UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended JanuaryJuly 31, 2021
or
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission file number 333-68008001-40699
PHARMACYTE BIOTECH, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 62-1772151 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
23046 Avenida de la Carlota, Suite 600, Laguna Hills, CA92653
(Address of principal executive offices)
(917)595-2850
(Registrant’s telephone number, including area code)
| Securities registered pursuant to Section 12(b) of the Act: | ||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx ☒ No o☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx ☒ No o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer | |
| Non-accelerated filer | Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ Nox ☒
As of March 12,September 14, 2021, the registrant had 2,385,125,674 outstanding shares of common stock, with a par value of $0.0001 per share.
PHARMACYTE BIOTECH, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED JANUARYJULY 31, 2021
| 2 |
PART I – FINANCIAL INFORMATION
PHARMACYTE BIOTECH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| January 31, 2021 | April 30, 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 3,090,971 | $ | 894,861 | ||||
| Prepaid expenses and other current assets | 41,710 | 142,785 | ||||||
| Total current assets | 3,132,681 | 1,037,646 | ||||||
| Other assets: | ||||||||
| Intangibles | 3,549,427 | 3,549,427 | ||||||
| Investment in SG Austria | 1,572,193 | 1,572,193 | ||||||
| Other assets | 7,372 | 7,372 | ||||||
| Total other assets | 5,128,992 | 5,128,992 | ||||||
| Total Assets | $ | 8,261,673 | $ | 6,166,638 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 79,159 | $ | 185,842 | ||||
| Accrued expenses | 494,341 | 816,638 | ||||||
| Current portion of Small Business Administration – Paycheck Protection Program loan | 66,753 | 28,918 | ||||||
| Total current liabilities | 640,253 | 1,031,398 | ||||||
| Long-term liabilities, less current portion: | ||||||||
| Small Business Administration – Paycheck Protection Program loan | 8,447 | 46,282 | ||||||
| Total Liabilities | 648,700 | 1,077,680 | ||||||
| Commitments and Contingencies (Notes 7 and 9) | ||||||||
| Stockholders' equity: | ||||||||
| Common stock, authorized: 2,490,000,000 shares, $0.0001 par value; 2,341,410,405 and 1,638,637,839 shares issued and outstanding as of January 31, 2021 and April 30, 2020, respectively | 234,142 | 163,864 | ||||||
| Additional paid-in capital | 113,849,337 | 108,805,062 | ||||||
| Accumulated deficit | (106,449,491 | ) | (103,858,259 | ) | ||||
| Accumulated other comprehensive loss | (21,015 | ) | (21,709 | ) | ||||
| Total stockholders' equity | 7,612,973 | 5,088,958 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 8,261,673 | $ | 6,166,638 | ||||
| July 31, 2021 | April 30, 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 959,270 | $ | 2,202,106 | ||||
| Prepaid expenses and other current assets | 549,094 | 73,131 | ||||||
| Total current assets | 1,508,364 | 2,275,237 | ||||||
| Other assets: | ||||||||
| Intangibles | 3,549,427 | 3,549,427 | ||||||
| Investment in SG Austria | 1,572,193 | 1,572,193 | ||||||
| Other assets | 7,372 | 7,372 | ||||||
| Total other assets | 5,128,992 | 5,128,992 | ||||||
| Total Assets | $ | 6,637,356 | $ | 7,404,229 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 394,775 | $ | 172,261 | ||||
| Accrued expenses | 530,199 | 552,517 | ||||||
| Total current liabilities | 924,974 | 724,778 | ||||||
| Total Liabilities | 924,974 | 724,778 | ||||||
| Commitments and Contingencies (Notes 7 and 9) | – | – | ||||||
| Stockholders' equity: | ||||||||
| Common stock, authorized: shares, $ par value; and shares issued and outstanding as of July 31, 2021 and April 30, 2021, respectively | 161 | 159 | ||||||
| Additional paid-in capital | 114,169,131 | 114,109,169 | ||||||
| Accumulated deficit | (108,434,913 | ) | (107,409,495 | ) | ||||
| Accumulated other comprehensive loss | (21,997 | ) | (20,382 | ) | ||||
| Total stockholders' equity | 5,712,382 | 6,679,451 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 6,637,356 | $ | 7,404,229 | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
| 3 |
PHARMACYTE BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended July 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | $ | 0 | $ | 0 | ||||
| Operating expenses: | ||||||||
| Research and development costs | 143,613 | 270,574 | ||||||
| Compensation expense | 268,885 | 278,970 | ||||||
| Director fees | 63,159 | 72,024 | ||||||
| Legal and professional | 185,748 | 141,756 | ||||||
| General and administrative | 361,946 | 118,352 | ||||||
| Total operating expenses | 1,023,351 | 881,676 | ||||||
| Loss from operations | (1,023,351 | ) | (881,676 | ) | ||||
| Other expense: | ||||||||
| Interest expense | (467 | ) | (388 | ) | ||||
| Other expense | (1,600 | ) | (1,880 | ) | ||||
| Total other expenses | (2,067 | ) | (2,268 | ) | ||||
| Net loss | $ | (1,025,418 | ) | $ | (883,944 | ) | ||
| Basic and diluted loss per share | $ | (0.64 | ) | $ | (0.79 | ) | ||
| Weighted average shares outstanding basic and diluted | 1,591,306 | 1,119,048 | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
PHARMACYTE BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | $ | – | $ | – | $ | – | $ | – | ||||||||
| Operating expenses: | ||||||||||||||||
| Research and development costs | 174,088 | 113,296 | 595,976 | 203,566 | ||||||||||||
| Compensation expense | 336,095 | 406,006 | 1,167,527 | 1,305,346 | ||||||||||||
| Director fees | 65,953 | 79,269 | 207,294 | 237,765 | ||||||||||||
| Legal and professional | 95,720 | 116,531 | 325,888 | 342,142 | ||||||||||||
| General and administrative | 84,991 | 160,206 | 291,353 | 987,686 | ||||||||||||
| Total operating expenses | 756,847 | 875,308 | 2,588,038 | 3,076,505 | ||||||||||||
| Loss from operations | (756,847 | ) | (875,308 | ) | (2,588,038 | ) | (3,076,505 | ) | ||||||||
| Other expenses: | ||||||||||||||||
| Interest expense | (249 | ) | – | (2,006 | ) | – | ||||||||||
| Other expense | – | – | (1,188 | ) | – | |||||||||||
| Total other expenses | (249 | ) | – | (3,194 | ) | – | ||||||||||
| Net loss | $ | (757,096 | ) | $ | (875,308 | ) | $ | (2,591,232 | ) | $ | (3,076,505 | ) | ||||
| Basic and diluted loss per share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
| Weighted average shares outstanding basic and diluted | 2,337,034,318 | 1,375,499,976 | 2,108,274,833 | 1,284,500,731 | ||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
| 4 |
PHARMACYTE BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | Three Months Ended July 31, | ||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||
| Net Loss | $ | (757,096 | ) | $ | (875,308 | ) | $ | (2,591,232 | ) | $ | (3,076,505 | ) | ||||||||||||
| Net loss | $ | (1,025,418 | ) | $ | (883,944 | ) | ||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||
| Foreign currency translation | 869 | (602 | ) | 694 | (7,530 | ) | ||||||||||||||||||
| Foreign currency translation adjustment | (1,615 | ) | 2,677 | |||||||||||||||||||||
| Other comprehensive income (loss) | 869 | (602 | ) | 694 | (7,530 | ) | (1,615 | ) | 2,677 | |||||||||||||||
| Comprehensive loss | $ | (756,227 | ) | $ | (875,910 | ) | $ | (2,590,538 | ) | $ | (3,084,035 | ) | $ | (1,027,033 | ) | $ | (881,267 | ) | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
| 5 |
PHARMACYTE BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINETHREE MONTHS ENDED JANUARYJULY 31, 2021 AND 2020
(UNAUDITED)
| Series A Preferred Stock | Common stock | Additional Paid-in | Accumulated | Other Comprehensive Income | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Loss) | Equity | |||||||||||||||||||||||||
| Balance, April 30, 2020 | – | $ | – | 1,638,637,839 | $ | 163,864 | $ | 108,805,062 | $ | (103,858,259 | ) | $ | (21,709 | ) | $ | 5,088,958 | ||||||||||||||||
| Shares issued for compensation | – | – | – | – | 67,320 | – | – | 67,320 | ||||||||||||||||||||||||
| Shares issued for services | – | – | 2,500,000 | 250 | 40,300 | – | – | 40,550 | ||||||||||||||||||||||||
| Shares issued for cash, net of issuance costs of $198,150 | – | – | 234,005,899 | 23,401 | 1,833,996 | – | – | 1,857,397 | ||||||||||||||||||||||||
| Stock-based compensation - options | – | – | – | – | 72,317 | – | – | 72,317 | ||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | – | – | 2,677 | 2,677 | ||||||||||||||||||||||||
| Net loss | – | – | – | – | – | (883,944 | ) | – | (883,944 | ) | ||||||||||||||||||||||
| Balance, July 31, 2020 | – | – | 1,875,143,738 | 187,515 | 110,818,995 | (104,742,203 | ) | (19,032 | ) | 6,245,275 | ||||||||||||||||||||||
| Shares issued for compensation | – | – | – | – | 67,320 | – | – | 67,320 | ||||||||||||||||||||||||
| Shares issued for services | – | – | 1,000,000 | 100 | 19,059 | – | – | 19,159 | ||||||||||||||||||||||||
| Shares issued for cash, net of issuances costs of $278,150 | – | – | 458,666,667 | 45,867 | 2,795,983 | – | – | 2,841,850 | ||||||||||||||||||||||||
| Stock-based compensation - options | – | – | – | – | 56,059 | – | – | 56,059 | ||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | – | – | (2,852 | ) | (2,852 | ) | ||||||||||||||||||||||
| Net loss | – | – | – | – | – | (950,192 | ) | – | (950,192 | ) | ||||||||||||||||||||||
| Balance, October 31, 2020 | – | – | 2,334,810,405 | 233,482 | 113,757,416 | (105,692,395 | ) | (21,884 | ) | 8,276,619 | ||||||||||||||||||||||
| Shares issued for compensation | – | – | 6,600,000 | 660 | 47,906 | – | – | 48,566 | ||||||||||||||||||||||||
| Shares issued for services | – | – | – | – | 5,409 | – | – | 5,409 | ||||||||||||||||||||||||
| Shares issued for cash | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
| Stock-based compensation - options | – | – | – | – | 38,606 | – | – | 38,606 | ||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | – | – | 869 | 869 | ||||||||||||||||||||||||
| Net loss | – | – | – | – | – | (757,096 | ) | – | (757,096 | ) | ||||||||||||||||||||||
| Balance, January 31, 2021 | – | $ | – | 2,341,410,405 | $ | 234,142 | $ | 113,849,337 | $ | (106,449,491 | ) | $ | (21,015 | ) | $ | 7,612,973 | ||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||
| Balance, April 30, 2021 | 1,590,084 | $ | 159 | $ | 114,109,169 | $ | (107,409,495 | ) | $ | (20,382 | ) | $ | 6,679,451 | |||||||||||
| Stock issued for compensation | – | – | 11,055 | – | – | 11,055 | ||||||||||||||||||
| Stock issued for services | 1,336 | – | 24,765 | – | – | 24,765 | ||||||||||||||||||
| Stock issued fractions shares -reverse stock split 1 for 1,500 | 20,251 | 2 | (2 | ) | – | – | – | |||||||||||||||||
| Stock-based compensation options | – | – | 24,144 | – | – | 24,144 | ||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | (1,615 | ) | (1,615 | ) | ||||||||||||||||
| Net loss | – | – | – | (1,025,418 | ) | – | (1,025,418 | ) | ||||||||||||||||
| Balance, July 31, 2021 | 1,611,671 | $ | 161 | $ | 114,169,131 | $ | (108,434,913 | ) | $ | (21,997 | ) | $ | 5,712,382 | |||||||||||
| Balance, April 30, 2020 | 1,092,425 | $ | 109 | $ | 108,968,817 | $ | (103,858,259 | ) | $ | (21,709 | ) | $ | 5,088,958 | |||||||||||
| Stock issued for compensation | – | – | 67,320 | – | – | 67,320 | ||||||||||||||||||
| Stock issued for services | 1,667 | – | 40,550 | – | – | 40,550 | ||||||||||||||||||
| Stock issued for cash, net of issuance costs of $194,150 | 156,004 | 16 | 1,857,381 | – | – | 1,857,397 | ||||||||||||||||||
| Stock-based compensation options | – | – | 72,317 | – | – | 72,317 | ||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | 2,677 | 2,677 | ||||||||||||||||||
| Net loss | – | – | – | (883,944 | ) | – | (883,944 | ) | ||||||||||||||||
| Balance, July 31, 2020 | 1,250,096 | $ | 125 | $ | 111,006,385 | $ | (104,742,203 | ) | $ | (19,032 | ) | $ | 6,245,275 | |||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
| 6 |
PHARMACYTE BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS' EQUITY (continued)
NINE MONTHS ENDED JANUARY 31, 2021 AND 2020CASH FLOWS
(UNAUDITED)
| Series A Preferred Stock | Common stock | Additional Paid-in | Accumulated | Other Comprehensive Income | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Loss) | Equity | |||||||||||||||||||||||||
| Balance, April 30, 2019 | – | $ | – | 1,186,004,505 | $ | 118,600 | $ | 104,966,158 | $ | (100,031,371 | ) | $ | (13,842 | ) | $ | 5,039,545 | ||||||||||||||||
| Shares issued for compensation | – | – | – | – | 104,726 | – | – | 104,726 | ||||||||||||||||||||||||
| Shares issued for services | – | – | 5,500,000 | 550 | 311,266 | – | – | 311,816 | ||||||||||||||||||||||||
| Shares issued for cash, net of issuance costs of $70,000 | – | – | 66,666,667 | 6,667 | 551,333 | – | – | 558,000 | ||||||||||||||||||||||||
| Stock-based compensation - options | – | – | – | – | 126,325 | – | – | 126,325 | ||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | – | – | (6,862 | ) | (6,862 | ) | ||||||||||||||||||||||
| Net loss | – | – | – | – | – | (1,134,075 | ) | – | (1,134,075 | ) | ||||||||||||||||||||||
| Balance, July 31, 2019 | – | – | 1,258,171,172 | 125,817 | 106,059,808 | (101,165,446 | ) | (20,704 | ) | 4,999,475 | ||||||||||||||||||||||
| Shares issued for compensation | – | – | – | – | 104,727 | – | – | 104,727 | ||||||||||||||||||||||||
| Shares issued for services | – | – | 3,700,000 | 370 | 73,183 | – | – | 73,553 | ||||||||||||||||||||||||
| Shares issued for cash, net of issuances costs of $24,500 | 1 | – | 70,000,000 | 7,000 | 318,501 | – | – | 325,501 | ||||||||||||||||||||||||
| Stock-based compensation - options | – | – | – | – | 98,409 | – | – | 98,409 | ||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | – | – | (66 | ) | (66 | ) | ||||||||||||||||||||||
| Net loss | – | – | – | – | – | (1,067,122 | ) | – | (1,067,122 | ) | ||||||||||||||||||||||
| Balance, October 31, 2019 | 1 | – | 1,331,871,172 | 133,187 | 106,654,628 | (102,232,568 | ) | (20,770 | ) | 4,534,477 | ||||||||||||||||||||||
| Shares issued for compensation | – | – | 6,600,000 | 660 | 99,578 | – | – | 100,238 | ||||||||||||||||||||||||
| Shares issued for services | – | – | – | – | 26,092 | – | – | 26,092 | ||||||||||||||||||||||||
| Shares repurchased for cash | (1 | ) | – | 90,000,000 | 9,000 | 440,999 | – | – | 449,999 | |||||||||||||||||||||||
| Stock-based compensation - options | – | – | – | – | 84,436 | – | – | 84,436 | ||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | – | – | (602 | ) | (602 | ) | ||||||||||||||||||||||
| Net loss | – | – | – | – | – | (875,308 | ) | – | (875,308 | ) | ||||||||||||||||||||||
| Balance, January 31, 2020 | – | $ | – | 1,428,471,172 | $ | 142,847 | $ | 107,305,733 | $ | (103,107,876 | ) | $ | (21,372 | ) | $ | 4,319,332 | ||||||||||||||||
| Three Months Ended July 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (1,025,418 | ) | $ | (883,944 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock issued for services | 24,765 | 40,550 | ||||||
| Stock issued for compensation | 11,055 | 67,320 | ||||||
| Stock-based compensation – options | 24,144 | 72,317 | ||||||
| Change in assets and liabilities: | ||||||||
| (Increase) decrease in prepaid expenses and other current assets | (246,930 | ) | 6,248 | |||||
| Increase (decrease) in accounts payable | (6,519 | ) | 198,990 | |||||
| Decrease in accrued expenses | (22,318 | ) | (52,483 | ) | ||||
| Net cash used in operating activities | (1,241,221 | ) | (551,002 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Net cash provided by (used in) investing activities | 0 | 0 | ||||||
| Cash flows from financing activities: | ||||||||
| Use of funds for payment of insurance financing loan | 0 | (37,337 | ) | |||||
| Proceeds from sale of common stock, net of issuance costs | 0 | 1,857,397 | ||||||
| Net cash provided by financing activities | 0 | 1,820,060 | ||||||
| Effect of currency rate exchange on cash | (1,615 | ) | 2,677 | |||||
| Net increase (decrease) in cash | (1,242,836 | ) | 1,271,735 | |||||
| Cash at beginning of the period | 2,202,106 | 894,861 | ||||||
| Cash at end of the period | $ | 959,270 | $ | 2,166,596 | ||||
| Supplemental disclosure of cash flows information: | ||||||||
| Cash paid during the periods for income taxes | $ | 1,600 | $ | 800 | ||||
| Cash paid during the periods for interest | $ | 467 | $ | 388 | ||||
| Supplemental information of non-cash activities: | ||||||||
Prepaid expenses included in accounts payable | $ | 229,033 | $ | 0 | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
| 7 |
PHARMACYTE BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended January 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (2,591,232 | ) | $ | (3,076,505 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Shares issued for services | 65,117 | 411,461 | ||||||
| Shares issued for compensation | 183,206 | 309,691 | ||||||
| Stock-based compensation – options | 166,982 | 309,170 | ||||||
| Change in assets and liabilities: | ||||||||
| Decrease in prepaid expenses and other current assets | 101,075 | 71,199 | ||||||
| Increase (decrease) in accounts payable | (106,682 | ) | 218,608 | |||||
| Increase (decrease) in accrued expenses | (209,052 | ) | 57,395 | |||||
| Net cash used in operating activities | (2,390,586 | ) | (1,698,981 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Net cash provided by (used in) investing activities | – | – | ||||||
| Cash flows from financing activities: | ||||||||
| Payment of insurance financing loan | (113,245 | ) | – | |||||
| Proceeds from sale of Series A Preferred Stock | – | 1 | ||||||
| Use of funds from purchase of Series A preferred stock | – | (1 | ) | |||||
| Proceeds from sale of common stock, net of issuance costs | 4,699,247 | 1,333,500 | ||||||
| Net cash provided by financing activities | 4,586,002 | 1,333,500 | ||||||
| Effect of currency rate exchange on cash | 694 | (7,530 | ) | |||||
| Net increase (decrease) in cash | 2,196,110 | (373,011 | ) | |||||
| Cash at beginning of the period | 894,861 | 515,253 | ||||||
| Cash at end of the period | $ | 3,090,971 | $ | 142,242 | ||||
Supplemental disclosure of cash flows information: | ||||||||
| Cash paid during the periods for income taxes | $ | 800 | $ | 800 | ||||
| Cash paid during the periods for interest | $ | 2,006 | $ | – | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
PHARMACYTE BIOTECH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – NATURE OF BUSINESS
Overview
PharmaCyte Biotech, Inc. (“Company”) is a biotechnology company focused on developing cellular therapies for cancer and diabetes based upon a proprietary cellulose-based live cell encapsulation technology known as “Cell-in-a-Box®”.” The Cell-in-a-Box®technology is intended to be used as a platform upon which therapies for several types of cancer, including locally advanced, inoperable, non-metastatic pancreatic cancer (“LAPC”), and Type 1 and insulin dependent Type 2 diabetes will be developed. The current generation of the Company’s product candidate is referred to as “CypCaps™”. On September 1, 2020, the Company submitted an Investigational New Drug Application (“IND”) to the U.S. Food and Drug Administration (“FDA”) for a planned Phase 2b clinical trial in LAPC. On October 1, 2020, the Company received notice from the FDA that it had placed the IND on clinical hold. On October 30, 2020, the FDA sent a letter to the Company setting forth the reasons for the clinical hold and specific guidance on what the Company must do to have the clinical hold lifted. To lift the clinical hold, the FDA has informed the Company that it needs to conduct several additional preclinical studies and assays. The FDA also requested additional information regarding several topics, including DNA sequencing data, manufacturing information and product release specifications. The Company is also in the process of conducting these studies and assays and gathering additional information to submit to the FDA. See “Our Investigational New Drug Application and the Clinical Hold” below.
The Cell-in-a-Box® encapsulation technology potentially enables genetically engineered live human cells to be used as a means to produce various biologically active molecules. The technology is intended to result in the formation of pinhead sized cellulose-based porous capsules in which genetically modified live human cells can be encapsulated and maintained. In a laboratory setting, this proprietary live cell encapsulation technology has been shown to create a micro-environment in which encapsulated cells survive and flourish. They are protected from environmental challenges, such as the sheer forces associated with bioreactors and passage through catheters and needles, which we believe enables greater growth and production. The capsules are largely composed of cellulose (cotton) and are bio inert.
The Company is developing therapies for pancreatic and other solid cancerous tumors by using genetically engineered live human cells that it believeswe believe are capable of converting a cancer prodrug into its cancer-killing form, encapsulatingform. The Company encapsulate those cells using the Cell-in-a-Box® technology and placingplace those capsules in the body as close as possible to the tumor. TheIn this way, the Company believes that when thea cancer prodrug is administered to a patient with a particular type of cancer that may be affected by the prodrug, the killing of the patient’s cancerous tumor may be optimized.
The Company is also examining ways to exploit the benefits of the Cell-in-a-Box® technology to develop therapies for cancer that involve prodrugs based upon certain constituents of the Cannabis plant; these constituents are of the class of compounds known as “cannabinoids.” Until the U.S. Food and Drug Administration (“FDA”) allows the Company to commence the clinical trial involving LAPC described in the Company’s Investigational New Drug Application (“IND”) for which the FDA has placed a clinical hold, the Company is not spending any further resources developing this program.
In addition, the Company is developing a therapyhas been exploring ways to delay the production and accumulation of malignant ascites fluid that results from many types of abdominal cancerous tumors. Malignant ascites fluid is secreted by abdominal cancerous tumors into the abdomen after the tumors have reached a certain stage of growth. This fluid contains cancer cells that can seed and form new tumors throughout the abdomen. This fluid accumulates in the abdominal cavity, causing swelling of the abdomen, severe breathing difficulties and extreme pain.
The Company is using its therapy for pancreatic cancer to determine if it can prevent or delay the production and accumulation of malignant ascites fluid. As with the Company’s Cannabis program, until the FDA allows it to commence the clinical trial involving LAPC described in its IND for which the FDA has placed a clinical hold, the Company is not spending any further resources developing this program.
The Company is also been developing a potential therapy for Type 1 diabetes and insulin-dependent Type 2 diabetes. The Company’s product candidate for the treatment of diabetes therapy consists of encapsulated genetically modified insulin-producing cells. The encapsulation will be done using the Cell-in-a-Box® technology. Implanting these cells in the body is designed to function as a bio-artificial pancreas for purposes of insulin production. As with
The Company has also been considering ways to exploit the two previous programs,benefits of the Company is not spending any further resources developing this program untilCell-in-a-Box® technology to develop therapies for cancer that involve prodrugs based upon certain constituents of the Cannabis plant (“Cannabis Program”); these constituents are of the class of compounds known as “cannabinoids”.
Until: (i) the FDA allows the Company to commence thea clinical trial involvingin LAPC described in its IND for which the FDA has placed a clinical hold.hold; and (ii) the Company validates its Cell-in-a-Box® encapsulation technology in its planned Phase 2b clinical trial in LAPC, the Company is not spending any further resources developing the Cannabis Program.
Finally, the Company had licensed (“Hai Kang License Agreement”) from Hai Kang Life Corporation (“Hai Kang”) the right to certain technology owned or controlled by Hai Kang related to SARS-Cov2 COVID-19 diagnostic kits (“Kits”). On November 19, 2020, the Company terminated the Hai Kang License Agreement.
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Clinical Hold
On September 1, 2020, the Company submitted an IND to the FDA for a planned Phase 2b clinical trial in LAPC. Shortly thereafter, the Company received Information Requests from the FDA related to the IND. The Company timely responded to all information requests.
On October 1, 2020, the Company received notice that the FDA had placed the IND on clinical hold.
On October 30, 2020, the FDA sent a letter to the Company setting forth the reasons for the clinical hold and specific guidance on what the Company must do to have the clinical hold lifted.
In order to lift the clinical hold, the FDA has informed the Company that it needs to conduct several additional preclinical studies. The FDA also requested additional information regarding several topics, including sequencing data, manufacturing information and product release specifications.
In addition, the FDA requested that several items not related to the clinical hold be addressed through the submission of an IND amendment. Specifically, the FDA requested that the Company perform qualification studies for the drug substance filling step to ensure that the product remains sterile and stable during the filling process. The FDA also requested additional information, discussion and clarification on several other topics.
Since October 30, 2020, there has been no further communication with the FDA regarding the clinical hold.
The Company has assembled a scientific team to address the FDA requests related to the clinical hold. That team is working through an extensive list of items that the FDA requested. Among other things, the Company has successfully completed a 9-month product stability study, commenced physical parameter testing for CypCaps™ and commenced additional studies for the sequence of DNA encoding of its encapsulated cells. The Company has also designed the biocompatibility tests for cytotoxicity, sensitization, irritation, acute systemic toxicity, material-mediated pyrogenicity, subacute/subchronic toxicity, genotoxicity and implantation. In addition, the Company has begun a compression and swelling study of CypCaps™, designed a study to determine if CypCaps™ are adversely affected by contrast medium and designed a study to show the catheters used to implant CypCaps™ do not adversely impact the encapsulated cells.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations-Clinical Hold for a further discussion of the clinical hold.
Impact of the COVID-19 Pandemic on the Company’s Operations
The coronavirus SARS-Cov2 pandemic (“COVID-19”) is causing significant, industry-wide delays in clinical trials. Although the Company is not yet in a clinical trial, the Company has filed an IND with the FDA to commence a clinical trial in LAPC. While the IND has been placed on clinical hold by the FDA, the Company has assessed the impact of COVID-19 on its operations. Currently, many clinical trials are being delayed due to COVID-19. There are numerous reasons for these delays. For example, patients have shown a reluctance to enroll or continue in a clinical trial due to fear of exposure to COVID-19 when they are in a hospital or doctor’s office. There are local, regional and state-wide orders and regulations restricting usual normal activity by people. These discourage and interfere with patient visits to a doctor’s office if the visit is not COVID-19 related. Healthcare providers and health systems are shifting their resources away from clinical trials toward the care of COVID-19 patients. The FDA and other healthcare providers are making product candidates for the treatment of COVID-19 a priority over product candidates unrelated to COVID-19. As of the date of this Reportthe accompanying condensed consolidated financial statements and related footnotes on Form 10-Q (“Report”), the COVID-19 pandemic has had an impact upon the Company’s operations, although the Company believes that impact is not material. The impact primarily relates to delays in tasks associated with the preparation of the Company’s responses to the clinical hold, including all requested preclinical studies. There may be further delays in generating responses to the requests from the FDA related to the clinical hold.
As a result of the COVID-19 pandemic, commencement of the Company’s planned clinical trial to treat LAPC may be delayed beyond the lifting of the clinical hold should that occur. Also, enrollment may be difficult for the reasons discussed above. In addition, after enrollment in the trial, if patients contract COVID-19 during their participation in the trial or are subject to isolation or shelter in place restrictions, this may cause them to drop out of our clinical trial, miss scheduled therapy appointments or follow-up visits or otherwise fail to follow the clinical trial protocol. If patients are unable to follow the clinical trial protocol or if the trial results are otherwise affected by the consequences of the COVID-19 pandemic on patient participation or actions taken to mitigate COVID-19 spread, the integrity of data from the clinical trial may be compromised or not be accepted by the FDA. This could further adversely impact or delay the Company’s clinical development program.
It is highly speculative in projecting the effects of COVID-19 on the Company’s clinical development program and the Company generally. The effects of COVID-19 quickly and dramatically change over time. Its evolution is difficult to predict, and no one is able to say with certainty when the pandemic will subside.
Company Background
The Company is a Nevada corporation incorporated in 1996. In 2013, the Company restructured its operations to focus on biotechnology. The restructuring resulted in the Company focusing all its efforts upon the development of a novel, effective and safe way to treat cancer and diabetes. In January 2015, the Company changed its name from Nuvilex, Inc. to PharmaCyte Biotech, Inc. to reflect the nature of its current business.
Increase in Authorized Shares and Reverse Stock Split
On July 2, 2021, pursuant to stockholder approval at the Annual Meeting of Stockholders, the Company filed with the Secretary of State of the State of Nevada a Certificate of Amendment to its Articles of Incorporation, as amended, to increase the number of authorized shares to fifty billion ten million (50,010,000,000) shares, of which fifty billion (50,000,000,000) shares, with a par value of $0.0001 per share are designated as common stock and of which ten million (10,000,000) shares, with a par value of $0.0001 per share, are designated as preferred stock.
Effective July 12, 2021, pursuant to the approval by the Board of Directors, the Company filed with the Secretary of State of Nevada a Certificate of Change to the Articles of Incorporation, to effect a 1-for-1,500 reverse stock split of the Company’s common stock. The reverse stock split decreased the number of authorized shares of common stock from fifty billion () shares to thirty-three million three hundred thirty-three thousand three hundred thirty-four () shares, with a par value of $ per share. Any fractional shares resulting from the reverse stock split were rounded up to the next whole share. Except as otherwise indicated, all share and per share information in the accompanying consolidated financial statements and related footnotes gives effect to the reverse stock split of the Company’s common stock.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The Condensed Consolidated Financial Statementsconsolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company operates independently and through four wholly owned subsidiaries: (i) Bio Blue Bird AG;Bird; (ii) PharmaCyte Biotech Europe Limited; (iii) PharmaCyte Biotech Australia Pty. Ltd.; and (iv) Viridis Biotech, Inc. and are prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”)GAAP and the rules and regulations of the United States Securities and Exchange Commission (“Commission”). IntercompanyCommission. Upon consolidation, intercompany balances and transactions are eliminated. The Company’s 14.5%14.5% investment in SG Austria is presented on the cost method of accounting.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates these estimates including those related to fair values of financial instruments, intangible assets, fair value of stock-based awards, income taxes and contingent liabilities, among others. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s Condensed Consolidated Financial Statements;consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of the Company’s condensed consolidated financial position and results of operations. The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly changing and difficult to predict. Therefore, the Company’s accounting estimates and assumptions may change over time in response to the COVID-19 pandemic and may change materially in future periods.
Intangible Assets
The Financial Accounting Standards Board ("FASB"(“FASB”) standard on goodwill and other intangible assets prescribes a two-step process for impairment testing of goodwill and indefinite-lived intangibles, which is performed annually, as well as when an event triggering impairment may have occurred. The first step tests for impairment, while the second step, if necessary, measures the impairment. The Company has elected to perform its annual analysis at the end of its reporting year.
The Company’s intangible assets are licensing agreements related to the Cell-in-a-Box® technology for $1,549,427$1,549,427 and the diabetes license for $2,000,000$2,000,000 for an aggregate total of $3,549,427.$3,549,427.
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These intangible assets have an indefinite life; therefore, they are not amortizable.
The Company concluded that there was no0 impairment of the carrying value of the intangiblesintangible assets for the ninethree months ended JanuaryJuly 31, 2021 and 2020.2020, respectively.
Impairment of Long-Lived Assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset are less than carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value. No impairment was identified or recorded during the ninefor three months ended JanuaryJuly 31, 2021 and 2020.
Fair Value of Financial Instruments
For certain of the Company’s non-derivative financial instruments, including cash, accounts payable and accrued expenses, the carrying amount approximates fair value due to the short-term maturities of these instruments.
Accounting Standards Codification ("ASC") Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the condensed consolidated balance sheets for current liabilities qualify as financial instruments and are a reasonable estimate of their fair values because of the short period between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
| Level 1. Observable inputs such as quoted prices in active markets; |
| Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
| Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Income Taxes
Deferred taxes are calculated using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
A valuation allowance is provided for deferred income tax assets when, in management’s judgment, based upon currently available information and other factors, it is more likely than not that all or a portion of such deferred income tax assets will not be realized. The determination of the need for a valuation allowance is based on an on-going evaluation of current information including, among other things, historical operating results, estimates of future earnings in different taxing jurisdictions and the expected timing of the reversals of temporary differences. The Company believes the determination to record a valuation allowance to reduce a deferred income tax asset is a significant accounting estimate because it is based on, among other things, an estimate of future taxable income in the U.S. and certain other jurisdictions, which is susceptible to change and may or may not occur, and because the impact of adjusting a valuation allowance may be material. In determining when to release the valuation allowance established against the Company’s net deferred income tax assets, the Company considers all available evidence, both positive and negative. Consistent with the Company’s policy, and because of the Company’s history of operating losses, the Company does not currently recognize the benefit of all its deferred tax assets, including tax loss carry forwards, which may be used to offset future taxable income. The Company continually assesses its ability to generate sufficient taxable income during future periods in which deferred tax assets may be realized. When the Company believes it is more-likely-than-notmore likely than not that it will recover its deferred tax assets, the Company will reverse the valuation allowance as an income tax benefit in the Condensed Consolidated Statementsstatements of Operations.operations.
The U.S. GAAP method of accounting for uncertain tax positions utilizes a two-step approach to evaluate tax positions. Step one, recognition, requires evaluation of the tax position to determine if based solely on technical merits it is more-likely-than-notmore likely than not to be sustained upon examination. Step two, measurement, is addressed only if a position is more-likely-than-notmore likely than not to be sustained. In step two, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis, which is more-likely-than-notmore likely than not to be realized upon ultimate settlement with tax authorities. If a position does not meet the more-likely-than-notmore likely than not threshold for recognition in step one, no benefit is recorded until the first subsequent period in which the more-likely-than-notmore likely than not standard is met, the issue is resolved with the taxing authorityauthorities or the statute of limitations expires. Positions previously recognized are derecognized when the Company subsequently determines the position no longer is more-likely-than-notmore likely than not to be sustained. Evaluation of tax positions, their technical merits and measurements using cumulative probability are highly subjective management estimates. Actual results could differ materially from these estimates.
On March 27, 2020, Congress enacted the “CoronavirusCoronavirus Aid, Relief and Economic Security ("CARES") Act”Act to provide certain relief as a result of COVID-19.the Coronavirus Disease 2019 outbreak. The Company maintains a full valuation allowance on its U.S. net deferred tax assets. Deferred tax asset remeasurement (tax expense) was offset by a net decrease in valuation allowance, that resulted in no impact on the Company's income tax expense. Therefore, the Company does not expect the provisions in the CARES Act will impact the Company’s Condensed Consolidated Financial Statements.consolidated financial statements.
On March 11, 2021, Congress enacted the American Rescue Plan Act of 2021. The Company does not expect the provisions of this act will impact the Company’s consolidated financial statements.
Research and Development
Research and Development
Research and development (“R&D”) expenses consist of costs incurred for direct and overhead-related research expenses and are expensed as incurred. Costs to acquire technologies, including licenses, that are utilized in R&Dresearch and development and that have no alternative future use are expensed when incurred. Technology developed for use in the Company’s product candidates is expensed as incurred until technological feasibility has been established.
R&D expenses for the three and nine months ended JanuaryJuly 31, 2021 were $174,088 and $595,976, respectively, and for the three and nine months ended January 31, 2020 were $113,296$143,613 and $203,566,$270,574, respectively.
The Company recognizes stock-based compensation expense for only those awards ultimately expected to vest on a straight-line basis over the requisite service period of the award. The Company estimates the fair value of stock options using a Black-Scholes-Merton valuation model. This model requires the input of highly subjective assumptions, including the option's expected term and stock price volatility. In addition, judgment is also required in estimating the number of stock-based awards that are expected to be forfeited. Forfeitures are estimated based on historical experience at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The assumptions used in calculating the fair value of share-based payment awards represent management's best estimates, but these estimates involve inherent uncertainties and the application of management's judgment. Thus, if factors change and the Company uses different assumptions, the stock-based compensation expense could be materially different in the future.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains most of its cash balance at a financial institution located in California. Accounts at this institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Uninsured balances aggregated approximately $2,810,000 and $618,000$679,000 at JanuaryJuly 31, 2021 and $1,921,000 at April 30, 2020, respectively.2021. The Company has not experienced any losses in such accounts. Management believes it is not exposed to any significant credit risk on cash. See Note 13 – Subsequent Events.
Foreign Currency Translation
The Company translates the financial statements of its foreign subsidiaries from the local (functional) currencies to U.S. dollars in accordance with FASB ASC 830, Foreign Currency Matters. All assets and liabilities of the Company’s foreign subsidiaries are translated at period-endyear-end exchange rates, while revenue and expenses are translated at average exchange rates prevailing during the period.year. Adjustments for foreign currency translation fluctuations are excluded from net loss and are included in other comprehensive income (loss). Gains and losses on short-term intercompany foreign currency transactions are recognized as incurred.
Going Concern
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Liquidity
The accompanying Condensed Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern; however, the following conditions raise substantial doubt about the Company's ability to do so. As of JanuaryJuly 31, 2021, the Company has an accumulated deficit of $106,449,491$108,434,913 and incurred a net loss for the nine monthsperiod ended JanuaryJuly 31, 2021 of $2,591,232.$1,025,418. The Company requires substantial additional capital to finance its planned business operations and expects to incur operating losses in future periods due to the expenses related to the Company’s core businesses. The Company has not realized any revenue since it commenced doing business in the biotechnology sector, and there can be no assurance that it will be successful in generating revenues in the future in this sector. The Condensed Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverabilityCompany has spent and classification of assets or the amounts and classifications of liabilities that may result should the Company be unableexpects to continue asto spend, a going concern.substantial amount of funds in connection with implementing its business strategy.
For the nine months ended January 31, 2021, funding was provided by investors to maintain and expand the Company’s operations. Sales of the Company’s common stock were made under a Form S-3 (“S-3”) allowing for offerings of up to $50 million dollars. During the nine months ended January 31,On August 9, 2021, the Company raised funds throughentered into an underwriting agreement to offer and sell shares of common stock, pre-funded warrants to purchase common stock and warrants to purchase common stock in a public offering (“First Offering”). The gross proceeds of the Company’s S-3First Offering were $15 million, before deduction of underwriting discounts, commissions and estimated offering expenses. See Note 13- Subsequent Events.
On August 19, 2021, the Company entered into a securities purchase agreement (“Purchase Agreement”) with certain institutional investors (“Purchasers”) pursuant to which the placement agent sells shares of common stock “at-the-market” as definedCompany agreed to sell in Rule 415 under the Securities Act of 1933, as amendeda registered direct offering (“Securities Act”Registered Direct Offering”), or in transactions of a distinct block or blocks of shares of the Company’s common stock (“Block Trade Transactions”) in a program which is structuredand pre-funded warrants to provide up to $25 million to the Company less certain commissionspurchase shares of common stock. Further, pursuant to the S-3.Purchase Agreement, in a concurrent private placement (together with the Registered Direct Offering, “Second Offering”), the Company also agreed to issue to the Purchasers unregistered warrants (“Series A Warrants”) to purchase shares of common stock. The Company received gross proceeds from the Second Offering, before deducting placement agent fees and other estimated offering expenses payable by the Company, of approximately $70 million. See Note 13- Subsequent Events.
On August 13, 2020, the Company no longer met the eligibility requirements to use the S-3 to raise capital, and the Company ceased to use the S-3 to raise capital after that date. From May 1, 2020 through August 13, 2020 the Company raised capital of approximately $4.7 million in Block Trade Transactions and “at-the-market” transactions.
Management determined that its plans to raise additional capital alleviate substantial doubt about the Company’s ability to continue as a going concern. The Company believes the cash on hand at July 31, 2021 and the potential sales of unregistered shares of its common stockproceeds from the First and any publicSecond offerings of common stock in which the Company may engage in willand warrant exercises provide sufficient capital to meet the Company’s capital requirements and to fundthrough at least one year from the Company’s operations through March 31, 2022.issuance date of these condensed consolidated financial statements.
As of September 13, 2021, the Company had cash on hand of approximately $88 million.
Recent Accounting Pronouncements
ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("“ASU 2016-13"2016-13”), was issued in June 2016. Under ASU 2016-13, existing guidance on reporting credit losses for trade and other receivables and available for sale debt securities will be replaced with a new forward-looking "expected loss"“expected loss” model that generally will result in the earlier recognition of allowances for losses. The Company’s adoption of ASU 2016-13 during the quarter ended July 31, 2020 did not result in an impact on the Company’s Condensed Consolidated Financial Statements.condensed consolidated financial statements. As part of the Company’s continuing assessment of the adequacy of AUASU 2016-13, there are no factors to be considered at this time since the Company does not have an allowance for credit losses.
ASU No. 2019-12, Simplifying the Accounting for Income Taxes ("(“ASU 2019-12"2019-12”), was issued in December 2019. Under ASU 2019-12, the accounting for income taxes is simplified by eliminating certain exceptions and implementing additional requirements which result in a more consistent application of ASC 740. The Company is currently in the processCompany’s adoption of evaluating the impact of adopting ASU 2019-12 during the quarter ended July 31, 2021 did not result in 2021, but itan impact on the Company’s condensed consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) and also issued subsequent amendments to the initial guidance (collectively, “Topic 848”). Topic 848 is effective for all entities as of March 12, 2020 through December 31, 2022 and provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. The Company will adopt Topic 848 when relevant contracts are modified upon transition to alternative reference rates. The Company does not expect itthe adoption of Topic 848 to have a material impact on the Company’s Condensed Consolidated Financial Statements.condensed consolidated financial statements.
NOTE 3 – ACCRUED EXPENSES
Accrued expenses at JanuaryJuly 31, 2021 and April 30, 20202021 are summarized below:
| Accrued expenses | ||||||||||||||||
| January 31, 2021 | April 30, 2020 | July 31, 2021 | April 30, 2021 | |||||||||||||
| Payroll related costs | $ | 484,462 | $ | 435,577 | $ | 509,793 | $ | 490,904 | ||||||||
| Director and Officer insurance financing | – | 113,245 | ||||||||||||||
| Director and Officer insurance | 12,786 | 50,805 | ||||||||||||||
| Other | 9,879 | 267,816 | 7,620 | 10,808 | ||||||||||||
| Total | $ | 494,341 | $ | 816,638 | $ | 530,199 | $ | 552,517 | ||||||||
The Company financed the Director and Officer insurance policy. The term of the policy is from March 8, 20202021 through MarchSeptember 8, 2021.2021. The financing agreement has an interest rate of 4.25%4.85% per annum and requires teneight monthly payments of $12,806.$12,829. The unpaid balances as of JanuaryJuly 31, 2021 and April 30, 2020 are $02021 of $12,786 and $113,245,$50,805, respectively, which are included in accrued expenses.
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NOTE 4 – SMALL BUSINESS ADMINISTRATION – PAYCHECK PROTECTION PROGRAM
On March 27, 2020, the CARESCoronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted to provide financial aid to family and businesses impacted by COVID-19.the COVID-19 pandemic. The Company participated in the CARES Act, and on April 15, 2020, the Company entered into a note payable with a bank under the Small Business Administration (“SBA”), Paycheck Protection Program (“PPP”) loan in the amount of $75,200.$75,200. This PPP loan payable maturesmatured on April 15, 2022 with a fixed interest rate of 1%1% per annum with interest deferred for six months. The PPP loan hashad an initial term of two years, iswas unsecured and guaranteed by the SBA. Under the terms of the PPP loan, the Company may apply for forgiveness of the amount due on the PPP loan. The Company used the proceeds from the PPP loan for qualifying expenses as defined in the PPP. The Company intends to applyapplied for forgiveness of the PPP loan in accordance with the terms of the CARES Act. However,The SBA issued a notice of PPP loan forgiveness with an effective date of April 28, 2021, forgiving the entire principal of $75,200 and the accrued interest of $779. The Company cannot assure at this time thatrecognized the forgiveness of the PPP loan will be forgiven partially orand accrued interest as Gain on forgiveness of Paycheck Protection Program loan in full. The outstanding PPP loan balance as of January 31, 2021 andthe fiscal year ended April 30, 2020 was $75,200.2021.
NOTE 5 – COMMON STOCK TRANSACTIONS
A summary of the Company’s compensatory stock activity and related weighted average grant date fair value information for the ninethree months ended JanuaryJuly 31, 2021 and 2020 is as follows:
During the nine monthsyear ended January 31, 2020, the Company issued 2,000,000 shares of common stock to four non-employee members of the Company’s Board of Directors (“Board”) pursuant to Director Letter Agreements (“DLAs”) with the Company for services relating to the prior year. The shares vested upon issuance and the Company recorded a non-cash expense of $0 and $0 and for the three and nine months ended January 31, 2021, respectively, and $0 and $19,212 for the three and nine months ended January 31, 2020, respectively. There were zero unvested shares as of January 31, 2021.
Effective July 1, 2018, the Company issued 1,200,000 shares of common stock to a consultant. The term of the agreement is for twelve months. The shares vest monthly over a twelve-month period and are subject to the consultant providing services under the agreement. The Company recorded a non-cash consulting expense in the amount of $0 and $0 for the three and nine months ended January 31, 2021, respectively, and $0 and $12,816 for the three and nine months ended January 31, 2020, respectively. There were zero unvested shares as of January 31, 2021 and 2020.
During the month of April 2019, two consultants were issued 2,500,000 shares of common stock pursuant to their consulting agreements. The term of the agreements is for twelve months which covered prior and current periods. The shares vest monthly over a twelve-month period and are subject to the consultants providing services under their respective consulting agreements. The Company recorded a non-cash consulting expense in the amount of $0 and $0 for the three and nine months ended January 31, 2021, respectively, and $0 and $11,910 for the three and nine months ended January 31, 2020, respectively. There were zero unvested shares as of January 31, 2021 and 2020.
During the nine months ended January 31, 2020, a consultant was issued 500,000 shares of common stock pursuant to his consulting agreement with the Company. The term of the consulting agreement is for twelve months which covered prior and current periods. The shares vest monthly over a twelve-month period and are subject to the consultant providing services under his consulting agreement. The Company recorded a non-cash consulting expense in the amount of $0 and $0 for the three and nine months ended January 31, 2021, respectively, and $0 and $17,350 for the three and nine months ended January 31, 2020, respectively. There were zero unvested shares as of January 31, 2021 and 2020.
In January 2019, the Company awarded 6,600,000 shares of common stock to executive officers of the Company as part of their compensation agreements for 2019. These shares vest monthly over a twelve-month period and are subject to the executive officers continuing to provide service under their compensation agreements. During the three and nine months ended January 31, 2021, the Company recorded a non-cash compensation expense in the amount of $0 and $0, respectively, and $69,438 and $278,891 for the three and nine months ended January 31, 2020, respectively. There were zero unvested shares as of January 31, 2021 and 2020.
During the nine months ended January 31,30, 2020, four non-employee members of the Board were issued 2,000,000 shares of common stock pursuant to their DLAs withrespective Director Letter Agreement (“DLAs”) and relating to their services for the Company.prior year. The shares were fully vested upon issuance. The Company recorded a non-cash expense of $0$ and $10,561 $for the three and nine months ended JanuaryJuly 31, 2021 respectively, and $18,988 and $46,433 for the three and nine months ended January 31, 2020, respectively. There were zero unvested shares of common stock remaining related to these DLAs as of JanuaryJuly 31, 2021 and 2020.2020, respectively.
DuringIn January 2020, the nine months ended January 31, 2020, a consultant was issued 2,000,000Company awarded shares of common stock in respect of his services asto the Chairmanexecutive officers of the Company’s Medical and Scientific Advisory BoardCompany as part of their compensation agreements for 2020. These shares vest monthly over a four-yeartwelve-month period with their vestingand are subject to them continuing service under the consultant continuing to provide services toagreements. During the Company. Thethree months ended July 31, 2021 and 2020, the Company recorded a non-cash consultingcompensation expense in the amount of $0$ and $0 for the three and nine months ended January 31, 2021, respectively, and $0 and $11,851 for the three and nine months ended January 31, 2020,$, respectively. There were zero and unvested shares remaining related to his compensation arrangement as of JanuaryJuly 31, 2021 and 2020.2020, respectively.
During the ninethree months ended JanuaryJuly 31, 2021, four2020, three non-employee members of the Board were issued 2,000,000 shares of common stock pursuant to their DLAs in respect of their service during that year. The shares were fully vested upon issuance. The Company recorded a non-cash expense of $10,411$ and $26,859$ for the three and nine months ended JanuaryJuly 31, 2021 and 2020, respectively. There were zero unvested shares remaining related to such DLAs as of JanuaryJuly 31, 2021.
During the ninethree months ended JanuaryJuly 31, 20212020, four consultants were issued 1,000,000 shares of common stock pursuant to their consulting agreements with the Company. The terms of the agreements are for twelve months. The shares vest monthly over a twelve-month period and are subject to the consultants continuing to provide services under their consulting agreements. The Company recorded a non-cash consulting expense in the amount of $5,409$ and $15,017$ for the three and nine months ended JanuaryJuly 31, 2021 and 2020, respectively. There were 250,000zero and unvested shares remaining related to these consulting agreements as of January 31, 2021.
In January 2020, the Company awarded 6,600,000 shares of common stock to the executive officers of the Company as part of their compensation agreements for 2020. These shares vest monthly over a twelve-month period and are subject to the executive officers continuing to provide service under their compensation agreements. During the three and nine months ended January 31, 2021, the Company recorded a non-cash compensation expense in the amounts of $44,881 and $179,521, respectively, and $30,800 and $30,800 for the three and nine months ended January 31, 2020, respectively. There were zero and 6,050,000 unvested shares as of JanuaryJuly 31, 2021 and 2020, respectively.
During the nine months ended January 31, 2021,In September 2020, a consultant was issued 500,000 shares of common stock in respect of his services as the Chairman of the Company’s Medical and Scientific Advisory Board with vesting subject to the consultant continuing to provide services to the Company. The Company recorded a non-cash consulting expense in the amount of $2,125$ and $2,833$ for the three and nine months ended JanuaryJuly 31, 2021 respectively, and $0 and $0 for the three and nine months ended January 31, 2020, respectively. There were zero unvested shares remaining related to his compensation arrangement as of JanuaryJuly 31, 2021 and 2020, respectively.2021.
In January 2021, the Company awarded 6,600,000 shares of common stock to the executive officers of the Company as part of their compensation agreements for 2021. These shares vest monthly over a twelve-month period and are subject to the executive officers continuing to provide service under their compensation agreements. During the three and nine months ended JanuaryJuly 31, 2021, the Company recorded a non-cash compensation expense in the amountsamount of $3,685 and $3,685, respectively.$. There were 6,050,000 unvested shares as of JanuaryJuly 31, 2021.
During the three months ended July 31, 2021, three non-employee members of the Board were issued shares of common stock pursuant to their DLAs in respect of their service during that year. The shares were fully vested upon issuance. The Company recorded a non-cash expense of $ for the three months ended July 31, 2021. There were zero unvested shares remaining related to such DLAs as of July 31, 2021.
During the three months ended July 31, 2021, two consultants were issued shares of common stock pursuant to their consulting agreements with the Company. The shares vest monthly over a twelve-month period and are subject to the consultants continuing to provide services under their consulting agreements. The Company recorded a non-cash consulting expense in the amount of $ for the three months ended July 31, 2021. There were unvested shares remaining related to these consulting agreements as of July 31, 2021.
All shares listed above were issued without registration under the Securities Act in reliance upon the exemption afforded by Section 4(a)(2) of the Securities Act.
On September 28, 2017, a S-3 registration statement was declared effective by the Commission for the Company to sell from time to time in one or more public offerings of up to $50 million of its securities on a “shelf offering” basis. During the ninethree months ended JanuaryJuly 31, 2021 and 2020, the Company sold and issued approximately 693 million and 137 million shares of common stock, respectively, at prices ofranging from approximately $0.01$15 to $45 per share pursuant to the Company’s S-3.share. Net of underwriting discounts, legal, accounting and other offering expenses, the Company received net proceeds of approximately $4.7$0 and $1.9 million and $884,000 from the sale of these shares for the ninethree months ended JanuaryJuly 31, 2021 and 2020, respectively. On April 9, 2021, the Third S-3 (“Third S-3”) was declared effective by the Commission for a public offering of up to $100 million on a “shelf offering” basis.
A summary of the Company’s unvestednon-vested restricted stock activity and related weighted average grant date fair value information for the ninethree months ended JanuaryJuly 31, 2021 isare as follows:
| Schedule of non-vested restricted stock activity | |||||||||||||||||
| Shares | Weighted Average Grant Date Fair Value | Shares | Weighted Average Grant Date Fair Value | ||||||||||||||
| Unvested, at April 30, 2020 | 4,600,000 | $ | 0.06 | ||||||||||||||
| Unvested, at April 30, 2021 | 2,933 | 10.05 | |||||||||||||||
| Granted | 10,100,000 | 0.01 | 1,336 | 23.96 | |||||||||||||
| Vested | (8,400,000 | ) | 0.01 | (2,185 | ) | 16.66 | |||||||||||
| Forfeited | – | – | 0 | – | |||||||||||||
| Unvested, at January 31, 2021 | 6,300,000 | $ | 0.01 | ||||||||||||||
| Unvested, at July 31, 2021 | 2,084 | 12.03 | |||||||||||||||
Stock Options
As of JanuaryJuly 31, 2021, the Company had 62,600,000 outstanding stock options to its directors and executive officers (collectively, “Employee Options”) and consultants (“Non-Employee Options”).
During the ninethree months ended JanuaryJuly 31, 2021 and 2020, the Company granted 11,000,000 and 11,000,000 Employee Options, respectively.
The fair value of the Employee Options at the date of grant was estimated using the Black-Scholes-Merton option-pricing model, based on the following weighted average assumptions:
| Assumptions | ||||||||||||||||
| Nine Months Ended January 31, | Three Months Ended July 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Risk-free interest rate | 0.35% | 1.8% | % | % | ||||||||||||
| Expected volatility | 97% | 91% | % | % | ||||||||||||
| Expected term (years) | 2.7 | 2.7 | ||||||||||||||
| Expected lives (years) | ||||||||||||||||
| Expected dividend yield | 0.00% | 0.00% | % | % | ||||||||||||
The Company’s computation of expected volatility is based on the historical daily volatility of its publicly traded stock. For stock option grants issued during the ninethree months ended JanuaryJuly 31, 2021 and 2020, the Company used a calculated volatility for each grant. The Company lacks adequate information about the exercise behavior now and therefore has determined the expected term assumption under the simplified method provided for under ASC 718, which averages the contractual term of the Company’s stock options of five years with the average vesting term of two and seven-tenthsone-half years for an average of 2.7three years. The dividend yield assumption of zero is based upon the fact the Company has never paid cash dividends and presently has no intention of paying cash dividends. The risk-free interest rate used for each grant is equal to the U.S. Treasury rates in effect at the time of the grant for instruments with a similar expected life.
During the ninethree months ended JanuaryJuly 31, 2021 and 2020, the Company granted zero and 1,200,000 Non-Employee Options, respectively. During the three months ended January 31, 2021 and 2020, the Company granted zero and zero Non-Employee Options, respectively.Options.
A summary of the Company’s stock option activity and related information for the ninethree months ended JanuaryJuly 31, 2021 isare shown below:
| Stock option activity | ||||||||||||
| Options | Weighted Average Exercise Price | Weighted Average Grant Date Fair Value per Share | ||||||||||
| Outstanding, April 30, 2021 | 41,333 | $ | 79.97 | $ | 79.97 | |||||||
| Issued | 1,000 | 23.10 | 23.10 | |||||||||
| Forfeited | 0 | – | – | |||||||||
| Exercised | 0 | – | – | |||||||||
| Outstanding, July 31, 2021 | 42,333 | $ | 78.63 | $ | 78.63 | |||||||
| Exercisable, July 31, 2021 | 39,833 | $ | 82.93 | $ | – | |||||||
| Vested and expected to vest | 42,333 | $ | 78.63 | $ | – | |||||||
| Options | Weighted Average Exercise Price per Share | Weighted Average Grant Date Fair Value per Share | ||||||||||
| Outstanding, April 30, 2020 | 67,200,000 | $ | 0.06 | $ | 0.06 | |||||||
| Granted | 11,000,000 | 0.01 | 0.01 | |||||||||
| Forfeited | (15,600,000 | ) | – | – | ||||||||
| Exercised | – | – | – | |||||||||
| Outstanding, January 31, 2021 | 62,600,000 | $ | 0.05 | $ | 0.05 | |||||||
| Exercisable, January 31, 2021 | 54,350,000 | $ | 0.06 | $ | – | |||||||
| Vested and expected to vest | 62,600,000 | $ | 0.05 | $ | – | |||||||
A summary of the activity for unvested stock options during the nine monthsyears ended January 31,April 30, 2021 and 2020 is as follows:
| Options | Weighted Average Grant Date Fair Value per Share | |||||||
| Unvested, April 30, 2020 | 6,200,000 | $ | 0.05 | |||||
| Granted | 11,000,000 | 0.01 | ||||||
| Vested | (8,950,000 | ) | – | |||||
| Forfeited | – | – | ||||||
| Unvested, January 31, 2021 | 8,250,000 | $ | 0.01 | |||||
| Unvested stock option activity | ||||||||
| Options | Weighted Average Grant Date Fair Value per Share | |||||||
| Unvested, April 30, 2021 | 4,000 | $ | 10.05 | |||||
| Granted | 1,000 | 23.10 | ||||||
| Vested | (2,500 | ) | – | |||||
| Forfeited | 0 | – | ||||||
| Unvested, July 31, 2021 | 2,500 | $ | 10.05 | |||||
The Company recorded $38,606$ and $74,025$ of stock-based compensation expense related to the issuance of Employee Options to certain executive officers and directors in exchange for services during the three months ended January 31, 2021 and 2020, respectively, and $166,982 and $284,934 during the nine months ended JanuaryJuly 31, 2021 and 2020, respectively. At JanuaryJuly 31, 2021, there remained $35,148$ of unrecognized compensation expense related to unvested Employee Options granted to executive officers and directors, to be recognized as expense over a weighted-average period of the remaining eleven months in the calendar year. The unvested options vest at 750,000500 shares per month and are expected to be fully vested on December 31, 2021.
The Company recorded $0 and $10,411 of stock-based compensation related to the issuance of Non-Employee Options in exchange for services during the three months ended JanuaryJuly 31, 2021 and 2020, respectively, and $0 and $24,237 during the nine months ended January 31, 2021 and 2020, respectively. There were no unvested Non-Employee Options on January 31, 2021.
| 16 |
The following table summarizes the outstanding stock options by exercise price at JanuaryJuly 31, 2021:
| Schedule of options by exercise price | ||||||||||||||||||||||
| Exercise Price | Number of Options Outstanding | Weighted Average Remaining Contractual Life (Years) of Outstanding Options | Weighted Average Exercisable Price Per Share | Number of Options Exercisable | Weighted Average Exercise Price of Exercisable Options | |||||||||||||||||
| $ | 156.00 | 6,967 | $ | 156.00 | 6,967 | $ | 156.00 | |||||||||||||||
| $ | 87.00 | 1,634 | $ | 87.00 | 1,634 | $ | 87.00 | |||||||||||||||
| $ | 110.10 | 800 | $ | 110.10 | 800 | $ | 110.10 | |||||||||||||||
| $ | 109.35 | 1,200 | $ | 109.35 | 1,200 | $ | 109.35 | |||||||||||||||
| $ | 133.50 | 800 | $ | 133.50 | 800 | $ | 133.50 | |||||||||||||||
| $ | 82.95 | 333 | $ | 82.95 | 333 | $ | 82.95 | |||||||||||||||
| $ | 83.70 | 6,000 | $ | 83.70 | 6,000 | $ | 83.70 | |||||||||||||||
| $ | 80.10 | 800 | $ | 80.10 | 800 | $ | 80.10 | |||||||||||||||
| $ | 80.85 | 667 | $ | 80.85 | 667 | $ | 80.85 | |||||||||||||||
| $ | 102.45 | 333 | $ | 102.45 | 333 | $ | 102.45 | |||||||||||||||
| $ | 97.35 | 333 | $ | 97.35 | 333 | $ | 97.35 | |||||||||||||||
| $ | 74.25 | 6,000 | $ | 74.25 | 6,000 | $ | 74.25 | |||||||||||||||
| $ | 57.00 | 800 | $ | 57.00 | 800 | $ | 57.00 | |||||||||||||||
| $ | 60.60 | 667 | $ | 60.60 | 667 | $ | 60.60 | |||||||||||||||
| $ | 55.50 | 333 | $ | 55.50 | 333 | $ | 55.50 | |||||||||||||||
| $ | 51.00 | 333 | $ | 51.00 | 333 | $ | 51.00 | |||||||||||||||
| $ | 61.20 | 6,000 | $ | 61.20 | 6,000 | $ | 61.20 | |||||||||||||||
| $ | 36.00 | 667 | $ | 36.00 | 667 | $ | 36.00 | |||||||||||||||
| $ | 37.05 | 333 | $ | 37.05 | 333 | $ | 37.05 | |||||||||||||||
| $ | 15.75 | 333 | $ | 15.70 | 333 | $ | 15.70 | |||||||||||||||
| $ | 10.05 | 6,000 | $ | 10.05 | 3,500 | $ | 10.05 | |||||||||||||||
| $ | 26.55 | 667 | $ | 26.55 | 667 | $ | 26.55 | |||||||||||||||
| $ | 16.20 | 333 | $ | 16.20 | 333 | $ | 16.20 | |||||||||||||||
| Total | 42,333 | $ | 78.63 | 39,833 | $ | 82.93 | ||||||||||||||||
| Exercise Price | Number of Options Outstanding | Weighted Average Remaining Contractual Life of Outstanding Options (years) | Weighted Average Exercisable Price | Number of Options Exercisable | Weighted Average Exercise Price of Exercisable Options | |||||||||||||||||
| $ | 0.104 | 10,450,000 | 0.71 | $ | 0.104 | 10,450,000 | $ | 0.104 | ||||||||||||||
| $ | 0.0685 | 600,000 | 0.24 | $ | 0.0685 | 600,000 | $ | 0.0685 | ||||||||||||||
| $ | 0.058 | 2,450,000 | 1.06 | $ | 0.058 | 2,450,000 | $ | 0.058 | ||||||||||||||
| $ | 0.0734 | 1,200,000 | 1.25 | $ | 0.0734 | 1,200,000 | $ | 0.0734 | ||||||||||||||
| $ | 0.0729 | 1,800,000 | 1.44 | $ | 0.0729 | 1,800,000 | $ | 0.0729 | ||||||||||||||
| $ | 0.089 | 1,200,000 | 1.46 | $ | 0.089 | 1,200,000 | $ | 0.089 | ||||||||||||||
| $ | 0.0553 | 500,000 | 0.84 | $ | 0.0553 | 500,000 | $ | 0.0553 | ||||||||||||||
| $ | 0.0558 | 9,000,000 | 1.15 | $ | 0.0558 | 9,000,000 | $ | 0.0558 | ||||||||||||||
| $ | 0.0534 | 1,200,000 | 2.59 | $ | 0.0534 | 1,200,000 | $ | 0.0534 | ||||||||||||||
| $ | 0.0539 | 1,000,000 | 1.12 | $ | 0.0539 | 1,000,000 | $ | 0.0539 | ||||||||||||||
| $ | 0.0683 | 500,000 | 1.21 | $ | 0.0683 | 500,000 | $ | 0.0683 | ||||||||||||||
| $ | 0.0649 | 500,000 | 1.34 | $ | 0.0649 | 500,000 | $ | 0.0649 | ||||||||||||||
| $ | 0.0495 | 9,000,000 | 1.88 | $ | 0.0495 | 9,000,000 | $ | 0.0495 | ||||||||||||||
| $ | 0.0380 | 1,200,000 | 3.65 | $ | 0.0380 | 1,200,000 | $ | 0.0380 | ||||||||||||||
| $ | 0.0404 | 1,000,000 | 1.62 | $ | 0.0404 | 1,000,000 | $ | 0.0404 | ||||||||||||||
| $ | 0.0370 | 500,000 | 1.71 | $ | 0.0370 | 500,000 | $ | 0.0370 | ||||||||||||||
| $ | 0.0340 | 500,000 | 1.85 | $ | 0.0340 | 500,000 | $ | 0.0340 | ||||||||||||||
| $ | 0.0408 | 9,000,000 | 2.35 | $ | 0.0408 | 9,000,000 | $ | 0.0408 | ||||||||||||||
| $ | 0.0240 | 1,000,000 | 2.12 | $ | 0.0240 | 1,000,000 | $ | 0.0240 | ||||||||||||||
| $ | 0.0247 | 500,000 | 2.21 | $ | 0.0247 | 500,000 | $ | 0.0247 | ||||||||||||||
| $ | 0.0105 | 500,000 | 2.35 | $ | 0.0105 | 500,000 | $ | 0.0105 | ||||||||||||||
| $ | 0.0067 | 9,000,000 | 2.95 | $ | 0.0067 | 750,000 | $ | 0.0067 | ||||||||||||||
| Total | 62,600,000 | 1.72 | $ | 0.05 | 54,350,000 | $ | 0.06 | |||||||||||||||
The aggregate intrinsic value of outstanding options as of JanuaryJuly 31, 2021 was $12,225.$. This represents options whose exercise price was less than the closing fair market value of the Company’s common stock on JanuaryJuly 31, 2021 of approximately $0.018$ per share.
Warrants
The warrants issued by the Company are equity-classified. The fair value of the warrants was recorded as additional paid-in-capital, and no further adjustments are made.
For stock warrants paid in consideration of services rendered by non-employees, the Company recognizes consulting expense in accordance with the requirements of ASC 505. Common Stock Purchase Warrants issued in conjunction with Block Trade transactions to Aeon Capital, Inc. (“Aeon”), the Company’s placement agent under its S-3 “at-the-market” prospectus, are accounted for in accordance with ASC 815-40, with the fair value recorded to additional paid-in capital and offsetting amounts recorded as equity issuance costs on the Condensed Consolidated Statement of Stockholders’ Equity.
Effective June 13, 2019, the Company issued a Common Stock Purchase Warrant to Aeon for a Block Trade transaction. The Company issued a warrant to purchase 1,338,889 shares of common stock based upon the Block Trade transaction pursuant to the Company’s engagement agreement with Aeon dated February 22, 2018 (“Aeon Engagement Agreement”). The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these warrants to be approximately $9,000. The warrants have a cashless exercise feature.
Effective July 15, 2019, the Company issued a Common Stock Purchase Warrant to Aeon for a Block Trade transaction. The Company issued a warrant to purchase 1,944,444 shares of common stock based upon the Block Trade pursuant to the Aeon Engagement Agreement. The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these warrants to be approximately $12,000. The warrants have a cashless exercise feature.
Effective August 7, 2019, the Company issued two Common Stock Purchase Warrants to Aeon for two Block Trade transactions. The Company issued two warrants to purchase a total of 3,500,000 shares of common stock based on two Block Trades pursuant to the Aeon Engagement Agreement. The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate value of these warrants to be approximately $12,000. The warrants have a cashless exercise feature.
Effective July 10, 2020, the Company issued a Common Stock Purchase Warrant to Aeon for a Block Trade transaction. The Company issued a warrant to purchase 4,100,000 shares of common stock based upon the Block Trade pursuant to the Aeon Engagement Agreement. The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these warrants to be approximately $29,000. The warrants have a cashless exercise feature.
Effective July 18, 2020, the Company issued a Common Stock Purchase Warrant to Aeon for a Block Trade transaction. The Company issued a warrant to purchase 3,500,000 shares of common stock based upon the Block Trade pursuant to the Aeon Engagement Agreement. The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these warrants to be approximately $18,000. The warrants have a cashless exercise feature.
Effective July 19, 2020, the Company issued a Common Stock Purchase Warrant to Aeon for a Block Trade transaction. The Company issued a warrant to purchase 1,333,333 shares of common stock based upon the Block Trade pursuant to the Aeon Engagement Agreement. The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these warrants to be approximately $7,000. The warrants have a cashless exercise feature.
Effective July 27, 2020, the Company issued a Common Stock Purchase Warrant to Aeon for a Block Trade transaction. The Company issued a warrant to purchase 2,500,000 shares of common stock based upon the Block Trade pursuant to the Aeon Engagement Agreement. The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these warrants to be approximately $13,000. The warrants have a cashless exercise feature.
Effective August 3, 2020, the Company issued a Common Stock Purchase Warrant to Aeon for a Block Trade transaction. The Company issued a warrant to purchase 4,500,000 shares of common stock based upon the Block Trade pursuant to the Aeon Engagement Agreement. The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these warrants to be approximately $24,000. The warrants have a cashless exercise feature.
Effective August 6, 2020, the Company issued a Common Stock Purchase Warrant to Aeon for a Block Trade transaction. The Company issued a warrant to purchase 4,100,000 shares of common stock based upon the Block Trade pursuant to the Aeon Engagement Agreement. The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these warrants to be approximately $29,000. The warrants have a cashless exercise feature.
Effective August 6, 2020, the Company issued a Common Stock Purchase Warrant to Aeon for a Block Trade transaction. The Company issued a warrant to purchase 5,000,000 shares of common stock based upon the Block Trade pursuant to the Aeon Engagement Agreement. The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these warrants to be approximately $18,000. The warrants have a cashless exercise feature.
Effective August 7, 2020, the Company issued a Common Stock Purchase Warrant to Aeon for a Block Trade transaction. The Company issued a warrant to purchase 2,500,000 shares of common stock based upon the Block Trade pursuant to the Aeon Engagement Agreement. The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these warrants to be approximately $13,000. The warrants have a cashless exercise feature.
Effective August 7, 2020, the Company issued a Common Stock Purchase Warrant to Aeon for a Block Trade transaction. The Company issued a warrant to purchase 5,500,000 shares of common stock based upon the Block Trade pursuant to the Aeon Engagement Agreement. The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these warrants to be approximately $19,000. The warrants have a cashless exercise feature.
Effective August 10, 2020, the Company issued a Common Stock Purchase Warrant to Aeon for a Block Trade transaction. The Company issued a warrant to purchase 1,333,333 shares of common stock based upon the Block Trade pursuant to the Aeon Engagement Agreement. The Company classified these warrants as equity. The warrants have a term of five years with an exercise price of approximately $0.01 per warrant share. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these warrants to be approximately $7,000. The warrants have a cashless exercise feature.
A summary of the Company’s warrant activity and related information for the ninethree months ended JanuaryJuly 31, 2021 isare shown below:
| Warrants | Weighted Average Exercise Price | ||||||||
| Outstanding, April 30, 2020 | 47,890,155 | $ | 0.05 | ||||||
| Issued | 34,366,666 | 0.01 | |||||||
| Expired | (17,000,000 | ) | – | ||||||
| Outstanding, January 31, 2021 | 65,256,821 | 0.01 | |||||||
| Exercisable, January 31, 2021 | 65,256,821 | $ | 0.01 | ||||||
| Warrant activity | ||||||||
| Warrants | Weighted Per Share | |||||||
| Outstanding, April 30, 2021 | 2,981 | $ | 58.70 | |||||
| Issued | 0 | – | ||||||
| Exercised | 0 | – | ||||||
| Expired | 0 | – | ||||||
| Outstanding, July 31, 2021 | 2,981 | – | ||||||
| Exercisable, July 31, 2021 | 2,981 | $ | 58.70 | |||||
The following table summarizes additional information concerning warrants outstanding and exercisable at JanuaryJuly 31, 2021:
| Exercise Prices | Number of Warrant Shares Exercisable at April 30, 2020 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | |||||||||||
| $ | 0.065 | 769,231 | 0.88 | |||||||||||
| $ | 0.0575 | 869,565 | 1.17 | |||||||||||
| $ | 0.03 | 2,500,000 | 1.82 | |||||||||||
| $ | 0.026 | 1,923,077 | 2.41 | |||||||||||
| $ | 0.025 | 2,000,000 | 1.48 | |||||||||||
| $ | 0.018 | 1,388,889 | 2.33 | |||||||||||
| $ | 0.011 | 2,272,727 | 2.75 | |||||||||||
| $ | 0.01 | 13,200,000 | 4.17 | |||||||||||
| $ | 0.015 | 833,333 | 4.22 | |||||||||||
| $ | 0.009 | 3,333,333 | 3.42 | |||||||||||
| $ | 0.0075 | 15.666.666 | 4.49 | |||||||||||
| $ | 0.005 | 20,500,000 | 3.88 | |||||||||||
| 65,256,821 | 3.83 | $ | 0.01 | |||||||||||
| Schedule of warrants outstanding and exercisable | ||||||||||||
| Exercise Prices | Number of Warrant Shares Exercisable at July 31, 2021 | Weighted Average Remaining Contractual Life Years | Weighted Average Exercise Price Per Share | |||||||||
| $97.50 | 513 | |||||||||||
| $86.25 | 580 | |||||||||||
| $37.50 | 1,333 | |||||||||||
| $45.00 | 555 | |||||||||||
| 2,981 | $ | 58.70 | ||||||||||
NOTE 7 – LEGAL PROCEEDINGS
TheThere is no material litigation currently pending against the Company is not currently a party toor any pending legal proceedings, materialof its subsidiaries or otherwise. There are no legal proceedings to which any property of the Companysubsidiaries’ property is subject. To the Company’s knowledge, there is no material litigation against any of its officers or directors in their capacity as such, and no such litigation is contemplated by any governmental authorities.
NOTE 8 – RELATED PARTY TRANSACTIONS
The Company had the following related party transactions during the three and nine months ended JanuaryJuly 31, 2021 and 2020.2020, respectively.
The Company owns 14.5%14.5% of the equity in SG Austria Pte. Ltd. (“SG Austria”) and is reported on the cost method of accounting. SG Austria has two subsidiaries: (i) Austrianova Singapore Pte. Ltd. (“Austrianova”); and (ii) Austrianova Thailand CompanyCo., Ltd. The Company purchased products and services from these subsidiariescompanies in the approximate amounts of $109,500$58,000 and $183,500$64,000 in the three and nine months ended JanuaryJuly 31, 2021 respectively, and $85,000 and $87,400 for the three and nine months ended January 31, 2020, respectively.
In April 2014, the Company entered thea Consulting Agreement with Vin-de-Bona Consulting AgreementTrading Company, Pte. Ltd. (“Vin-de Bona”) pursuant to which Vin-de-Bonait agreed to provide professional consulting services to the Company. Vin-de-Bona is owned by Prof. Walter H. Günzburg (“Prof. Günzburg”) and Dr. Brian Salmons (“Dr. Salmons”), both of whom are involved in numerous aspects of the Company’s scientific endeavors relating to cancer and diabetes (Prof. Gunzburg is the Chairman and Chief Technical Officer of Austrianova, and Dr. Salmons is the Chief Executive Officer and President of Austrianova). The term of the agreement wasis for 12 months, automatically renewable for successive 12-month terms. After the initial term, either party can terminate the agreement by giving the other party 30 days’ written notice before the effective date of termination. The agreement has been automatically renewed annually. The amounts incurred for the three and nine months ended JanuaryJuly 31, 2021 and 2020 were approximately $21,000$32,000 and $65,000, respectively, and $3,000 and $18,000 for the three and nine months ended January 31, 2020,$23,000, respectively. In addition, during the ninethree months ended JanuaryJuly 31, 2021 and 2020 the Company issued 250,000 and shares of common stock, respectively, to Dr. Salmons to be a member of the Company’s Medical and Scientific Advisory Board.Salmons. The Company recorded a noncash consulting expense of approximately $3,700$ and $ relating to thisthese share issuanceissuances for the ninethree months ended JanuaryJuly 31, 2021.2021 and 2020, respectively.
During the year ended April 30, 2020, the Company issued one share of Series A Preferred Stock to the Chief Executive Officer of the Company for $1 pursuant to a Subscription Agreement. The Series A Preferred Stock is described in detail in Note 12 – Preferred Stock. The Board exercised its right to have the Company redeem the one share of Series A Preferred Stock. It is no longer issued and outstanding.
See Note 9 under Service Agreements for related party disclosures.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
The Company acquires assets still in development and enters R&D arrangements with third parties that often require milestone and royalty payments to the third-party contingent upon the occurrence of certain future events linked to the success of the asset in development. Milestone payments may be required, contingent upon the successful achievement of an important point in the development lifecycle of the pharmaceutical product (e.g., approval of the product for marketing by a regulatory agency). If required by the license agreements, the Company may have to make royalty payments based upon a percentage of the sales of the pharmaceutical productproducts if regulatory approval for marketing of the product candidate is obtained.
Office Lease
Effective September 1, 2017, the Company entered into an office lease at 23046 Avenida de la Carlota, Suite 600, Laguna Hills, California (“Leased Premises”). The term of the lease was for 24 months and expired on August 31, 2019. In May 2019, the Company entered into an additionala lease for its office space in California for a one-year lease for the Leased Premises, commencing upon the expiration of the term of the prior lease.leased premises. The term of the lease expired on August 31, 2020.
On May 28, 2020, the Company entered into an additional six-month lease of the Leased Premises,office space, commencing on September 1, 2020. The term of the new lease expiresexpired on February 28, 2021.
On December 2, 2020,May 24, 2021, the Company entered into an additional six-month lease of the Leased Premises,office space, commencing on MarchSeptember 1, 2021. This lease2021 which expires on August 31, 2021.February 28, 2022.
Rent expenses for these officesthe office for the three months ended JanuaryJuly 31, 2021 and 2020 were $5,288$3,738 and $7,152, respectively, and for the nine months ended January 31, 2021 and 2020 were $17,824 and $23,812,$7,152, respectively.
The following table summarizes the Company’s aggregate future minimum lease payments required under the operating leaseslease as of January 31, 2021.of:
| Amount | |||||
| 2021 | $ | 3,764 | |||
| 2022 | 4,956 | ||||
| Total | $ | 8,720 | |||
| Schedule of future minimum rental payments for operating leases | ||||
| Period Ending April 30, 2022 | Amount | |||
| $ | 8,673 | |||
| $ | 8,673 | |||
Compensation Agreements
The Company entered into executive compensation agreements with its three executive officers in March 2015, each of which was amended in December 2015 and March 2017. Each agreement hadhas a term of two years with automatic annual extensions thereafter unless the Company or the executive officer provides written notification of termination at least ninety days prior to the end of the term or subsequent extensions. Each agreement has been renewed. The Company also entered a compensation agreement with a Board member in April 2015 which continued in effect until amended in May 2017.
In May 2017, the Company amended the compensation agreement with the Board members and the termterms continue in effect until a member is no longer on the Board.
The Company has four independent directors. Each director receives the same compensation: (i) $12,500 in cash for each calendar quarter of service on the Board; (ii) 500,000 fully-paid,333 fully paid, non-assessable shares of the Company’s restricted common stock (“Shares”) annually; and (iii) a five-year option to purchase 500,000333 Shares annually at an exercise price equal to the fair market value of the Shares on the date of grant. The Shares and the option Shares fully vest on the date of the grants.
Service Agreements
The Company entered into several service agreements with independent and related parties pursuant to which services will be provided over a specified period-of-time related to our IND which was placed on clinical hold by the FDA and proposed clinical trial involving LAPC. The services include regulatory affairs strategy, advice and follow up work on the IND and services related to having the clinical hold lifted. They also cover a 24-month stability study, which is approximately fifty percent complete, including the container closure integrity testing of the clinical trial product syringes. The total cost is estimated to be approximately $437,000, of which the related party portion will be approximately $310,000. These amounts take into account some of the cost associated with the work and preclinical studies required to lift the FDA’s clinical hold.
NOTE 10 - INCOME TAXES
The Company had no0 income tax expense for the ninethree months ended JanuaryJuly 31, 2021 and 2020, respectively. During the ninethree months ended JanuaryJuly 31, 2021 and 2020, the Company had a net operating loss (“NOL”) for each period which generated deferred tax assets for NOL carryforwards. The Company provided valuation allowances against the net deferred tax assets including the deferred tax assets for NOL carryforwards. Valuation allowances provided for the net deferred tax asset increased by approximately $565,000$295,000 and $270,000$98,000 for the ninethree months ended JanuaryJuly 31, 2021 and 2020, respectively.
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There was no material difference between the effective tax rate and the projected blended statutory tax rate for the ninethree months ended JanuaryJuly 31, 2021 and 2020.
Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. Based on the assessment of all available evidence including, but not limited to, the Company’s limited operating history in its core business and lack of profitability, uncertainties of the commercial viability of its technology, the impact of government regulations and healthcare reform initiatives and other risks normally associated with biotechnology companies, the Company has concluded that is more-likely-than-not that these operating loss carryforwards will not be realized. Accordingly, 100% of the deferred tax valuation allowance has been recorded against these assets at JanuaryJuly 31, 2021.
The Company’s policy is to recognize any interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of the ninethree months ended JanuaryJuly 31, 2021 and 2020, the Company had no0 accrued interest or penalties related to uncertain tax positions.
See Note 10 of Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended April 30, 20202021 for additional information regarding income taxes.
Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders by the weighted average number of shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares and potentially dilutive shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would be outstanding if the potentially dilutive securities had been issued. Potential shares of common stock outstanding principally include stock options and warrants. During the nine monthsperiods ended JanuaryJuly 31, 2021 and 2020, the Company incurred losses. Accordingly, the effect of any common stock equivalent would be anti-dilutive during those periods and are not included in the calculation of diluted weighted average number of shares outstanding.
The table below sets forth the basic loss per share calculations:
| Three Months Ended January 31, | ||||||||
| 2021 | 2020 | |||||||
| Net loss | $ | (757,096 | ) | $ | (875,308 | ) | ||
| Basic weighted average number of shares outstanding | 2,337,034,318 | 1,375,499,976 | ||||||
| Diluted weighted average number of shares outstanding | 2,337,034,318 | 1,375,499,976 | ||||||
| Basic and diluted loss per share | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Earnings per share calculations | ||||||||||||||||
| Nine Months Ended January 31, | Three months Ended July 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net loss | $ | (2,591,232 | ) | $ | (3,076,505 | ) | $ | (1,025,418 | ) | $ | (883,944 | ) | ||||
| Basic weighted average number of shares outstanding | 2,108,274,833 | 1,284,500,731 | 1,591,306 | 1,119,048 | ||||||||||||
| Diluted weighted average number of shares outstanding | 2,108,274,833 | 1,284,500,731 | 1,591,306 | 1,119,048 | ||||||||||||
| Basic and diluted loss per share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.64 | ) | $ | (0.79 | ) | ||||
The table below sets forth these potentially dilutive securities:
| Schedule of potentially dilutive securities | ||||||||
| Three months Ended July 31, | ||||||||
| 2021 | 2020 | |||||||
| Excluded options | 42,333 | 45,800 | ||||||
| Excluded warrants | 2,981 | 39,549 | ||||||
| Total excluded options and warrants | 45,314 | 85,349 | ||||||
| Nine Months Ended January 31, | ||||||||
| 2021 | 2020 | |||||||
| Excluded options | 62,600,000 | 94,650,000 | ||||||
| Excluded warrants | 65,256,821 | 48,056,822 | ||||||
| Total excluded options and warrants | 127,856,821 | 142,706,822 | ||||||
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NOTE 12 – PREFERRED STOCK
The Company has authorized 10,000,000 shares of preferred stock, with a par value of $0.0001, of which one share has been designated as "Series A Preferred Stock". The one share of Series A Preferred Stock was issued on October 30, 2019 and redeemedrepurchased by the Company on December 3, 2019. As of JanuaryJuly 31, 2021, there are no shares of preferred stock issued and outstanding.
The description of the Series A Preferred Stock below is qualified in its entirety by reference to the Company’s Articles of Incorporation, as amended.
The Series A Preferred Stock has the following features:
| There is one share of preferred stock designated as Series A Preferred Stock; | ||
| The Series A Preferred Stock has a number of votes at any time equal to the number of votes then held by all other shareholders of the Company having a right to vote on any matter plus one. The Certificate of Designations that designated the terms of the Series A Preferred Stock cannot be amended without the consent of the holder of the Series A Preferred Stock; |
| • | The Company may redeem the Series A Preferred Stock at any time for a redemption price of $1.00 paid to the holder of the share of Series A Preferred Stock; and | |
| The Series A Preferred Stock has no rights of transfer, conversion, dividends, preferences upon liquidation or participation in any distributions to shareholders. |
NOTE 13 – SUBSEQUENT EVENTS
Nasdaq Listing
Our common stock began trading on the Nasdaq Capital Market on August 10, 2021, under the symbol “PMCB.” Prior to that, our common stock was quoted on the OTCQB Market under the symbol “PMCB,” and following the reverse stock split of our common stock effective as of July 12, 2021, and until August 6, 2021, the OTCQB Market Symbol for our common stock had temporarily been PMCBD.
August 2021 Underwritten Offering
On March 1,August 9, 2021, the Company received noticesentered into an underwriting agreement with H.C. Wainwright & Co. LLC (“Wainwright”) with respect to a public offering of 2,630,385 shares (“Shares”) of common stock, with a par value of $0.0001, 899,027 Pre-funded warrants (“Pre-funded Warrants”) to purchase common stock and common stock warrants (“Common Warrants”) to purchase 3,529,412 shares of common stock. The total gross proceeds of the offering before deduction of underwriting discounts, commissions and estimated offering expenses payable by the Company was approximately $15 million pursuant to the Third S-3. Each share of common stock (or pre-funded warrant in lieu thereof) was sold together with one warrant to purchase one share of common stock at an effective combined public offering price of $4.25 per share of common stock and accompanying warrant, less underwriting discounts and commissions. The Common Warrants have an exercise price of $4.25 per share, are exercisable immediately, and will expire five years following the date of issuance. The Pre-funded Warrants have an exercise price of $0.001 per share, are exercisable immediately, and do not have an expiration date. In addition, the Company granted the Underwriter a 30-day option to purchase up to 529,411 Shares and/or Common Warrants at the public offering price, less underwriting discounts and commissions, which the underwriter has partially exercised for 26Common Warrants to purchase an aggregate of up to 499,116 shares of common stock.
August 2021 Registered Direct Offering and Concurrent Private Placement
On August 19, 2021, the Company entered into a Purchase Agreement with certain institutional investors. Pursuant to the Purchase Agreement, the Company agreed to sell in a Registered Direct Offering 8,430,000 shares (“Shares”) of the Company’s Common Stock, Purchasewith a par value of $0.0001, and Pre-funded warrants to purchase up to 5,570,000 shares of Common Stock. The Pre-Funded Warrants (“Warrants”). The holderhave an exercise price of $0.001 per share and are immediately exercisable and can be exercised at any time after their original issuance until such Pre-Funded Warrants are exercised in full. Each Share was sold at an offering price of $5.00 and each Pre-Funded Warrant was sold at an offering price of $4.999 (equal to the purchase price per Share minus the exercise price of the Warrants electedPre-Funded Warrant). Pursuant to exercise the Warrants throughPurchase Agreement, in a cashless exercise in accordanceconcurrent private placement (together with the terms ofRegistered Direct Offering, the Warrants. This resulted in“August 19 Offerings”), the Company issuing 43,715,269also agreed to issue to the Purchasers unregistered warrants (“Series A Warrants”) to purchase up to 7,000,000 shares of unregistered common stock.Common Stock. Each Series A Warrant has an exercise price of $5.00 per share, is exercisable immediately, and will expire five years following the date of issuance. The Company receives gross proceeds from the August 19 Offerings, before deducting placement agent fees and other estimated offering expenses payable by the Company, of approximately $70 million.
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In addition, the Company issued to Wainwright or its designees upon closing of the August 19 Offerings warrants (“Placement Agent Warrants”) to purchase 1,050,000 shares of common stock at an exercise price of $6.25 per share (which represents 125% of the offering price per Share in the August 19 Offerings). The Placement Agent Warrants will terminate five years after the date of commencement of sales in the Offerings.
August 2021 Warrant Exercises
As of August 18, 2021, all 899,027 of the Pre-funded Warrants issued in the August 2021 underwritten offering have been exercised.
As of August 31, 2021, 2,522,387 of the Common Warrants issued in the August 2021 underwritten offering have been exercised, for aggregate gross proceeds to the Company of $10,720,145.
As of August 31, 2021, 4,620,000 of the Pre-funded Warrants issued in the August 19, 2021 Offerings have been exercised, for aggregate gross proceeds to the Company of $4,620.
Item 2. Management’s Discussion and Analysis of Financial ConditionConditions and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
This Report on Form 10-Q (“Report”) includes “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical fact are “forward-looking statements” for purposes of this Report, including any projections of earnings, revenue or other financial items, any statements regarding the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, any statements regarding expected benefits from any transactions and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by use of terminology such as “may,” “will,” “should,” “believes,” “intends,” “expects,” “plans,” “anticipates,” “estimates,” “goal,” “aim,” “potential” or “continue,” or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future, including risks relating to the continuing outbreak of COVID-19.terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Report are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. Thus, investors should refer to and carefully review information in future documents we file with the Commission.United States Securities and Exchange Commission (“Commission”). Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risk and uncertainties, including, but not limited to, the risk factors set forth in “Part I, Item 1A – Risk Factors” set forth in our Form 10-K for period ended April 30, 2020 and our Quarterly Reports on Form 10-Qthis Report and for the reasons described elsewhere in this Report. Among others, these include our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; whether the FDA lifts itsUnited States Food and Drug Administration (“FDA”) approves our Investigational New Drug Application (“IND”) after we submit a response to the FDA’s clinical hold, after we have submitted our responses to the FDA concerns related to our IND submission so that we can commence our planned clinical trial involving LAPC;locally advanced, inoperable, non-metastatic pancreatic cancer (“LAPC”); the success and timing of our preclinical studies and clinical trials; the potential that results of preclinical studies and clinical trials may indicate that any of our technologies and product candidates are unsafe or ineffective; our dependence on third parties in the conduct of our preclinical studies and clinical trials; the difficulties and expenses associated with obtaining and maintaining regulatory approval of our product candidates; the material adverse impact that COVID-19the coronavirus pandemic may have on our business, including our efforts to have the clinical hold lifted and our planned clinical trial involving LAPC, which could materially affect our operations as well as the business or operations of third parties with whom we conduct business; and whether the FDA will approve our product candidates after our clinical trials are completed, assuming the FDA allows our clinical trialtrials to proceed after submission and review of our response to the FDA’s clinical hold submission.hold. All forward- looking statements and reasons why results may differ included in this Report are made as of the date hereof, and we do not intend to update any forward-looking statements except as required by law or applicable regulations. Except where the context otherwise requires, in this Report, the “Company,” “we,” “us” and “our” refer to PharmaCyte Biotech, Inc., a Nevada corporation, and, where appropriate, its subsidiaries.
Product CandidatesOverview of Business
We are a biotechnology company focused on developing cellular therapies for cancer and diabetes based upon a proprietary cellulose-based live cell encapsulation technology known as “Cell-in-a-Box®.”.” The Cell-in-a-Box®technology is intended to be used as a platform upon which therapies for several types of cancer, including LAPC and Type 1 and insulin dependent Type 2 diabeteslocally advanced, inoperable, non-metastatic pancreatic cancer (“LAPC”) will be developed. The current generation of our product candidate is referred to as “CypCaps™”. On September 1, 2020, we submitted an Investigational New Drug Application (“IND”) to the U.S. Food and Drug Administration (“FDA”) for a planned Phase 2b clinical trial in LAPC. On October 1, 2020, the Company received notice from the FDA that it had placed the IND on clinical hold. On October 30, 2020, the FDA sent a letter to us setting forth the reasons for the clinical hold and specific guidance on what we must do to have the clinical hold lifted. To lift the clinical hold, the FDA has informed us that we need to conduct several additional preclinical studies and assays. The FDA also requested additional information regarding several topics, including DNA sequencing data, manufacturing information and product release specifications. We are in the process of conducting these studies and assays and gathering additional information to submit to the FDA. See “Our Investigational New Drug Application and the Clinical Hold” below.
The Cell-in-a-Box® encapsulation technology potentially enables genetically engineered live human cells to be used as a means to produce various biologically active molecules. The technology is intended to result in the formation of pinhead sized cellulose-based porous capsules in which genetically modified live human cells can be encapsulated and maintained. In a laboratory setting, this proprietary live cell encapsulation technology has been shown to create a micro-environment in which encapsulated cells survive and flourish. They are protected from environmental challenges, such as the sheer forces associated with bioreactors and passage through catheters and needles, which we believe enables greater growth and production. The capsules are largely composed of cellulose (cotton) and are bio inert.
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We are developing therapies for pancreatic and other solid cancerous tumors by using genetically engineered live human cells that we believe are capable of converting a cancer prodrug into its cancer-killing form, encapsulatingform. We encapsulate those cells using the Cell-in-a-Box®technology and placingplace those capsules in the body as close as possible to the tumor. In this way, we believe that when thea cancer prodrug is administered to a patient with a particular type of cancer that may be affected by the prodrug, the killing of the patient’s cancerous tumor may be optimized.
We are also examining ways to exploit the benefits of the Cell-in-a-Box® technology to develop therapies for cancer that involve prodrugs based upon certain constituents of the Cannabis plant; these constituents are of the class of compounds known as “cannabinoids”. Until the FDA allows us to commence the clinical trial involving LAPC described in our IND, which the FDA has placed a clinical hold, we will not spend any further resources developing this program.
In addition, we are developing a therapyhave been exploring ways to delay the production and accumulation of malignant ascites fluid that results from many types of abdominal cancerous tumors. Malignant ascites fluid is secreted by abdominal cancerous tumors into the abdomen after the tumors have reached a certain stage of growth. This fluid contains cancer cells that can seed and form new tumors throughout the abdomen. This fluid accumulates in the abdominal cavity, causing swelling of the abdomen, severe breathing difficulties and extreme pain. We are using our therapy for pancreatic cancer to determine if it can prevent or delay the production and accumulation of malignant ascites fluid. As with our Cannabis program, until the FDA allows us to commence the clinical trial involving LAPC described in our IND, which the FDA has placed a clinical hold, we will not spend any further resources developing this program.
We arehave also been developing a potential therapy for Type 1 diabetes and insulin-dependent Type 2 diabetes. Our product candidate for the treatment of diabetes therapy consists of encapsulated genetically modified insulin-producing human cells. The encapsulation of the cell will be done using the Cell-in-a-Box®technology. Implanting these cells in the body is designed to function as a bio-artificial pancreas for purposes of insulin production. As with
We have also been considering ways to exploit the two previous programs,benefits of the Cell-in-a-Box® technology to develop therapies for cancer that involve prodrugs based upon certain constituents of the Cannabis plant (“Cannabis Program”); these constituents are of the class of compounds known as “cannabinoids”.
Until: (i) the FDA allows us to commence a clinical trial in LAPC described in our IND for which the FDA has placed a clinical hold; and (ii) we validate our Cell-in-a-Box® encapsulation technology in our planned Phase 2b clinical trial in LAPC, we are not spending any further resources developing this program until the FDA allows us to commence the clinical trial involving LAPC described in our IND, which the FDA has placed a clinical hold.Cannabis Program.
Finally, we had licensed from Hai KangOur Investigational New Drug Application and the right to certain technology owned or controlled by Hai Kang related to COVID-19 diagnostic Kits. Our license is both for the sale of Kits as well as for the use of the technology underlying the Kits.
On November 19, 2020, we terminated the Hai Kang License Agreement.
Clinical Hold
On September 1, 2020, we submitted an IND to the FDA for a planned Phase 2b clinical trial in LAPC. Shortly thereafter, we received Information Requests from the FDA related to the IND. We timely responded to all information requests.Information Requests.
On October 1, 2020, we received notice that the FDA had placed our IND on clinical hold.
On October 30, 2020, the FDA sent a letter to us setting forth the reasons for the clinical hold and providing specific guidance on what we must do to have the clinical hold lifted.
In order to address the clinical hold, the FDA has requested that we:
| · | Provide additional sequencing data and genetic stability studies; |
| · | Conduct a stability study on the final formulated drug product as well as the cells from |
| · | Evaluate the compatibility of the delivery devices |
| · | Provide additional detailed description of the manufacturing process; |
| · | Provide additional product release specifications for |
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| · | Demonstrate comparability between the |
| · | Conduct a biocompatibility assessment using the final finished capsules after the entire drug product manufacturing process (but without cells); |
| · | Address insufficiencies in Chemistry, Manufacturing and Controls information in the cross-referenced Drug Master File; |
| · | Conduct an additional nonclinical study in a large animal (such as a pig) to assess the safety, activity and distribution of the drug |
| · | Revise the Investigators Brochure to include any additional preclinical studies conducted in response to the clinical hold and remove any statements not supported by the |
The FDA also requested that we address severalthe following issues not related to the clinical hold inas an amendment to the IND, including:IND:
| · |
| · |
| · |
| · |
| · |
| · |
| · |
Since October 31, 2020, there has been no further communication with the FDA regarding the clinical hold.
We have assembled a scientific and regulatory team of experts to address the FDA requests related to the clinical hold.requests. That team is working to complete the items requested by the FDA. We have not yet determinedare in varying stages of addressing the estimated cost orstudies and acquiring the time necessary to complete these items. The cost and time associated with completing these items will be significant.information requested by the FDA.
Thus far,The following provides a summary of the activities in which we are engaged to have successfully completed a 9-month product stability study, commenced physical parameter testing for CypCaps™ and commenced additional studies for the sequence of DNA encoding of its encapsulated cells. We have also designed the biocompatibility tests for cytotoxicity, sensitization, irritation, acute systemic toxicity, material-mediated pyrogenicity, subacute/subchronic toxicity, genotoxicity and implantation. In addition, we have begun a compression and swelling study of CypCaps™, designed a study to determine if CypCaps™ are adversely affected by contrast medium and designed a study to show the catheters used to implant CypCaps™ do not adversely impact the encapsulated cells.clinical hold lifted:
| · | We have completed a 3, 6, 9, and 12-month product stability study of our clinical trial product (CypCaps™), including container closure integrity testing for certain timepoints; the next time point in this ongoing study will be at 18 months of product stability. |
| · | We have designed and commenced various additional studies required by the FDA. These include (i) a stability study on the cells from our Master Cell Bank (“MCB”) used to make the CypCaps™, which are already at the 3-year stability timepoint; (ii) further sequence analysis of the DNA encoding of the Cyp2B1 gene in the cells in the CypCaps™; and (iii) collated existing information on the reproducibility and quality of the filling of the MCB cells into vials ready for CypCaps™ manufacturing. |
| · | We have designed and commenced biocompatibility studies such as (i) a Subchronic and Chronic Toxicity study; (ii) a Skin Sensitization study; (iii) an Acute Systematic Toxicity study; (iv) an Ames test (Genotoxicity Bacteria and Reverse Mutation tests); (v) an Intracutaneous test; (vi) a Complement Activation test; (vii) a Hemolysis test; (viii) an In Vitro Cytotoxicity test; and (ix) an In Vivo Micronucleus assay. Some of the data being generated by these studies will also be used to demonstrate comparability with the CypCaps™ that were successfully used in the two earlier German clinical trials over twenty years ago for pancreatic cancer discussed below. |
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| · | To enable the biocompatibility studies to be performed, we had Austrianova manufacture and deliver an additional 400 syringes of empty capsules. |
| · | We designed and commenced studies designed to show that CypCaps™ are not in any way adversely affected by the catheters used by interventional radiologists to deliver them, nor by the contract media used to visualize the blood vessels during implantation of the CypCaps™. |
| · | We designed and commenced studies to demonstrate how robust the CypCaps™ are during delivery and use as well as to document that the syringes used to deliver the CypCaps™ will allow delivery consistently, smoothly and safely. |
| · | With our support, Austrianova will provide additional detailed confidential information to the FDA on the manufacturing process, including information on the improvements made to the live cell encapsulated product since the last clinical trials with respect to reproducibility and safety of the CypCaps™. |
| · | We are in the process of updating our IND submission documents to include: (i) more pre-clinical data as discussed above, (ii) some additional parameters for release of the CypCaps™, (iii) a recommendation of the catheters and contrast medium to be used to deliver the CypCaps™; and (iv) an extensive discussion of the potential for cellular and humoral immune reactivity against the heterologous rat CYP2B1 protein and potential for induction of autoimmune-mediated toxicities in our study population in the LAPC . |
| · | We have designed an abbreviated study in pigs to address biocompatibility and long-term implantation of the capsules. This animal study will complement the positive data already available from the previous human clinical trials conducted by Bavarian Nordic showing the safety of CypCaps™ implantation for up to two years in humans. |
COVID-19 Potential Impact on the Financial Condition and Results of Operations
COVID-19The coronavirus SARS-Cov2 pandemic (“COVID-19”) is causing significant, industry-wide delays in clinical trials. Although we are not yet in a clinical trial, we have filed an IND with the FDA to commence a clinical trial in LAPC. While the IND has been placed on clinical hold by the FDA, we have assessed the impact of COVID-19 on our operations. Currently,As of the date of this Report, we believe the COVID-19 pandemic has had an impact upon our operations, primarily relating to delays in tasks associated with the preparation of the Company’s responses to the FDA’s clinical hold, including the requested preclinical studies and assays. There may be further delays in generating responses to the requests from the FDA related to the clinical hold. Many of these delays are due to the impact of the COVID-19 pandemic in foreign countries where we are conducting these preclinical studies and assays, including India, Europe, Singapore and Thailand. There have also been supply chain interruptions due to the COVID-19 pandemic.
Further, many clinical trials are beinghave been delayed due to COVID-19. There are numerous reasons for these delays. For example, patients have shown a reluctance to enroll or continue in a clinical trial due to fear of exposure to COVID-19 when they are in a hospital or doctor’s office. There are local, regional and state-wide orders and regulations restricting usual normal activity by people. These discourage and interfere with patient visits to a doctor’s office if the visit is not COVID-19 related. Healthcare providers and health systems are shiftinghave shifted their resources away from clinical trials toward the care of COVID-19 patients. The FDA and other healthcare providers are making product candidates for the treatment of COVID-19 a priority over product candidates unrelated to COVID-19.
As a result of COVID-19 and the datemitigation efforts to address it, we may experience additional disruptions that could adversely impact our business and clinical trial, including: (i) delays or difficulties in enrolling patients in our Phase 2b clinical trial if the FDA allows us to go forward with the trial; (ii) delays or difficulties in clinical site activation, including difficulties in recruiting clinical site investigators and clinical site personnel; (iii) delays in clinical sites receiving the supplies and materials needed to conduct our clinical trial, including interruption in global shipping that may affect the transport of this Report,our clinical trial product; (iv) changes in local regulations as part of a response to the COVID-19 pandemic has had anwhich may require us to change the ways in which our clinical trial is to be conducted, which may result in unexpected costs, or to discontinue the clinical trial altogether; (v) diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trial; (vi) interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others, or interruption of clinical trial subject visits and study procedures, the occurrence of which could affect the integrity of clinical trial data; (vii) risk that participants enrolled in our clinical trials will acquire COVID-19 while the clinical trial is ongoing, which could impact upon our operations, although we believe that impact is not material. The impact primarily relates tothe results of the clinical trial, including by increasing the number of observed adverse events; (viii) delays in tasks associatednecessary interactions with local regulators, ethics committees, and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; (ix) limitations in employee resources that would otherwise be focused on the preparationconduct of our responsesclinical trial because of sickness of employees or their families or the desire of employees to the clinical hold, including all requested preclinical studies. There may be further delays in generating responses to the requests fromavoid contact with large groups of people; (x) refusal of the FDA related to theaccept data from clinical hold.trials in affected geographies; and (xi) interruption or delays to our clinical trial activities.
As a result of the COVID-19 pandemic, commencement of our planned clinical trial to treat LAPC may be delayed beyond the lifting of the clinical hold by the FDA should that occur. Also, enrollment may be difficult for the reasons discussed above. In addition, after enrollment in the trial, if patients contract COVID-19 during their participation in the trial or are subject to isolation or shelter in place restrictions, this may cause them to drop out of our clinical trial, miss scheduled therapy appointments or follow-up visits or otherwise fail to follow the clinical trial protocol. If patients are unable to follow the clinical trial protocol or if the trial results are otherwise affected by the consequences of the COVID-19 pandemic on patient participation or actions taken to mitigate COVID-19 spread, the integrity of data from the clinical trial may be compromised or not be accepted by the FDA. This could further adversely impact or delay our clinical development program.program if the FDA allows it to proceed.
It is highly speculative in projecting the effects of COVID-19 on our proposed clinical development program and the Company generally. Moreover, the various precautionary measures taken by many governmental authorities around the world in order to limit the spread of COVID-19 has had and may continue to have an adverse effect on us generally.the global markets and global economy, including on the availability and pricing of employees, resources, materials, manufacturing and delivery efforts and other aspects of the global economy. The continuation of the COVID-19 pandemic could materially disrupt our business and operations, hamper our ability to raise additional funds or sell or securities, continue to slow down the overall economy, curtail consumer spending, interrupt our sources of supply, and make it hard to adequately staff our operations. The effects of COVID-19 quickly and dramatically change over time. Its evolution is difficult to predict, and no one is able to say with certainty when the pandemic will subside.
COVID-19 could materially affectcease to have an impact on our operations, as well as the business or operations of third parties with whom we conduct business. Our business could be adversely affected by the effects of other future health pandemics in regions where we or third parties on which we rely have significant business operations. See the risk factors set forth in “Part I, Item 1A – Risk Factors” set forth in our Form 10-K for period ended April 30, 2020 and for the risk factors described elsewhere in this Report.
Performance Indicators
Non-financial performance indicators used by management to manage and assess how the business is progressing will include, but are not limited to, the ability to: (i) acquire appropriate funding for all aspects of our operations; (ii) acquire and complete necessary contracts; (iii) complete activities for producing genetically modified human cells and having them encapsulated for our preclinical studies and the planned clinical trial in LAPC; (iv) respond to the issues raised by the FDA in its clinical hold on our IND and otherwise have regulatory work completed to enable studies and clinical trials to be submitted to regulatory agencies; (v) complete all required tests and studies on the cells and capsules we plan to use in our clinical trial in patients with LAPC; and (vi) ensure completion of the production of encapsulated cells according to current Good Manufacturing Practices cGMP regulations to use in our planned clinical trial involving LAPC.
There are numerous items required to be completed successfully in order for the FDA’s clinical hold on our IND to be lifted andensure our final product candidate is ready for use in our planned clinical trial involving LAPC. The effects of material transactions with related parties, and certain other parties to the extent necessary for such an undertaking, may have substantial effects on both the timeliness and success of our current and prospective financial position and operating results. Nonetheless, we are actively working to ensure strong ties and interactions to minimize the inherent risks regarding success. We do not believe there are factors which will cause materially different amounts to be reported than those presented in this Report. We aim to assess this regularly to provide accurate information to our shareholders.
Results of Operations
Three and nine months ended JanuaryJuly 31, 2021 compared to three and nine months ended JanuaryJuly 31, 2020
Revenue
We had no revenues for the three and nine months ended JanuaryJuly 31, 2021 and 2020.
Operating Expenses and Loss from Operations
The following table summarizes our operating expenses and loss from operations for the three and nine months ended JanuaryJuly 31, 2021 and 2020, respectively:
| Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||||||
| Three Months Ended July 31, | Three Months Ended July 31, | |||||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||
| $ | 756,847 | $ | 875,308 | $ | 2,588,038 | $ | 3,076,505 | 1,023,351 | $ | 881,676 | ||||||||||
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The total operating expenses for the three-month periodthree months ended JanuaryJuly 31, 2021 decreasedincreased by $118,461$141,675 from the three months ended JanuaryJuly 31, 2020. The decreaseincrease is attributable to a decreasean increase in general and administrative (“G&A”) expenses of $75,215,$243,594, an increase in legal and professional expense of $43,992 net of a decrease in director fees of $13,316, a decrease in legal and professional expense of $20,811$8,865, a decrease in compensation expense of $69,911, net of an increase$10,085, and a decrease in R&D expense of $60,792.$126,961. The decreaseincrease in G&A expenses were mainly attributable to reductionsincreases in consulting fees, and travel expenses.
The total operating expenses for the nine-month period ended January 31, 2021 decreased by $488,467 from the nine months ended January 31, 2020. The decrease is attributable to a decrease in G&A expenses of $696,333, a decrease in director fees of $30,471, a decrease in compensation expense of $137,819, a decrease in legal and professional expense of $16,254, net of an increase in R&D expense of $392,410. The decrease in G&A expenses were mainly attributable to reductions in consultingfiling fees and travel expenses.expenses related to the annual shareholders’ meeting.
Other expense
The following table sets forth our other expense for the three and nine months ended JanuaryJuly 31, 2021 and 2020:
| Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||||||
| Three Months Ended July 31, | Three Months Ended July 31, | |||||||||||||||||||
| 2021 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||
| $ | 249 | $ | – | $ | 3,194 | $ | – | 2,067 | $ | 2,268 | ||||||||||
Total other expense for the three months ended JanuaryJuly 31, 2021 increaseddecreased by the amount of $249$201 from the three months ended JanuaryJuly 31, 2020. The increaseincrease/decrease is attributable to the increase of interest expense in the amount of $249.
Total other expense for the nine months ended January 31, 2021 increased by the amount of $3,194 from the nine months ended January 31, 2020. The increase is attributable to the increase of interest expense in the amount of $2,006,$79, an increase in income taxes of $800 and an increasea decrease in foreign exchange losses of $388.$1,080.
Discussion of Operating, Investing and Financing Activities
The following table presents a summary of our sources and uses of cash for the ninethree months ended JanuaryJuly 31, 2021 and 2020, respectively:
| Nine Months Ended | Three Months Ended | |||||||||||||||
| January 31, 2021 | January 31, 2020 | July 31, 2021 | July 31, 2020 | |||||||||||||
| Net cash used in operating activities: | $ | (2,390,586 | ) | $ | (1,698,981 | ) | $ | (1,241,221 | ) | $ | (551,002 | ) | ||||
| Net cash provided by (used in) investing activities: | – | – | ||||||||||||||
| Net cash used in investing activities: | – | – | ||||||||||||||
| Net cash provided by financing activities: | 4,586,002 | 1,333,500 | – | 1,820,060 | ||||||||||||
| Effect of currency rate exchange | 694 | (7,530 | ) | (1,615 | ) | 2,677 | ||||||||||
| Net increase (decrease) in cash | $ | 2,196,110 | $ | (373,011 | ) | $ | (1,242,836 | ) | $ | 1,271,735 | ||||||
Operating Activities:
The net cash used in operating activities for the ninethree months ended JanuaryJuly 31, 2021 is a result of our net losses, decreasesincreases in accounts payable, accrued expenses and a decreasean increase in prepaid expenses and an increase in securities issued for services and compensation.compensation, net of a decrease in accrued expenses. The cash used in operating activities for the ninethree months ended JanuaryJuly 31, 2020 is a result of our net losses, increase in accounts payable offset by an increase in stock issued, a decrease indecreases to prepaid expenses and increases in accounts payable and accrued expenses. See Condensed Consolidated Statements of Cash Flows on page 8.7.
Investing Activities:
There were no investing activities in the ninethree months ended JanuaryJuly 31, 2021 and 2020.
Financing Activities:
The cash provided from financing activities is mainly attributable to the proceeds from the sale of our common stock net of the use of funds for payment of director and officer insurance financing.financing for the three months ended July 31, 2020.
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Liquidity and Capital Resources
As of JanuaryJuly 31, 2021, our cash totaled approximately $3,091,000,$959,000, compared to approximately $142,000$2,167,000 at JanuaryJuly 31, 2020. Working capital was approximately $2,492,000$583,000 at JanuaryJuly 31, 2021 and approximately a negative $810,000$1,116,000 at JanuaryJuly 31, 2020. The increasedecrease in cash is attributable to a higherlower beginning cash balance, an increase inno proceeds from the sale of our common stock offset by a decreaseand an increase in our operating expenses. As a result of the proceeds of the First and Second Offerings and resulting warrant exercises, as of September 13, 2021, our cash totaled approximately $88 million.
During the ninethree months ended JanuaryJuly 31, 2021, no funding was provided by investors to maintain and expand our operations and R&D. Sales of our common stock were consummated using the S-3.Third S-3 and a private placement in August 2021. During the ninethree months ended JanuaryJuly 31, 2020, we continued to acquire funds through our Second S-3 pursuant to Block Trades transactions in a program which is structured to provide up to $25 million dollars to us less certain commissions pursuant to the S-3.commissions.
As of August 13, 2020, we no longer met the eligibility requirements to use the S-3.
In Note 2 – Going Concern to our Condensed Consolidated Financial Statements set forth in this Report, we note that certain conditions raise substantial doubt about our ability to continue as a going concern. However, we believe the cash on hand, the potential sales of unregistered shares of its common stock and any public offerings of common stock in which the Company may engage in will provide sufficient capital to meet the Company’s capital requirements and to fund the Company’s operations through March 31, 2022.
Use of Estimates and Critical Accounting Policies
For a discussion regarding the Company’s use of estimates and critical accounting policies, see Note 2 “Summary of Significant Accounting Policies” of the Notes to our Condensed Consolidated Financial Statements contained in this Report.
Off-Balance Sheet Arrangements
Except as described below, we have no off-balance sheet arrangements that could have a material current effect or that are reasonably likely to have a material adverse effect on our financial condition, changes in financial conditions,condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Service Agreements
We entered into several service agreements, with both independent and related parties, pursuant to which services will be provided over a specified period-of-timethe next twelve months related to the clinical hold on our IND which was placed on clinical hold by the FDA and proposed clinical trialsubmission involving LAPC. The services include regulatory affairs strategy, advicedeveloping studies and follow up work on the IND and services relatedstrategies relating to havingclearing the clinical hold lifted.hold. They also cover a 24-month stability study, which is approximately fifty percent complete. includingincludes the container closure integrity testing, of the clinical trial product syringes. The total cost is estimated to be approximately $437,000,$250,000, of which the related party portion will be approximately $310,000. These amounts take into account some of the cost associated with the work and preclinical studies required to lift the FDA’s clinical hold.$162,000.
New Accounting Pronouncements
For a discussion of all recently adopted and recently issued but not yet adopted accounting pronouncements, see Note 2 “Summary of Significant Accounting Policies” of the Notes to our Condensed Consolidated Financial Statements contained in this Report.
Available Information
Our website is located at www.PharmaCyte.com. In addition, all our filings submitted to the Commission, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all our other reports and statements filed with the Commission are available on the Commission’s web site at www.sec.gov. Such filings are also available for download free of charge on our website. The contents of the website are not, and are not intended to be, incorporated by reference into this Report or any other report or document filed with the Commission or furnished by us, and any reference to the websites are intended to be inactive textual references only.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The information called for by Item 3 is not required for a smaller reporting company.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer, President and General Counsel, as our principal executive officer (“Chief Executive Officer”), and our Chief Financial Officer, as our principal financial officer (“Chief Financial Officer”), evaluated the effectiveness of our “disclosure controls and procedures,” as such term is defined in Rules 13a - 15(e) and 15d - 15(e)Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (“Exchange Act”).Act. Disclosure controls and procedures are designed to ensure that the information required to be disclosed in the reports that we file or submit to the Commission pursuant to the Exchange Act are recorded, processed, summarized and reported within the period specified by the Commission’s rules and forms and are accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosures. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of JanuaryJuly 31, 2021, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting.reporting, below described in Management’s Report on Internal Control over Financial Reporting.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Also, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Controls over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting as that term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected in a timely basis.
Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal controls over financial reporting as of JanuaryJuly 31, 2021 based on the criteria outlined in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and identified the following material weaknesses in internal controls over financial reporting:
| · |
| Insufficient segregation of duties of the Chief Financial Officer. We have delegated some of the duties of our Chief Financial Officer to other personnel within the Company and have added review and approval processes performed by the Chief Executive Officer. However, we have determined that we still have insufficient segregation of the duties of our Chief Financial Officer and will continue to review these procedures to determine ways to further improve them given our limited staff. | ||
| · | Insufficient information technology controls and documentation. We currently use accounting software which we have determined is inadequate to provide the level of controls required by COSO. We are in the process of initiating a review process to fully evaluate the deficiencies in our technology controls and documentation. Based upon the results of this review process, we intend to implement the required remediation measures when it is reasonable to do so. |
Because of these material weaknesses, our Chief Executive Officer and our Chief Financial Officer concluded that, as of JanuaryJuly 31, 2021, our internal controls over financial reporting were not effective based on the COSO criteria.
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We are in the process of investigating new procedures and controls for the balance of fiscal year 2021. At the appropriate time we2022. We plan to make changes to our procedures and controls that we believe are reasonable and reasonably likely to strengthen and materially affect our internal controls over financial reporting.
Prior to the remediation of these material weaknesses, there remains risk that the processes and procedures on which we currently rely will fail to be sufficiently effective, which could result in material misstatement of our financial position or results of operations and require a restatement. Because of the inherent limitations in all control systems, no evaluation of controls - even where we conclude the controls are operating effectively - can provide absolute assurance that all control issues, including instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of a person, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events; accordingly, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, our control systems, as we develop them, may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected and could be material to our financial statements.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal controlscontrol over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
The Certifications of our Principal Executive Officer and Principal Financial Officer required in accordance with Rule 13a-14(a) under the Exchange Act and Section 302 of the Sarbanes-Oxley Act of 2002 (“Certifications”) are attached to this Report. The disclosures set forth in this Item 4 contain information concerning: (i) the evaluation of our disclosure controls and procedures, and changes in internal control over financial reporting, referred to in paragraph 4 of the Certifications; and (ii) material weaknesses in the design or operation of our internal control over financial reporting, referred to in paragraph 5 of the Certifications. The Certifications should be read in conjunction with this Item 4 for a more complete understanding of the matters covered by the Certifications.
We are not currently a party to any material pending legal proceedings. There areis no material legal proceedingslitigation currently pending against us or any of our subsidiaries or to which any property of oursour or our subsidiaries’ property is subject. To our knowledge, there is no material litigation against any of our officers or directors in their capacity as such, and no such litigation is contemplated by any governmental authorities.
In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Form 10-K filed with the Commission on August 13, 2020. The information set forth therein and in this Report could materially affect our business, financial position and results of operations. There are no material changes from the risk factors set forth the 10-K, except as follows:
As a result of the clinical hold that has been placed on our INDcalled for by the FDA, it may take considerable time and expense to respond to the FDA and no assurance can be given that the FDA will remove the clinical hold in which case our business and prospects will likely suffer material adverse consequences.
On October 1, 2020, we received notice that the FDA had placed our INDItem 1A is not required for a planned Phase 2b clinical trial in LAPC on clinical hold. As part of the clinical hold process, the FDA has asked for additional information, tasks to be performed by us and new preclinical studies. It may take a considerable period of time, the length of which is unknown at this time, for us to conduct such tasks and preclinical studies and to generate and prepare the requested information. In addition, the significant expense of such work is likely to require us to raise additional capital. It is possible that the service providers that we will utilize for such work may have considerable backlogs and/or are suffering from slowdowns as a result of COVID-19 and may not be able to perform such work for an extended period of time. Even if we are able to fully respond to the FDA’s requests, they may subsequently make additional requests that we would need to fulfill prior to the lifting of the clinical hold and we may never be able to begin our clinical trial in LAPC, obtain regulatory approval or obtain commercialization for our product candidates. An inability to conduct clinical trial in LAPC as a result of the clinical hold or otherwise, would likely force us to terminate our clinical development plans. It is possible that we will be unable to fully respond to the FDA in a satisfactory manner, and as a result the clinical hold may never be lifted. If the clinical hold is not lifted or if the lifting takes an extended period of time, our business and prospects will likely suffer material adverse consequences.smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three monthsthree-months ended JanuaryJuly 31, 2021, we issued an aggregate of 6.6 million1,002 unregistered shares of common stock to three of our executive officersdirectors pursuant to their respective 2021 executive compensation agreement as disclosed in this Report.DLAs. The non-cash expense for thisthese share issuanceissuances totaled $44,220.$4,885.
During the three monthsthree-months ended JanuaryJuly 31, 2021,2020, we issued an aggregate of 9 million1,000 stock options to three of our three executive officersdirectors pursuant to their respective 2021 executive compensation agreement.DLAs. The non-cash expense for stock options totaled $14,558.
During the three-months ended July 31, 2020, we issued an aggregate of 334 unregistered shares of common stock to two independent contractors pursuant to their professional services agreements. The non-cash expense for these stock optionsshare issuances totaled $38,344.$1,620.
All such securities were issued without registration under the Securities Act of 1933, as amended, in reliance upon the exemption afforded by Section 4(a)(2) of that Act based on the limited number of investors, the sophistication of the individuals involved and the use of restrictive legends on the securities issued to prevent a public distribution of the relevant securities. No underwriters were involved in any of these issuances.Act.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosure.
Not applicable.
None.
| Exhibit No. | Description | Location |
| 101.INS | ||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB | ||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
PharmaCyte Biotech, Inc.
| By: /s/ Kenneth L. Waggoner | |
| Kenneth L. Waggoner | |
| Chief Executive Officer | |
| (Duly Authorized Officer and Principal Executive Officer) | |
| By: /s/ Carlos A. Trujillo | |
| Carlos A. Trujillo | |
| Chief Financial Officer | |
| (Duly Authorized Officer and Principal Financial and Principal Accounting Officer) |