| 1A. RESTATEMENT | PharmaCyte
Biotech, Inc. (including, where appropriate, its subsidiaries, “Company”) restated its consolidated financial statements
as of and for the year ended April 30, 2015 to reflect adjustments made to correct the treatment of the issuance of certain shares
of the Company’s common stock, $0.0001 par value per share (“common stock”), certain warrants and certain other
matters, as further described below, resulting in a material understatement to assets, a material overstatement to liabilities
and a material understatement to stockholdersÂ’ equity for the fourth quarter of the year ended April 30, 2015, as well as
corrections to disclosures relating to certain issuances of common stock and of options to purchase common stock to certain directors
and officers of the Company. The nature and impact of these adjustments are more particularly described below. See also
Note 16, Quarterly Financial Information (Unaudited) The adjustments
described above relate to the CompanyÂ’s issuance of certain warrants to purchase common stock with a cashless exercise feature
(“cashless warrants”) in connection with its entry into a marketing and consulting agreement (“Consultant Agreement”)
with a consultant on March 23, 2015. The Company accounted for the cashless warrants as a derivative liability, as disclosed
in our Annual Report on Form 10-K for the year ended April 30, 2015, which was filed with the Securities and Exchange Commission
(“Commission”) on July 29, 2015 (the “Original Filing”). However, upon further analysis, the Company determined
that the cashless warrants should have been accounted for as equity in accordance with generally accepted accounting principles
in the United States of America (“U.S. GAAP”) in the Original Filing. Additionally, the Company determined that
the Consultant Agreement, issuance of shares of common stock to the consultant pursuant to the Consultant Agreement and the issuance
of certain warrants to purchase common stock with a cash exercise feature (“cash warrants”) and the cashless warrants
should have been recorded as a prepaid asset and amortized over the term of the Consultant Agreement in accordance with GAAP in
the Original Filing. In the Original Filing, the Company recorded a derivative liability of $492,049 on its consolidated balance
sheets as of and for the year ended April 30, 2015. As a result of the CompanyÂ’s determination that the cashless warrants
should be accounted for as equity, and that the Consultant Agreement, cash warrants and cashless warrants should be accounted
for as a prepaid asset, the Company decreased general and administrative expenses by the amount of $434,754 on its consolidated
statements of operations for the year ended April 30, 2015, and increased prepaid assets by the amount of $1,349,024, net of amortization,
and decreased by the amount of $492,049 total current liabilities on its consolidated balance sheet as of April 30, 2015, as set
forth in the Restated Financial Statements. As a result of these adjustments, the Company also recorded a decrease to its
accumulated deficit in the amount of $926,803, an increase to additional paid in capital in the amount of $914,270 and an increase
to total stockholdersÂ’ equity in the amount of $1,841,073. As set forth
in this Note 1A and Note 9 to the Restated Financial Statements, the Company accounted for the expense of the cashless warrants
for the year ended April 30, 2015 using the Black-Scholes option pricing model, which requires the exercise of significant judgment
on the part of management and estimates for the inputs used in the model. The following reflects the weighted-average assumptions
used for purposes of the model: risk-free interest rate of 1.41%; expected lives of the warrants of 5 years; expected volatility
of 144%; no expected dividend yield; and the number of warrants of 10,000,000. 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. The expected lives are based on the remaining contractual lives
of the related cashless warrants at the valuation date. The CompanyÂ’s computation of expected volatility is based
on the historical daily volatility of its publicly traded common stock. As set forth
in the Restated Financial Statements, the effect of the timing of the recognition of the cashless warrant expense and the reclassification
of the Consultant Agreement, cash warrants and cashless warrants to prepaid assets resulted in a decrease of $926,803 to reported
net loss. In addition, as set forth in the Restated Financial Statements, the correction to the treatment of the cashless
warrant expense also resulted in an increase in consolidated other income in the net amount of $492,049 and an initial increase
to consolidated general and administrative expenses of $914,270, reduced by the reclassification of $1,349,024 to prepaid expense,
for a net reduction to consolidated general and administrative expenses in the amount of $434,754 in the CompanyÂ’s consolidated
statements of operations for the year ended for the year ended April 30, 2015. As set forth
in the Restated Financial Statements, with respect to the consolidated statement of cash flows for the year ended April 30, 2015,
the adjustments described above resulted in a decrease in net loss of $926,803, an increase in stock based compensation for warrants
in the amount of $914,270, a reduction in loss on derivative liability in the amount of $492,049 and an increase in current assets
(prepaid expenses) in the amount of $1,349,024. Further,
the Company also restated two disclosures in Note 7, Common Stock Transactions The impact
of adjustments to the CompanyÂ’s consolidated balance sheets, consolidated statements of operations, consolidated statements
of comprehensive loss, consolidated statements of stockholdersÂ’ equity (deficiency) and consolidated statements of cash
flows as of and for the fiscal year ended April 30, 2015 is as follows:
April 30, 2015
As Previously Reported Adjustment As Restated
Selected Consolidated Balance Sheet Accounts
Prepaid expenses and other current
assets $ 119,257 $ 1,349,024 $ 1,468,281
Total current assets $ 2,818,994 $ 1,349,024 $ 4,168,018
Total assets $ 7,948,468 $ 1,349,024 $ 9,297,492
Derivative liability $ 492,049 $ (492,049 ) $ –
Total current liabilities $ 2,012,415 $ (492,049 ) $ 1,520,366
Total liabilities $ 2,012,415 $ (492,049 ) $ 1,520,366
Additional paid in capital $ 85,415,954 $ 914,270 $ 86,330,224
Accumulated deficit $ (79,554,636 ) $ 926,803 $ (78,627,833 )
Total stockholders' equity $ 5,936,053 $ 1,841,073 $ 7,777,126
Total liabilities and stockholders' equity $ 7,948,468 $ 1,349,024 $ 9,297,492
Year Ended April
30, 2015
As Previously Adjustment As Restated
Consolidated Statement of Operation
Total revenue $ – $ – $ –
Cost of revenue – – –
Gross margin – – –
Sales and marketing expense 230,500 – 230,500
Research and development costs 3,476,912 – 3,476,912
Compensation expense 6,489,334 – 6,489,334
Director fee 18,000 – 18,000
Legal and professional 884,346 – 884,346
General and administrative 2,596,397 (434,754 ) 2,161,643
Loss from operations (13,695,489 ) 434,754 (13,260,735 )
Unrealized loss on change
in derivative (492,049 ) 492,049 –
Gain on settlements 3,337,967 – 3,337,967
Interest expense, net (4,938 ) – (4,938 )
Total other income (expense),
net 2,840,980 492,049 3,333,029
Net loss $ (10,854,509 ) $ 926,803 $ (9,927,706 )
Basic and diluted loss
per share $ (0.02 ) $ 0.01 $ (0.01 )
Year Ended April
30, 2015
As Previously Adjustment As Restated
Consolidated Statement of Comprehensive Loss
Net loss $ (10,854,509 ) $ 926,803 $ (9,927,706 )
Foreign currency translation
adjustment 1,462 – 1,462
Comprehensive loss $ (10,853,047 ) $ 926,803 $ (9,926,244 )
Year Ended April
30, 2015
As Previously Reported Adjustment As Restated
Consolidated Stockholders' Equity
Balance, April 30, 2014 $ 8,942,384 $ $ 8,942,384
Shares issued for compensation 735,188 735,188
Shares issued for services 1,269,707 1,269,707
Shares issued for cash 3,719,832 3,719,832
Conversion of warrants 66,001 66,001
Recovery of shares issued for compensation (3,337,967 ) (3,337,967 )
Recovery of shares issued for consulting expense (74,436 ) (74,436 )
Stock options granted 5,236,901 5,236,901
Warrants granted 231,490 914,270 1,145,760
Foreign currency translation adjustment 1,462 1,462
Net loss (10,854,509 ) 926,803 (11,276,730 )
Balance, April 30, 2015 $ 5,936,053 $ 1,841,073 $ 7,777,126
Year Ended April
30, 2015
As Previously Reported Adjustment As Restated
Consolidated Statement of Cash Flows
Operating activities
Net loss $ (10,854,509 ) $ 926,803 $ (9,927,706 )
Stock issued for services 1,269,707 (443,684 ) 826,023
Stock issued for compensation 735,189 735,189
Stock based compensation - options 5,236,901 5,236,901
Stock based compensation - warrants 231,490 8,930 240,420
Gain on settlements (3,337,967 ) (3,337,967 )
Gain on recovery of stock issued for services (74,436 ) (74,436 )
Loss on derivative liability 492,049 (492,049 ) –
Decrease in prepaid expenses and current assets 450,849 450,849
Increase in accounts payable 308,654 308,654
Decrease in accrued expenses (18,096 ) (18,096 )
Increase in license agreement
obligation 1,000,000 1,000,000
Net cash used in operating
activities (4,560,169 ) – (4,560,169 )
Investing activities
Net cash from investing
activities – – –
Financing activities
Proceeds from sale of common stock 3,785,833 – 3,785,833
Repayment of debt, related
party (143,859 ) – (143,859 )
Net cash provided by financing
activities 3,641,974 – 3,641,974
Effect of currency rate exchange on cash 1,462 – 1,462
Net decrease in cash (916,733 ) – (916,733 )
Cash at beginning of year 3,616,470 – 3,616,470
Cash at end of year $ 2,699,737 $ – $ 2,699,737 |
