 2024 Net cash used in operating activities $ (1,939,067 ) $ (235,515 ) Net cash used in investing activities $ (2,491 ) $ - Net cash provided by financing activities $ 2,526,772 $ 215,699 Effect of exchange rate changes on cash $ 5,435 $ 7,999 Net Cash Flow from Operating Activities Net cash used in operating activities was $1,939,067 for the three months ended September 30, 2025, due to our net loss of $4,837,738 offset primarily non-cash charges of amortization of debt discount of $150,902, accretion of put premium of $37,450, non-cash interest expense of $4,906, total stock-based expenses of $3,750,853, foreign currency transaction loss of $34,699, and change in fair value of derivatives of $19,706 addback gain from extinguishment of debt of $195,862. Net changes in operating assets and liabilities totaled $907,685, which is primarily attributable to an increase in prepaid expenses of $362,329, decrease in accounts payable of $186,803, and decrease in accrued expenses and other payables of $361,479. Net cash used in operating activities was $235,515 for the three months ended September 30, 2024, due to our net loss of $354,310 offset primarily by non-cash charges of amortization of debt discount of $56,983, non-cash interest expense of $2,548, derivative expense of $27,182, foreign currency transaction gain of $8,423, addback change in fair value of derivatives of $52,787 and loss from extinguishment of debt of $11,319. Net changes in operating assets and liabilities totaled $68,939, which is primarily attributable to increase accrued interest of $24,093 and increase in accrued expenses and other payables of $54,457. 5 Net Cash Flow from Investing Activities Net cash used in investing activities was $2,491 for the three months ended September 30, 2025, related to purchase of equipment, as compared to $0 for the three months ended September 30, 2024. Net Cash Flow from Financing Activities Net cash provided by financing activities for the three months ended September 30, 2025 was $2,526,772. During the three months ended September 30, 2025 we received net proceeds from sales of our common stock for $3,314,458, proceeds from issuance of notes of $175,000 and proceeds from issuance of loan from related parties of $78,249 offset by repayment of notes of $875,127 and loans payable – related party of $150,808, and deferred offering cost of $15,000. Net cash provided by financing activities for the three months ended September 30, 2024 was $215,699. During the three months ended September 30, 2024 we received net proceeds from issuance of convertible notes of $60,000 and proceeds from issuance of loan from related parties of $155,699. Effect of Exchange Rate The effect of the exchange rate on cash resulted in a $5,435 positive adjustment to cash flows in the three months ended September 30, 2025 as compared to a $7,999 positive adjustment to cash flows in the three months ended September 30, 2024. The reason for the fluctuation is due to the application of currency translation rates throughout the cash flow statement, the volume of transactions within each period and the daily fluctuation in exchange rates. Critical Accounting Estimates Below is a discussion of our more subjective accounting estimation processes for purposes of explaining (i) 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 numerous assumptions that, if incorrect, could create a material adverse impact on the Company’s results of operations and financial condition. Reference is frequently made herein to the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”). This is the source of authoritative US GAAP recognized by the FASB to be applied to non-governmental entities. Each ASC reference in this filing is presented with a three-digit number, which represents its Topic. As necessary for explanation and as applicable, an ASC topic may be followed with a two-digit subtopic, a two-digit section or a two-or-three-digit paragraph. Derivative Instruments: ASC 815, “Derivatives and Hedging,” establishes accounting and reporting standards for derivative instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings. On the date of conversion, or payoff, of debt, we record the fair value of the conversion shares, remove the fair value of the related derivative liability, remove any discounts and record a net gain or loss on debt extinguishment. Prepaid expenses – current portion and long-term portion consist primarily of costs paid for future services which will occur between 1 month to three years. Prepaid expenses principally include prepayments in fully vested, non-forfeitable equity instruments for general consulting, investor relations, and business advisory services, which are being amortized over the terms of their respective agreements. Recent Accounting Pronouncements Please see section captioned “Recent Accounting Pronouncements” in Note 1 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of recently issued and adopted accounting pronouncements. Going Concern Qualification We did not generate any revenue for the three months ended September 30, 2025 and 2024 and 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 audit report for each of the fiscal years ended June 30, 2025 and 2024. In addition, we have negative working capital and convertible debt that is past maturity that we are currently negotiating with lenders in order to amend the maturity dates. The foregoing raises substantial doubt about our ability to continue as a going concern for a period of 12 months from the issue date of this report. Our ability to continue as a going concern is dependent on our ability to execute our strategy and on our ability to raise additional funds and/or to consummate a public offering. Management is currently seeking additional funds, primarily through the issuance of equity and/or debt securities for cash to operate our business. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case of equity and/or convertible debt financing. 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. 6 Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable to smaller reporting companies.