10-Q: Regen Biopharma Faces Going Concern Doubt Amid Rising Losses

Regen Biopharma, Inc. reported a significant increase in net loss for the nine months ended June 30, 2025, and disclosed substantial doubt about its ability to continue as a going concern.

Summary

• The company reported a net loss of $167,292 for the three months ended June 30, 2025, an increase from $130,120 in the prior year period.
• For the nine months ended June 30, 2025, the net loss was $702,033, significantly higher than $397,507 for the same period in 2024.
• The accumulated deficit reached $21,119,151 as of June 30, 2025.
• Cash on hand was critically low at $1,761 as of June 30, 2025.
• Total current liabilities increased to $6,012,532 from $5,378,456, leading to a working capital deficit of approximately $5.8 million.
• Derivative liability significantly increased to $1,780,402 from $1,404,090.
• Research and Development expenses were $0 for both the three and nine months ended June 30, 2025, down from $32,500 and $120,161 respectively in the prior year periods.
• The company issued 10,000,000 common shares to its CEO, David R. Koos, in settlement of $50,000 in accrued salary on June 10, 2025.
• Post-period end, the company secured two new convertible promissory notes totaling $230,000 from CFI Capital LLC and Labrys Fund II LP in July and August 2025.

Sentiment

Score: 1

Explanation: The company faces severe financial distress, evidenced by increasing net losses driven by derivative liabilities, a growing accumulated deficit, and a critically low cash balance. The explicit 'going concern' warning, coupled with zero research and development spending for the period, indicates a significant risk to its core business model and long-term viability. While operating expenses decreased, this was largely due to the cessation of R&D, which is detrimental for a biopharma company. The reliance on dilutive financing and related-party transactions further highlights its precarious financial position.

Positives

• Operating loss decreased for both the three months ($40,756 vs. $107,966) and nine months ($215,485 vs. $331,819) ended June 30, 2025, primarily due to reduced operating expenses.
• Total operating expenses decreased by 40.24% for the three-month period and 22.85% for the nine-month period, largely due to the cessation of research and development activities and lower consulting fees.

Negatives

• Net loss significantly increased for both the three-month and nine-month periods ended June 30, 2025, primarily driven by a substantial increase in derivative losses.
• The accumulated deficit grew to over $21 million, indicating persistent unprofitability.
• The working capital deficit expanded to approximately $5.8 million, highlighting severe liquidity issues.
• Cash on hand remains critically low at $1,761, posing a significant challenge to ongoing operations.
• Research and development expenses were $0 for the current periods, suggesting a halt in core product development activities for a biopharma company.
• The company explicitly states 'significant doubt persists regarding the company's ability to continue as a going concern'.

Risks

• Significant doubt exists regarding the company's ability to continue as a going concern due to recurring losses, negative cash flows, and dependence on external funding.
• There is no assurance of securing additional operating funds through equity or debt offerings, and failure to do so may compel the company to reduce or cease operations.
• The company is in the early stages of product development, with no FDA approval granted for any products, and no assurance of future approval.
• There is no assurance that the company will be able to sell or license any product, or that such sales/licenses will be on favorable terms.
• Changes in the fair value of embedded derivatives significantly impact net income/loss, introducing volatility.
• Heavy reliance on financing from related parties (CEO, BST Partners, Zander Therapeutics, Inc.) introduces potential conflicts of interest and financial instability.
• Ongoing issuance of common shares for debt satisfaction, services, and potential conversion of convertible notes could lead to significant shareholder dilution.
• Disclosure controls and procedures were deemed ineffective as of June 30, 2025.

Future Outlook

Management intends to secure additional operating funds through equity or debt offerings to support working capital requirements. The company expects to continue incurring significant professional costs to remain publicly traded and anticipates significant research & development costs for product development, despite reporting $0 R&D expenses in the current period.

Management Comments

• "Management intends to secure additional operating funds through equity or debt offerings."
• "The Company has incurred and expects to continue to incur significant professional costs to remain as a publicly traded company and it has incurred and expects to continue incur significant research & development cost for products development."
• "The Company's Principal Executive Officer and Principal Financial Officer have concluded that the Company's disclosure controls and procedures were ineffective at this reasonable assurance level as of the period covered."

Industry Context

Regen Biopharma operates in the highly capital-intensive and regulated biotechnology sector, focusing on regenerative medical applications for oncology and autoimmune diseases. This industry typically demands substantial and continuous investment in research and development, long clinical trial processes, and significant regulatory hurdles (e.g., FDA approval). The company's current financial state, characterized by minimal cash, large accumulated deficits, and zero R&D spending in the reported periods, is highly unusual for a company claiming active development in this space, suggesting a significant disconnect from typical industry operational models and funding requirements.

Comparison to Industry Standards

• Research and Development Spending: The reported $0 R&D expense for the three and nine months ended June 30, 2025, is critically low for a biopharma company aiming to develop new therapies. Industry peers, even early-stage ones, typically invest millions to hundreds of millions annually in R&D to advance drug candidates through preclinical and clinical trials. For example, a single Phase I clinical trial can cost several million dollars, making Regen Biopharma's current R&D expenditure an extreme outlier.
• Cash Position: A cash balance of $1,761 is severely inadequate for any operating company, especially a biopharma firm. Healthy industry companies, even small ones, typically maintain cash reserves sufficient to cover at least 6-12 months of operating expenses, which for a development-stage biopharma company would be in the millions of dollars.
• Going Concern Status: The explicit 'going concern' warning is a severe red flag, indicating a high risk of business failure. This is not a standard disclosure for financially stable or progressing biopharma companies.
• Revenue Model: The company's revenue primarily stems from fixed anniversary payments from related-party license agreements (Zander Therapeutics, Inc. and Oncology Pharma, Inc.), rather than from product sales, significant milestone payments, or royalties tied to successful commercialization. This model is atypical for a biopharma company focused on product development, as it does not reflect progress in clinical or commercial stages.
• Investment Valuation: The fair value of the company's investments in Zander Therapeutics, Inc. is based on Level 3 inputs, which are unobservable and require significant management judgment. This contrasts with the more transparent and liquid valuations typically associated with investments in more mature or publicly traded biopharma assets.

Corporate Governance

Related Party Transactions

• Accounts Receivable: $177,147 from a related party (company where the CEO is also an executive) as of June 30, 2025.
• Investment Securities: Owns 7.9% of Zander Therapeutics, Inc. (under common control with the company), valued at $17,733.
• Revenue Transaction: License agreement with Zander Therapeutics, Inc. (under common control) for exclusive worldwide rights to intellectual property for non-human veterinary therapeutic use, including annual payments and royalties.
• Sublease of Facility: Sublease agreement with BST Partners (controlled by CEO David Koos) for office space at $5,000 per month, plus reimbursement for shared expenses.
• Notes Payable to Related Parties: Includes $73,303 lent by CEO David Koos (15% interest, due on demand), $133,836 lent by BST Partners (10% interest), and $59,200 lent by Zander Therapeutics, Inc. (10% interest, various maturity dates).
• Common Shares Issued to Related Party: 10,000,000 common shares issued to CEO David R. Koos on June 10, 2025, in settlement of $50,000 accrued but unpaid salary.

Stakeholder Impact

• Shareholders face significant dilution risk due to ongoing issuance of common shares for debt, services, and dividends, coupled with the severe risk to investment value indicated by the 'going concern' warning.
• Creditors face high risk given the company's accumulated deficit, negative cash flows, and explicit going concern doubt, with convertible notes potentially leading to further financial strain.
• Employees may face job insecurity due to the company's financial instability and the cessation of research and development activities.
• Customers/Licensees, particularly those involved in related-party agreements, may experience long-term uncertainty regarding the viability of licensed intellectual property given the lack of active R&D and financial distress.

Next Steps

• Secure additional operating funds through equity or debt offerings.
• Continue to incur significant professional costs to remain a publicly traded company.
• Continue to incur significant research & development costs for product development (as stated in future outlook, despite current $0 R&D).

Key Dates

Recommendation

The company is in severe financial distress, explicitly stating 'significant doubt' about its ability to continue as a going concern. It has a critically low cash balance, a rapidly increasing accumulated deficit, and its net loss has worsened significantly due to derivative liabilities. The cessation of research and development expenses, a core activity for a biopharma company, indicates a fundamental problem with its business model. The reliance on highly dilutive financing and related-party transactions further exacerbates the risk for investors. There are no clear positive catalysts or a viable path to profitability presented in the filing.

Keywords

Biopharma, Regenerative Medicine, Oncology, Autoimmune Disease, SEC Filing, 10-Q, Financial Report, Going Concern, Convertible Debt, Related Party Transactions, Net Loss, Derivative Liability, Shareholder Dilution, Liquidity