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 JulyJanuary 31, 20202021
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 333-68008
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, CA 92653
(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 | ||
| N/A | N/A | N/A | ||
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. Yes x 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). Yes x 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 o | Accelerated filer o | |
| Non-accelerated filer x | Smaller reporting company x | |
| Emerging growth company o |
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 No x
As of September 11, 2020,March 12, 2021, the registrant had 2,333,810,4052,385,125,674 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 JULYJANUARY 31, 20202021
| 2 |
PART I – FINANCIAL INFORMATION
PHARMACYTE BIOTECH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| January 31, 2021 | April 30, 2020 | |||||||||||||||
| July 31, 2020 | April 30, 2020 | |||||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash | $ | 2,166,596 | $ | 894,861 | $ | 3,090,971 | $ | 894,861 | ||||||||
| Prepaid expenses and other current assets | 136,537 | 142,785 | 41,710 | 142,785 | ||||||||||||
| Total current assets | 2,303,133 | 1,037,646 | 3,132,681 | 1,037,646 | ||||||||||||
| Other assets: | ||||||||||||||||
| Intangibles | 3,549,427 | 3,549,427 | 3,549,427 | 3,549,427 | ||||||||||||
| Investment in SG Austria | 1,572,193 | 1,572,193 | 1,572,193 | 1,572,193 | ||||||||||||
| Other assets | 7,372 | 7,372 | 7,372 | 7,372 | ||||||||||||
| Total other assets | 5,128,992 | 5,128,992 | 5,128,992 | 5,128,992 | ||||||||||||
| Total Assets | $ | 7,432,125 | $ | 6,166,638 | $ | 8,261,673 | $ | 6,166,638 | ||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Accounts payable | $ | 384,832 | $ | 185,842 | $ | 79,159 | $ | 185,842 | ||||||||
| Accrued expenses | 726,818 | 816,638 | 494,341 | 816,638 | ||||||||||||
| Current portion of Small Business Administration – Paycheck Protection Program loan | 41,498 | 28,918 | 66,753 | 28,918 | ||||||||||||
| Total current liabilities | 1,153,148 | 1,031,398 | 640,253 | 1,031,398 | ||||||||||||
| Long-term liabilities, less current portion: | ||||||||||||||||
| Small Business Administration – Paycheck Protection Program loan | 33,702 | 46,282 | 8,447 | 46,282 | ||||||||||||
| Total Liabilities | 1,186,850 | 1,077,680 | 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; 1,875,143,738 and 1,638,637,839 shares issued and outstanding as of July 31, 2020 and April 30, 2020, respectively | 187,515 | 163,864 | ||||||||||||||
| 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 | 110,818,995 | 108,805,062 | 113,849,337 | 108,805,062 | ||||||||||||
| Accumulated deficit | (104,742,203 | ) | (103,858,259 | ) | (106,449,491 | ) | (103,858,259 | ) | ||||||||
| Accumulated other comprehensive loss | (19,032 | ) | (21,709 | ) | (21,015 | ) | (21,709 | ) | ||||||||
| Total stockholders' equity | 6,245,275 | 5,088,958 | 7,612,973 | 5,088,958 | ||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 7,432,125 | $ | 6,166,638 | $ | 8,261,673 | $ | 6,166,638 | ||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
| 3 |
PHARMACYTE BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended July 31, | ||||||||
| 2020 | 2019 | |||||||
| Revenue | $ | – | $ | – | ||||
| Operating expenses: | ||||||||
| Research and development costs | 270,574 | 72,330 | ||||||
| Compensation expense | 278,970 | 453,194 | ||||||
| Director fees | 72,024 | 75,642 | ||||||
| Legal and professional | 141,756 | 110,157 | ||||||
| General and administrative | 118,352 | 422,752 | ||||||
| Total operating expenses | 881,676 | 1,134,075 | ||||||
| Loss from operations | (881,676 | ) | (1,134,075 | ) | ||||
| Other expense: | ||||||||
| Interest expense | (388 | ) | – | |||||
| Other expense | (1,880 | ) | – | |||||
| Total other expenses | (2,268 | ) | – | |||||
| Net loss | $ | (883,944 | ) | $ | (1,134,075 | ) | ||
| Basic and diluted loss per share | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted average shares outstanding basic and diluted | 1,678,572,167 | 1,210,305,834 | ||||||
| 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 July 31, | ||||||||
| 2020 | 2019 | |||||||
| Net loss | $ | (883,944 | ) | $ | (1,134,075 | ) | ||
| Other comprehensive income (loss): | ||||||||
| Foreign currency translation adjustment | 2,677 | (6,862 | ) | |||||
| Other comprehensive income (loss) | 2,677 | (6,862 | ) | |||||
| Comprehensive loss | $ | (881,267 | ) | $ | (1,140,937 | ) | ||
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net Loss | $ | (757,096 | ) | $ | (875,308 | ) | $ | (2,591,232 | ) | $ | (3,076,505 | ) | ||||
| Other comprehensive income (loss): | ||||||||||||||||
| Foreign currency translation | 869 | (602 | ) | 694 | (7,530 | ) | ||||||||||
| Other comprehensive income (loss) | 869 | (602 | ) | 694 | (7,530 | ) | ||||||||||
| Comprehensive loss | $ | (756,227 | ) | $ | (875,910 | ) | $ | (2,590,538 | ) | $ | (3,084,035 | ) | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
| 5 |
PHARMACYTE BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREENINE MONTHS ENDED JULYJANUARY 31, 20202021 AND 2019 2020
(UNAUDITED)
| Common stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||
| 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 | |||||||||||
| Stock issued for compensation | – | – | 67,320 | – | – | 67,320 | ||||||||||||||||||
| Stock issued for services | 2,500,000 | 250 | 40,300 | – | – | 40,550 | ||||||||||||||||||
| Stock issued for cash, net of issuance costs of $194,150 | 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 | |||||||||||
| Balance, April 30, 2019 | 1,186,004,505 | $ | 118,600 | $ | 104,966,158 | $ | (100,031,371 | ) | $ | (13,842 | ) | $ | 5,039,545 | |||||||||||
| Stock issued for compensation | – | – | 104,726 | – | – | 104,726 | ||||||||||||||||||
| Stock issued for services | 5,500,000 | 550 | 311,266 | – | – | 311,816 | ||||||||||||||||||
| Stock issued for cash, net of issuance costs of $42,000 | 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 | |||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
| 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 | ||||||||||||||||
| 6 |
PHARMACYTE BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWSSTOCKHOLDERS' EQUITY (continued)
NINE MONTHS ENDED JANUARY 31, 2021 AND 2020
(UNAUDITED)
| Three Months Ended July 31, | ||||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (883,944 | ) | $ | (1,134,075 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock issued for services | 40,550 | 311,816 | ||||||
| Stock issued for compensation | 67,320 | 104,726 | ||||||
| Stock-based compensation – options | 72,317 | 126,325 | ||||||
| Change in assets and liabilities: | ||||||||
| (Increase) decrease in prepaid expenses and other current assets | 6,248 | (11,137 | ) | |||||
| Increase (decrease) in accounts payable | 198,990 | (54,337 | ) | |||||
| Decrease in accrued expenses | (52,483 | ) | (106,458 | ) | ||||
| Net cash used in operating activities | (551,002 | ) | (763,140 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Net cash provided by (used in) investing activities | – | – | ||||||
| Cash flows from financing activities: | ||||||||
| Use of funds for payment of insurance financing loan | (37,337 | ) | – | |||||
| Proceeds from sale of common stock, net of issuance costs | 1,857,397 | 582,500 | ||||||
| Net cash provided by financing activities | 1,820,060 | 582,500 | ||||||
| Effect of currency rate exchange on cash | 2,677 | (6,862 | ) | |||||
| Net increase (decrease) in cash | 1,271,735 | (187,502 | ) | |||||
| Cash at beginning of the period | 894,861 | 515,253 | ||||||
| Cash at end of the period | $ | 2,166,596 | $ | 327,751 | ||||
Supplemental disclosure of cash flows information: | ||||||||
| Cash paid during the periods for income taxes | $ | 800 | $ | 800 | ||||
| Cash paid during the periods for interest | $ | 388 | $ | – | ||||
| Supplemental schedule of noncash investing and financing activity: | ||||||||
| Issuance costs for shares issued | $ | – | $ | 24,500 | ||||
| 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 | ||||||||||||||||
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.
| 8 |
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, pancreatic cancer (“LAPC”), and Type 1 and insulin dependent Type 2 diabetes will be developed.
The Company is developing therapies for pancreatic and other solid cancerous tumors by using genetically engineered live human cells that it believes are capable of converting a cancer prodrug into its cancer-killing form, encapsulating those cells using the Cell-in-a-Box® technology and placing those capsules in the body as close as possible to the tumor. In this way, theThe Company believes that when the 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 tumor may be optimized. 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 September 4, 2020, the Company received an Information Request from the FDA. The Company responded to the FDA’s Information Request on September 11, 2020. See Note 13 “Subsequent Events”.
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 FDAU.S. Food and Drug Administration (“FDA”) allows the Company to commence the clinical trial involving LAPC described in the Company’s recently filed IND,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 therapy 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 recently filed 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 developing a therapy for Type 1 diabetes and insulin-dependent Type 2 diabetes. The Company’s diabetes therapy consists of encapsulated genetically modified human liver cells and insulin-producing stem cells. The encapsulation for each type of 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 the two previous programs, the Company is not spending any further resources developing this program until the FDA allows itthe Company to commence the clinical trial involving LAPC described in its recently filed IND. Additionally, work atIND for which the University of Technology, Sydney (“UTS”) on the Melligen cells continues. Melligen cells are human liver cells that have been genetically engineered to produce, store and release insulin in response to the levels of blood sugar in the body.FDA has placed a clinical hold.
Finally, the Company hashad 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.
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.
The Company’s license is both for the sale of Kits as well as for the use of the technology underlying the Kits. Pursuant to the Hai Kang License Agreement,On October 1, 2020, the Company may directly (or throughreceived notice that the FDA had placed the IND on clinical hold.
On October 30, 2020, the FDA sent a third party) conduct research, use, develop, market, sell, distribute, import and export Kits and utilize their underlying technology for human and veterinary uses in North America, the United Kingdom and certain other European sites. A Kit is defined as any existing Kit of Hai Kang or any future Kit derived from Hai Kang’s Kits. The Kits will be manufactured and suppliedletter to the Company by Hai Kang. With respectsetting 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 Hai Kang License Agreementclinical 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 products, includingto the Kits, we mayclinical 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 be able to (i) develop a related product candidate with our current resources, on a timely basis, or at all; (ii) obtainadversely impact the necessary regulatory authorizations or approvals for such a product candidate orencapsulated cells.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations-Clinical Hold for a Kit; (iii) commercialize any such product candidate or Kit; or (iv) obtain reimbursement for such a product candidate or Kit infurther discussion of the U.S. and elsewhere. It is uncertain that any such product candidates or Kit will comply with U.S. regulatory requirements or that any health care facility or provider will be willing or able to use such product candidates or Kits.clinical hold.
Impact of the COVID-19 Pandemic on the Company’s Operations
The coronavirus SARS-Cov2 pandemic (“COVID-19”) pandemic 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 and is awaiting a response fromLAPC. While the FDA.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 Report 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 recently submitted INDresponses to treat LAPC.the clinical hold, including all requested preclinical studies. There may be further delays in generating responses required byto the Company to comments by or requests from the FDA related to the IND.clinical hold.
As a result of the COVID-19 pandemic, commencement of the Company’s planned clinical trial to treat LAPC may be delayed.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.
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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 and life as we knew it before the pandemic will return to normal.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.
Commencing in May 2011, the Company entered into a series of agreements and amendments with SG Austria to acquire certain assets from SG Austria as well as an exclusive, worldwide license to use, with a right to sublicense, the Cell-in-a-Box® technology and trademark for the development of therapies for cancer. (“SG Austria APA”)
In June 2013, the Company and SG Austria entered a Third Addendum to the SG Austria APA (“Third Addendum”). The Third Addendum materially changed the transaction contemplated by the SG Austria APA. Under the Third Addendum, the Company acquired 100% of the equity interests in Bio Blue Bird and received a 14.5% equity interest in SG Austria. The Company paid: (i) $500,000 to retire all outstanding debt of Bio Blue Bird; and (ii) $1.0 million to SG Austria. The Company also paid SG Austria $1,572,193 in exchange for a 14.5% equity interest of SG Austria. The transaction required SG Austria to return to the Company the 100,000,000 shares of our common stock held by SG Austria and for the Company to return to SG Austria the 100,000 shares of common stock of Austrianova which the Company held.
Effective as of the same date the Company entered into the Third Addendum, the Company and SG Austria also entered into a Clarification Agreement to the Third Addendum (“Clarification Agreement”) to clarify and include certain language that was inadvertently left out of the Third Addendum. Among other things, the Clarification Agreement confirmed that the Third Addendum granted the Company an exclusive, worldwide license to use, with a right to sublicense, the Cell-in-a-Box® Trademark and its Associated Technology for the development of therapies for cancer.
With respect to Bio Blue Bird, Bavarian Nordic A/S (“Bavarian Nordic”) and GSF-Forschungszentrum für Umwelt u. Gesundheit GmbH (collectively, “Bavarian Nordic/GSF”) and Bio Blue Bird entered into a non-exclusive License Agreement (“Bavarian Nordic/GSF License Agreement”) in July 2005, whereby Bio Blue Bird was granted a non-exclusive license to further develop, make, have made (including services under contract for Bio Blue Bird or a sub-licensee, by Contract Manufacturing Organizations, Contract Research Organizations, Consultants, Logistics Companies or others), obtain marketing approval, sell and offer for sale the clinical data generated from the pancreatic cancer clinical trials that used the cells and capsules developed by Bavarian Nordic/GSF (then known as “CapCells”) or otherwise use the licensed patent rights related thereto in the countries in which patents had been granted. Bio Blue Bird was required to pay Bavarian Nordic a royalty of 3% of the net sales value of each licensed product sold by Bio Blue Bird and/or its Affiliates and/or its sub-licensees to a buyer. The term of the Bavarian Nordic/GSF License Agreement continued on a country by country basis until the expiration of the last valid claim of the licensed patent rights.
Bavarian Nordic/GSF and Bio Blue Bird amended the Bavarian Nordic License Agreement in December 2006 (“First Amendment to Bavarian Nordic/GSF License Agreement”) to reflect that: (i) the license granted was exclusive; (ii) a royalty rate increased from 3% to 4.5%; (iii) Bio Blue Bird assumed the patent prosecution expenses for the existing patents; and (iv) to make clear that the license will survive as a license granted by one of the licensors if the other licensor rejects performance under the Bavarian Nordic License Agreement due to any actions or declarations of insolvency.
In June 2013, the Company acquired from Austrianova an exclusive, worldwide license to use the Cell-in-a-Box® Trademark and its Associated Technology for the development of a therapy for Type 1 and insulin-dependent Type 2 diabetes (“Diabetes Licensing Agreement”). This allows the Company to develop a therapy to treat diabetes through encapsulation of a human cell line that has been genetically modified to produce, store and release insulin in response to the levels of blood sugar in the human body.
In October 2014, the Company entered into an exclusive, worldwide license agreement with the UTS (“Melligen Cell License Agreement”) in Australia to use insulin-producing genetically engineered human liver cells developed by UTS to treat Type 1 diabetes and insulin-dependent Type 2 diabetes. These cells, named “Melligen”, were tested by UTS in mice and shown to produce insulin in direct proportion to the amount of glucose in their surroundings. In those studies, when Melligen cells were transplanted into immunosuppressed diabetic mice, the blood glucose levels of the mice became normal. In other words, the Melligen cells reportedly reversed the diabetic condition.
In December 2014, the Company acquired from Austrianova an exclusive, worldwide license to use the Cell-in-a-Box® Trademark and its Associated Technology in combination with genetically modified non-stem cell lines which are designed to activate cannabinoid prodrug molecules for development of therapies for diseases and their related symptoms (“Cannabis Licensing Agreement”). This allows the Company to develop a therapy to treat cancer and other diseases and symptoms through encapsulation of genetically modified cells designed to convert cannabinoids to their active form using the Cell-in-a-Box® trademark and its associated technologies.
In July 2016, the Company entered into a Binding Memorandum of Understanding with Austrianova (“Austrianova MOU”). Pursuant to the Austrianova MOU, Austrianova will actively work with the Company to seek an investment partner or partners who will finance clinical trials and further develop products for the Company’s therapy for cancer, in exchange for which the Company, Austrianova and any future investment partner will each receive a portion of the net revenue from the sale of cancer products.
In October 2016, Bavarian Nordic/GSF and Bio Blue Bird further amended the Bavarian Nordic License Agreement (“Second Amendment to Bavarian Nordic/GSF License Agreement”) in order to: (i) include the right to import in the scope of the license; (ii) reflect ownership and notification of improvements; (iii) clarify which provisions survive expiration or termination of the Bavarian Nordic License Agreement; (iv) provide rights to Bio Blue Bird to the clinical data after the expiration of the licensed patent rights; and (v) change the notice address and recipients of Bio Blue Bird.
In May 2018, the Company entered into a series of binding term sheet amendments (“Binding Term Sheet Amendments”). The Binding Term Sheet Amendments provide that the Company’s obligation to make milestone payments to Austrianova is eliminated in their entirety under the: (i) Cannabis License Agreement; and (ii) the Diabetes License Agreement, as amended. The Binding Term Sheet Amendments also provide that the Company’s obligation to make milestone payments to SG Austria for therapies for cancer to be eliminated in their entirety. In addition, the Binding Term Sheet Amendments also provides that the scope of the Diabetes License Agreement is expanded to include all cell types and cell lines of any kind or description now or later identified, including, but not limited to, primary cells, mortal cells, immortal cells and stem cells at all stages of differentiation and from any source specifically designed to produce insulin for the treatment of diabetes.
In addition, one of the Binding Term Sheet Amendments provides that the Company will have a 5-year right of first refusal from August 30, 2017 in the event that Austrianova chooses to sell, transfer or assign at any time during this period the Cell-in-a-Box® Trademark and Associated Technologies , intellectual property, trade secrets and know-how, which includes the right to purchase any manufacturing facility used for the Cell-in-a-Box® encapsulation process and a non-exclusive license to use the special cellulose sulfate utilized with the Cell-in-a-Box® encapsulation process (collectively, “Associated Technologies”); provided, however, that the Associated Technologies subject to the right of first refusal do not include Bac-in-a-Box®. Additionally, for a period of one year from August 30, 2017 one of the Binding Term Sheet Amendments provides that Austrianova will not solicit, negotiate or entertain any inquiry regarding the potential acquisition of the Cell-in-a-Box® and its Associated Technologies.
The Binding Term Sheet Amendments further provide that: (i) the royalty payments on gross sales as specified in the SG Austria APA, the Cannabis License Agreement and the Diabetes License Agreement are changed to 4%; and (ii) the royalty payments on amounts received by the Company from sublicensees on sublicensees’ gross sales under the same agreements are changed to 20% of the amount received from the sublicensees, provided, however, that in the event the amounts received by the Company from sublicensees is 4% or less of sublicensees’ gross sales, Austrianova will receive 50% of what the Company receives (up to 2%) and then additionally 20% of any amount the Company receives over that 4%.
One of the Binding Term Sheet Amendments requires that the Company pay $900,000 to Austrianova ratably over a nine-month period in the amount of two $50,000 payments each month during the nine-month period on the days of the month to be agreed upon between the parties, with a cure period of 20 calendar days after receipt by the Company of written notice from Austrianova that the Company has failed to pay timely a monthly payment. As of April 30, 2020, the $900,000 amount has been paid in full. The Binding Term Sheet Amendments also provide that Austrianova receives 50% of any other financial and non-financial consideration received from the Company’s sublicensees of the Cell-in-a-Box® technology.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The Condensed Consolidated 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;Bird AG; (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”) and the rules and regulations of the United States Securities and Exchange Commission (“Commission”). Intercompany balances and transactions are eliminated. The Company’s 14.5% investment in SG Austria is presented on the cost method of accounting.
Use of Estimates
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; 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.
Intangible Assets
The Financial Accounting Standards Board ("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 and the diabetes license for $2,000,000 for an aggregate total of $3,549,427.
These intangible assets have an indefinite life; therefore, they are not amortizable.
The Company concluded that there was no impairment of the carrying value of the intangibles for the threenine months ended JulyJanuary 31, 20202021 and 2019.2020.
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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 threenine months ended JulyJanuary 31, 20202021 and 2019.2020.
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 notmore-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 statementsCondensed Consolidated Statements 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 authority 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 “Coronavirus Aid, Relief and Economic Security ("CARES") Act” to provide certain relief as a result of the 2019 Coronavirus pandemic.COVID-19. 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.
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 research and developmentR&D 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 JulyJanuary 31, 2021 were $174,088 and $595,976, respectively, and for the three and nine months ended January 31, 2020 were $113,296 and 2019 were $270,574 and $72,330,$203,566, respectively.
Stock-Based Compensation
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 $1,887,000$2,810,000 and $618,000 at JulyJanuary 31, 20202021 and April 30, 2020, respectively. The Company has not experienced any losses in such accounts. Management believes it is not exposed to any significant credit risk on cash.
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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-end exchange rates, while revenue and expenses are translated at average exchange rates prevailing during the period. Adjustments for foreign currency translation fluctuations are excluded from net loss and are included in other comprehensive income.income (loss). Gains and losses on short-term intercompany foreign currency transactions are recognized as incurred.
Going Concern
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 JulyJanuary 31, 2020,2021, the Company has an accumulated deficit of $104,742,203$106,449,491 and incurred a net loss for threethe nine months ended JulyJanuary 31, 20202021 of $883,944.$2,591,232. 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 recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
For the threenine months ended JulyJanuary 31, 2020,2021, funding was provided by investors to maintain and expand the Company’s operations. Sales of the Company’s common stock were made under an operativea Form S-3 (“S-3”) allowing for offerings of up to $50 million dollars in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act or transactions structured as a public offering of a distinct block or blocks of the shares of the Company’s common stock.dollars. During the threenine months ended JulyJanuary 31, 2020,2021, the Company continued to acquireraised funds through the Company’s S-3 pursuant to which the placement agent sells shares of common stock “at-the-market” as defined in Rule 415 under the Securities Act of 1933, as amended (“Securities Act”), 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 structured to provide up to $25 million to the Company less certain commissions pursuant to the S-3. From May 1, 2020 through July 31, 2020 the Company raised capital of approximately $1.9 million in Block Trade transactions and “at-the-market” transactions.
From August 1, 2020 through August 12, 2020, the Company raised capital of approximately $2.8 million in Block Trades net of commissions.
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, 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 September 30, 2021.March 31, 2022.
Recent Accounting Pronouncements
ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 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" 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. As part of the Company’s continuing assessment of the adequacy of AU 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"), 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 process of evaluating the impact of adopting ASU 2019-12 in 2021, but it does not expect it to have a material impact on the Company’s Condensed Consolidated Financial Statements.
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NOTE 3 – ACCRUED EXPENSES
Accrued expenses at JulyJanuary 31, 20202021 and April 30, 2020 are summarized below:
| July 31, 2020 | April 30, 2020 | January 31, 2021 | April 30, 2020 | |||||||||||||
| Payroll related costs | $ | 443,906 | $ | 435,577 | $ | 484,462 | $ | 435,577 | ||||||||
| Director and Officer insurance financing | 75,908 | 113,245 | – | 113,245 | ||||||||||||
| Other | 207,004 | 267,816 | 9,879 | 267,816 | ||||||||||||
| Total | $ | 726,818 | $ | 816,638 | $ | 494,341 | $ | 816,638 | ||||||||
The Company financed the Director and Officer insurance policy. The term of the policy is from March 8, 2020 through March 8, 2021. The financing agreement has an interest rate of 4.25% per annum and requires eightten monthly payments of $12,806. The unpaid balances as of JulyJanuary 31, 20202021 and April 30, 2020 are $75,908$0 and $113,245, respectively, which are included in accrued expenses.
NOTE 4 – SMALL BUSINESS ADMINISTRATION – PAYCHECK PROTECTION PROGRAM
On March 27, 2020, the CARES Act was enacted to provide financial aid to family and businesses impacted by the COVID-19 pandemic.COVID-19. 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”PPP”) loan in the amount of $75,200. This loan payable matures on April 15, 2022 with a fixed interest rate of 1% per annum with interest deferred for six months. The PPP loan has an initial term of two years, is 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 apply for forgiveness of the PPP loan in accordance with the terms of the CARES Act. However, the Company cannot assure at this time that the PPP loan will be forgiven partially or in full. If the loan is not forgiven based on the PPP guidelines to be issued by the SBA, as defined, then, the monthly payment amount will be $4,229 beginning on October 15, 2020 through April 15, 2022. The outstanding PPP loan balance as of JulyJanuary 31, 20202021 and April 30, 2020 was $75,200.
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 threenine months ended JulyJanuary 31, 20202021 and 20192020 is as follows:
During the threenine months ended JulyJanuary 31, 2019,2020, 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 $13,804$0 and for the three and nine months ended JulyJanuary 31, 2021, respectively, and $0 and $19,212 for the three and nine months ended January 31, 2020, and 2019, 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 JulyJanuary 31, 2020, and 2019, respectively. There were zero unvested shares as of JulyJanuary 31, 20202021 and 2019, respectively.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 consultantconsultants providing services under their respective consulting agreements. The Company recorded a non-cash consulting expense in the amount of $0 and $7,209$0 for the three and nine months ended JulyJanuary 31, 20202021, respectively, and 2019,$0 and $11,910 for the three and nine months ended January 31, 2020, respectively. There were zero and 83,333 unvested shares as of JulyJanuary 31, 20202021 and 2019, respectively.2020.
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During the threenine months ended JulyJanuary 31, 2019,2020, a consultant was owedissued 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 $3,306$0 for the three and nine months ended JulyJanuary 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 2019, respectively. As of July 31, 2020 and 2019, zero and 500,000 shares remained unissued, respectively.2020.
TheIn 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 themthe executive officers continuing to provide service under thetheir compensation agreements. During the three and nine months ended JulyJanuary 31, 2020 and 2019,2021, the Company recorded a non-cash compensation expense in the amount of $0 and $104,726,$0, respectively, and $69,438 and $278,891 for the three and nine months ended January 31, 2020, respectively. There were zero and 2,750,000 unvested shares as of JulyJanuary 31, 20202021 and 2019, respectively.2020.
During the threenine months ended JulyJanuary 31, 2019, three2020, four non-employee members of the Board were issued 1,500,0002,000,000 shares of common stock pursuant to their DLAs with the Company. The shares were fully vested upon issuance. The Company recorded a non-cash expense of $7,356$0 and $11,642$10,561 for the three and nine months ended JulyJanuary 31, 20202021, respectively, and 2019,$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 JulyJanuary 31, 20202021 and 2019.2020.
During the threenine months ended JulyJanuary 31, 2019,2020, a consultant was issued 2,000,000 shares of common stock in respect of his services as the Chairman of the Company’s Medical and Scientific Advisory Board over a four-year period with their vesting subject to the consultant providingcontinuing to provide services to the Company. The Company recorded a non-cash consulting expense in the amount of $0 and $7,150$0 for the three and nine months ended JulyJanuary 31, 20202021, respectively, and 2019,$0 and $11,851 for the three and nine months ended January 31, 2020, respectively. There were zero unvested shares remaining related to thesehis compensation agreementsarrangement as of JulyJanuary 31, 20202021 and 2019.2020.
During the threenine months ended JulyJanuary 31, 2020, three2021, four non-employee members of the Board were issued 1,500,0002,000,000 shares of Common Stockcommon 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 $7,029$10,411 and $0$26,859 for the three and nine months ended JulyJanuary 31, 2020 and 2019,2021, respectively. There were zero unvested shares remaining related to a DLAsuch DLAs as of JulyJanuary 31, 2020.2021.
During the threenine months ended JulyJanuary 31, 2020,2021 four consultants were issued 1,000,000 shares of restricted Common Stockcommon stock pursuant to their respective consulting agreementagreements 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 providingcontinuing to provide services under the consultant’s respectivetheir consulting agreement.agreements. The Company recorded a non-cash consulting expense in the amount of $4,199$5,409 and $0$15,017 for the three and nine months ended JulyJanuary 31, 2020 and 2019,2021, respectively. There were 750,000250,000 unvested shares remaining related to these consulting agreements as of JulyJanuary 31, 2020.2021.
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.agreements for 2020. These shares vest monthly over a twelve-month period and are subject to themthe executive officers continuing to provide service under thetheir compensation agreements. During the three and nine months ended JulyJanuary 31, 2020,2021, the Company recorded a non-cash compensation expense in the amountamounts of $67,320.$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 2,750,000zero and 6,050,000 unvested shares as of JulyJanuary 31, 2020.2021 and 2020, respectively.
During the nine months ended January 31, 2021, 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 January 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 January 31, 2021 and 2020, respectively.
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 January 31, 2021, the Company recorded a non-cash compensation expense in the amounts of $3,685 and $3,685, respectively. There were 6,050,000 unvested shares as of January 31, 2021.
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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.
During the threenine months ended JulyJanuary 31, 20202021 and 2019,2020, the Company sold and issued approximately 234693 million and 66.7137 million shares of common stock, respectively, at prices ranging fromof approximately $0.01 to $0.03 per share pursuant to the Company’s S-3. Net of underwriting discounts, legal, accounting and other offering expenses, the Company received net proceeds of approximately $1,857,000$4.7 million and $558,000$884,000 from the sale of these shares for the threenine months ended JulyJanuary 31, 2021 and 2020, and 2019, respectively.
A summary of the Company’s unvested restricted stock activity and related weighted average grant date fair value information for the threenine months ended JulyJanuary 31, 2020 are2021 is as follows:
| Shares | Weighted Average Grant Date Fair Value | Shares | Weighted Average Grant Date Fair Value | ||||||||||||||
| Unvested, at April 30, 2020 | 4,600,000 | $ | 0.06 | 4,600,000 | $ | 0.06 | |||||||||||
| Granted | 2,500,000 | 0.02 | 10,100,000 | 0.01 | |||||||||||||
| Vested | (3,600,000 | ) | 0.03 | (8,400,000 | ) | 0.01 | |||||||||||
| Forfeited | – | – | – | – | |||||||||||||
| Unvested, at July 31, 2020 | 3,500,000 | $ | 0.04 | ||||||||||||||
| Unvested, at January 31, 2021 | 6,300,000 | $ | 0.01 | ||||||||||||||
NOTE 6 – STOCK OPTIONS AND WARRANTS
Stock Options
As of JulyJanuary 31, 2020,2021, the Company had 68,700,00062,600,000 outstanding stock options to its directors and executive officers (collectively, “Employee Options”) and consultants (“Non-Employee Options”).
During the threenine months ended JulyJanuary 31, 20202021 and 2019,2020, the Company granted 1,500,00011,000,000 and 1,500,00011,000,000 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:
| Three Months Ended July 31, | Nine Months Ended January 31, | |||||||||||||||
| 2020 | 2019 | 2021 | 2020 | |||||||||||||
| Risk-free interest rate | 0.3 | % | 2.1 | % | 0.35% | 1.8% | ||||||||||
| Expected volatility | 91 | % | 91 | % | 97% | 91% | ||||||||||
| Expected term (years) | 2.5 | 2.5 | 2.7 | 2.7 | ||||||||||||
| Expected dividend yield | 0.00 | % | 0.00 | % | 0.00% | 0.00% | ||||||||||
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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 threenine months ended JulyJanuary 31, 20202021 and 2019,2020, 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 one-halfseven-tenths years for an average of three2.7 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 nine months ended January 31, 2021 and 2020, the Company granted zero and 1,200,000 Non-Employee Options, respectively. During the three months ended JulyJanuary 31, 20202021 and 2019,2020, the Company granted nozero and zero Non-Employee Options.Options, respectively.
A summary of the Company’s stock option activity and related information for the threenine months ended JulyJanuary 31, 20202021 is shown below:
| Options | Weighted Average Exercise Price | Weighted Average Grant Date Fair Value per Share | 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 | 67,200,000 | $ | 0.06 | $ | 0.06 | ||||||||||||||
| Issued | 1,500,000 | 0.02 | 0.02 | |||||||||||||||||||||
| Granted | 11,000,000 | 0.01 | 0.01 | |||||||||||||||||||||
| Forfeited | – | – | – | (15,600,000 | ) | – | – | |||||||||||||||||
| Exercised | – | – | – | – | – | – | ||||||||||||||||||
| Outstanding, July 31, 2020 | 68,700,000 | $ | 0.06 | $ | 0.06 | |||||||||||||||||||
| Exercisable, July 31, 2020 | 64,950,000 | $ | 0.06 | $ | – | |||||||||||||||||||
| 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 | 68,700,000 | $ | 0.06 | $ | – | 62,600,000 | $ | 0.05 | $ | – | ||||||||||||||
A summary of the activity for unvested stock options during the threenine months ended JulyJanuary 31, 20202021 is as follows:
| Options | Weighted Average Grant Date Fair Value per Share | |||||||
| Unvested, April 30, 2020 | 6,200,000 | $ | 0.05 | |||||
| Granted | 1,500,000 | 0.02 | ||||||
| Vested | (3,950,000 | ) | – | |||||
| Forfeited | – | – | ||||||
| Unvested, July 31, 2020 | 3,750,000 | $ | 0.03 | |||||
| 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 | |||||
The Company recorded $72,317$38,606 and $116,914$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 JulyJanuary 31, 2021 and 2020, respectively, and 2019,$166,982 and $284,934 during the nine months ended January 31, 2021 and 2020, respectively. At JulyJanuary 31, 2020,2021, there remained $88,526$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 fiveeleven months in the calendar year. The unvested options vest at 750,000 shares per month and are expected to be fully vested on December 31, 2020.2021.
The Company recorded $0 and $9,411$10,411 of stock-based compensation related to the issuance of Non-Employee Options in exchange for services during the three months ended JulyJanuary 31, 2021 and 2020, respectively, and 2019,$0 and $24,237 during the nine months ended January 31, 2021 and 2020, respectively. There were no unvested Non-Employee Options on JulyJanuary 31, 2020.2021.
The following table summarizes the outstanding stock options by exercise price at JulyJanuary 31, 2020:2021:
| Exercise Price | 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 | 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 | ||||||||||||||||||||||||||||||||
| $ | 0.063 | 15,600,000 | 0.25 | $ | 0.063 | 15,600,000 | $ | 0.063 | 0.104 | 10,450,000 | 0.71 | $ | 0.104 | 10,450,000 | $ | 0.104 | ||||||||||||||||||||||||||||
| $ | 0.104 | 10,450,000 | 1.03 | $ | 0.104 | 10,450,000 | $ | 0.104 | 0.0685 | 600,000 | 0.24 | $ | 0.0685 | 600,000 | $ | 0.0685 | ||||||||||||||||||||||||||||
| $ | 0.0685 | 600,000 | 0.75 | $ | 0.0685 | 600,000 | $ | 0.0685 | 0.058 | 2,450,000 | 1.06 | $ | 0.058 | 2,450,000 | $ | 0.058 | ||||||||||||||||||||||||||||
| $ | 0.058 | 2,450,000 | 1.43 | $ | 0.058 | 2,450,000 | $ | 0.058 | 0.0734 | 1,200,000 | 1.25 | $ | 0.0734 | 1,200,000 | $ | 0.0734 | ||||||||||||||||||||||||||||
| $ | 0.0734 | 1,200,000 | 0.96 | $ | 0.0734 | 1,200,000 | $ | 0.0734 | 0.0729 | 1,800,000 | 1.44 | $ | 0.0729 | 1,800,000 | $ | 0.0729 | ||||||||||||||||||||||||||||
| $ | 0.0729 | 1,800,000 | 1.94 | $ | 0.0729 | 1,800,000 | $ | 0.0729 | 0.089 | 1,200,000 | 1.46 | $ | 0.089 | 1,200,000 | $ | 0.089 | ||||||||||||||||||||||||||||
| $ | 0.089 | 1,200,000 | 1.96 | $ | 0.089 | 1,200,000 | $ | 0.089 | 0.0553 | 500,000 | 0.84 | $ | 0.0553 | 500,000 | $ | 0.0553 | ||||||||||||||||||||||||||||
| $ | 0.0553 | 500,000 | 1.10 | $ | 0.0553 | 500,000 | $ | 0.0553 | 0.0558 | 9,000,000 | 1.15 | $ | 0.0558 | 9,000,000 | $ | 0.0558 | ||||||||||||||||||||||||||||
| $ | 0.0558 | 9,000,000 | 1.45 | $ | 0.0558 | 9,000,000 | $ | 0.0558 | 0.0534 | 1,200,000 | 2.59 | $ | 0.0534 | 1,200,000 | $ | 0.0534 | ||||||||||||||||||||||||||||
| $ | 0.0534 | 1,200,000 | 3.10 | $ | 0.0534 | 1,200,000 | $ | 0.0534 | 0.0539 | 1,000,000 | 1.12 | $ | 0.0539 | 1,000,000 | $ | 0.0539 | ||||||||||||||||||||||||||||
| $ | 0.0539 | 1,000,000 | 1.38 | $ | 0.0539 | 1,000,000 | $ | 0.0539 | 0.0683 | 500,000 | 1.21 | $ | 0.0683 | 500,000 | $ | 0.0683 | ||||||||||||||||||||||||||||
| $ | 0.0683 | 500,000 | 1.46 | $ | 0.0683 | 500,000 | $ | 0.0683 | 0.0649 | 500,000 | 1.34 | $ | 0.0649 | 500,000 | $ | 0.0649 | ||||||||||||||||||||||||||||
| $ | 0.0649 | 500,000 | 1.60 | $ | 0.0649 | 500,000 | $ | 0.0649 | 0.0495 | 9,000,000 | 1.88 | $ | 0.0495 | 9,000,000 | $ | 0.0495 | ||||||||||||||||||||||||||||
| $ | 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 | ||||||||||||||||||||||||||||
| $ | 0.0380 | 1,200,000 | 4.15 | $ | 0.0380 | 1,200,000 | $ | 0.0380 | 0.0404 | 1,000,000 | 1.62 | $ | 0.0404 | 1,000,000 | $ | 0.0404 | ||||||||||||||||||||||||||||
| $ | 0.0404 | 1,000,000 | 1.88 | $ | 0.0404 | 1,000,000 | $ | 0.0404 | 0.0370 | 500,000 | 1.71 | $ | 0.0370 | 500,000 | $ | 0.0370 | ||||||||||||||||||||||||||||
| $ | 0.0370 | 500,000 | 1.96 | $ | 0.0370 | 500,000 | $ | 0.0370 | 0.0340 | 500,000 | 1.85 | $ | 0.0340 | 500,000 | $ | 0.0340 | ||||||||||||||||||||||||||||
| $ | 0.0340 | 500,000 | 2.10 | $ | 0.0340 | 500,000 | $ | 0.0340 | 0.0408 | 9,000,000 | 2.35 | $ | 0.0408 | 9,000,000 | $ | 0.0408 | ||||||||||||||||||||||||||||
| $ | 0.0408 | 9,000,000 | 2.66 | $ | 0.0408 | 5,250,000 | $ | 0.0408 | 0.0240 | 1,000,000 | 2.12 | $ | 0.0240 | 1,000,000 | $ | 0.0240 | ||||||||||||||||||||||||||||
| $ | 0.0240 | 1,000,000 | 2.38 | $ | 0.0240 | 1,000,000 | $ | 0.0240 | 0.0247 | 500,000 | 2.21 | $ | 0.0247 | 500,000 | $ | 0.0247 | ||||||||||||||||||||||||||||
| $ | 0.0247 | 500,000 | 2.46 | $ | 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 | 68,700,000 | 1.47 | $ | 0.06 | 64,950,000 | $ | 0.06 | Total | 62,600,000 | 1.72 | $ | 0.05 | 54,350,000 | $ | 0.06 | |||||||||||||||||||||||||||||
The aggregate intrinsic value of outstanding options as of JulyJanuary 31, 20202021 was zero.$12,225. This represents options whose exercise price was less than the closing fair market value of the Company’s common stock on JulyJanuary 31, 20202021 of approximately $0.014$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 Capital, Inc. (“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.
| 20 |
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 nine months ended January 31, 2021 is 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 | ||||||
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A summary of the Company’s warrant activity and related information for the three months ended July 31, 2020 is shown below:
| Warrants | Weighted Average Exercise Price | |||||||
| Outstanding, April 30, 2020 | 47,890,155 | $ | 0.05 | |||||
| Issued | 11,433,333 | 0.01 | ||||||
| Expired | – | – | ||||||
| Outstanding, July 31, 2020 | 59,323,488 | 0.04 | ||||||
| Exercisable, July 31, 2020 | 59,323,488 | $ | 0.04 | |||||
The following table summarizes additional information concerning warrants outstanding and exercisable at JulyJanuary 31, 2020:2021:
| Exercise Prices | Number of Warrant Shares Exercisable at April 30, 2020 | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | |||||||||
| $0.12 | 17,000,000 | 0.44 | ||||||||||
| $0.065 | 769,231 | 1.39 | ||||||||||
| $0.0575 | 869,565 | 1.68 | ||||||||||
| $0.03 | 2,500,000 | 2.32 | ||||||||||
| $0.026 | 1,923,077 | 2.91 | ||||||||||
| $0.025 | 2,000,000 | 1.99 | ||||||||||
| $0.018 | 1,388,889 | 2.83 | ||||||||||
| $0.011 | 2,272,727 | 3.25 | ||||||||||
| $0.01 | 9,100,000 | 4.52 | ||||||||||
| $0.015 | 833,333 | 4.72 | ||||||||||
| $0.009 | 3,333,333 | 3.92 | ||||||||||
| $0.0075 | 7,333,333 | 4.97 | ||||||||||
| $0.005 | 10,000,000 | 4.41 | ||||||||||
| 59,323,488 | 2.96 | $ | 0.04 | |||||||||
| 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 | |||||||||||
NOTE 7 – LEGAL PROCEEDINGS
The Company is not currently a party to any pending legal proceedings, material or otherwise. There are no legal proceedings to which any property of the Company is subject.
NOTE 8 – RELATED PARTY TRANSACTIONS
The Company had the following related party transactions during the three and nine months ended JulyJanuary 31, 20202021 and 2019.2020.
The Company owns 14.5% of the equity in SG Austria and is reported on the cost method of accounting. SG Austria has two subsidiaries: (i) Austrianova;Austrianova Singapore Pte. Ltd. (“Austrianova”); and (ii) Austrianova Thailand PteCompany Ltd. The Company purchased products and services from these subsidiaries in the approximate amounts of $64,000$109,500 and $2,400$183,500 in the three and nine months ended JulyJanuary 31, 20202021, respectively, and 2019,$85,000 and $87,400 for the three and nine months ended January 31, 2020, respectively.
In April 2014, the Company entered the Vin-de-Bona Consulting Agreement pursuant to which itVin-de-Bona agreed to provide professional consulting services to the Company. Vin-de-Bona is owned by Prof. Walter H. Günzburg (“Prof. Günzburg)nzburg”) 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 iswas 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 JulyJanuary 31, 2020 and 20192021 were approximately $13,000$21,000 and $13,000,$65,000, respectively, and $3,000 and $18,000 for the three and nine months ended January 31, 2020, respectively. In addition, during the threenine months ended JulyJanuary 31, 20202021 the Company issued 250,000 shares of common stock to Dr. Salmons.Salmons to be a member of the Company’s Medical and Scientific Advisory Board. The Company recorded a noncash consulting expense of approximately $8,000$3,700 relating to thesethis share issuancesissuance for the threenine months ended JulyJanuary 31, 2020.2021.
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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 product 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 iswas for 24 months and expired on August 31, 2019. In May 2019, the Company entered into an additional one-year lease for the Leased Premises, commencing upon the expiration of the term of the prior lease. The term of the lease expiresexpired on August 31, 2020.
On May 28, 2020, the Company entered into an additional six-month lease of the Leased Premises, commencing on September 1, 2020. The term of the new lease expires on February 28, 2021. On December 2, 2020, the Company entered into an additional six-month lease of the Leased Premises, commencing on March 1, 2021. This lease expires on August 31, 2021.
Rent expenses for these offices for the three months ended JulyJanuary 31, 2021 and 2020 were $5,288 and 2019$7,152, respectively, and for the nine months ended January 31, 2021 and 2020 were $7,152$17,824 and $8,661,$23,812, respectively.
The following table summarizes the Company’s aggregate future minimum lease payments required under the operating leaseleases as of JulyJanuary 31, 2020.2021.
| Amount | ||||
| 2021 | $ | 12,456 | ||
| $ | 12,456 | |||
Material Agreements
The Company’s material agreements are identified and summarized in Note 1 – Nature of Business – Company Background.
| Amount | |||||
| 2021 | $ | 3,764 | |||
| 2022 | 4,956 | ||||
| Total | $ | 8,720 | |||
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 hashad 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 termsterm continue in effect until a member is no longer on the Board.
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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, non-assessable shares of the Company’s restricted common stock (“Shares”) annually; and (iii) a five-year option to purchase 500,000 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 no income tax expense for the threenine months ended JulyJanuary 31, 20202021 and 2019,2020, respectively. During the threenine months ended JulyJanuary 31, 20202021 and 2019,2020, 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 $98,000$565,000 and $201,000$270,000 for the threenine months ended JulyJanuary 31, 20202021 and 2019,2020, respectively.
There was no material difference between the effective tax rate and the projected blended statutory tax rate for the threenine months ended JulyJanuary 31, 20202021 and 2019.2020.
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 notmore-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 JulyJanuary 31, 2020.2021.
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 threenine months ended JulyJanuary 31, 20202021 and 2019,2020, the Company had no 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, 2020 for additional information regarding income taxes.
NOTE 11 – EARNINGS PER SHARE
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 threenine months ended JulyJanuary 31, 20202021 and 2019,2020, 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.
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The table below sets forth the basic loss per share calculations:
| Three Months Ended July 31, | Three Months Ended January 31, | |||||||||||||||
| 2020 | 2019 | 2021 | 2020 | |||||||||||||
| Net loss | $ | (883,944 | ) | $ | (1,134,075 | ) | $ | (757,096 | ) | $ | (875,308 | ) | ||||
| Basic weighted average number of shares outstanding | 1,678,572,167 | 1,210,305,834 | 2,337,034,318 | 1,375,499,976 | ||||||||||||
| Diluted weighted average number of shares outstanding | 1,678,572,167 | 1,210,305,834 | 2,337,034,318 | 1,375,499,976 | ||||||||||||
| Basic and diluted loss per share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
| Nine Months Ended January 31, | ||||||||
| 2021 | 2020 | |||||||
| Net loss | $ | (2,591,232 | ) | $ | (3,076,505 | ) | ||
| Basic weighted average number of shares outstanding | 2,108,274,833 | 1,284,500,731 | ||||||
| Diluted weighted average number of shares outstanding | 2,108,274,833 | 1,284,500,731 | ||||||
| Basic and diluted loss per share | $ | (0.00 | ) | $ | (0.00 | ) | ||
The table below sets forth these potentially dilutive securities:
| Three Months Ended July 31, | Nine Months Ended January 31, | |||||||||||||||
| 2020 | 2019 | 2021 | 2020 | |||||||||||||
| Excluded options | 68,700,000 | 108,950,000 | 62,600,000 | 94,650,000 | ||||||||||||
| Excluded warrants | 59,323,488 | 45,411,130 | 65,256,821 | 48,056,822 | ||||||||||||
| Total excluded options and warrants | 128,023,488 | 154,361,130 | 127,856,821 | 142,706,822 | ||||||||||||
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 repurchasedredeemed by the Company on December 3, 2019. As of JulyJanuary 31, 2020,2021, 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.
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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
From AugustOn March 1, 2020 through August 12, 2020,2021, the Company sold approximately 459 million sharesreceived notices of common stock using the S-3 structured as Block Trade transactions.exercise for 26 Common Stock Purchase Warrants (“Warrants”). The issuance of these shares resulted in gross proceeds to the Company of approximately $3 million. Pursuant to the Aeon Engagement Agreement, the Company paid Aeon a fee of approximately $183,000 and provided warrant coverage of 5%holder of the number of shares of commons stock sold inWarrants elected to exercise the Block Trade transactions This amounted to approximately 34 million warrant shares with a five-year term. The warrants haveWarrants through a cashless exercise feature. In addition,in accordance with the terms of the Warrants. This resulted in the Company incurred transaction feesissuing 43,715,269 shares of approximately $96,000 to an unrelated party.unregistered common stock.
On September 1, 2020, the Company submitted the IND to the FDA to allow the Company to commence a Phase 2b human clinical trial involving LAPC. Although no assurance as to the timing of the trial can be given or whether the FDA will allow the Company to commence a Phase 2b clinical trial as opposed to a Phase 1 clinical trial or further preclinical studies. The IND consisted of all available preclinical information (e.g. animal toxicity studies), Chemistry, Manufacturing and Controls information and other pre-clinical information about the Company’s product candidate to treat LAPC, as well as information regarding the proposed clinical trial program and other information and documentation required by FDA regulations. On September 4, 2020, the Company received an Information Request from the FDA. The Company responded to the FDA’s Information Request on September 11, 2020.
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Item 2. Management’s Discussion and Analysis of Financial ConditionsCondition 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 recentcontinuing outbreak of COVID-19. 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. 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-Q 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 approveslifts its clinical hold after we have submitted our recently submittedresponses to the FDA concerns related to our IND after it has been reviewed by the FDAsubmission so that we can commence our planned clinical trial involving 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 the coronavirus pandemicCOVID-19 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 trialstrial to proceed after review of our IND submission for LAPC.clinical hold submission. 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 Candidates
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 diabetes will be developed.
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, encapsulating those cells using the Cell-in-a-Box® technology and placing those capsules in the body as close as possible to the tumor. In this way, we believe that when the 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 tumor may be optimized.
On September 1, 2020, we submitted our IND to the FDA for a Phase 2b clinical trial in LAPC. However, no assurance as to the timing of the trial can be given or whether the FDA will allow us to commence a Phase 2b clinical trial as opposed to a Phase 1 clinical trial or further preclinical studies. The IND consisted of all available preclinical information (e.g. animal toxicity studies), Chemistry, Manufacturing and Controls information and other pre-clinical information about our product candidate to treat LAPC, as well as information regarding our proposed clinical trial program and other information and documentation required by FDA regulations. On September 4, 2020, we received an Information Request from the FDA. We responded to the FDA’s Information Request on September 11, 2020.
We must wait a minimum of 30 calendar days from the date of the IND submission before initiating our clinical trial. During this time, the FDA has an opportunity to review the IND to ensure that it is complete and that the planned clinical trial research patients will not be subject to unreasonable risk. It also gives the FDA time to ask for more information and clarification about the information submitted as was done with the FDA’s September 4, 2020 Information Request. If the FDA is not satisfied with the our September 11, 2020 response to the Information Request or our responses to any future Information Requests or the FDA identifies other issues with the our IND, the FDA can place a clinical hold on the clinical trial described in the IND. If the FDA does so, we cannot initiate the clinical trial to treat LAPC until or unless the FDA lifts the clinical hold. It is possible that the FDA may not permit us to initiate the clinical trial based on the available data and information.
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 recently submitted 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 therapy 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 recently submitted IND, which the FDA has placed a clinical hold, we will not spend any further resources developing this program.
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We are also developing a therapy for Type 1 diabetes and insulin-dependent Type 2 diabetes. Our diabetes therapy consists of encapsulated genetically modified human liver cells and insulin-producing stemhuman cells. The encapsulation for each type 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 the two previous programs, 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 recently submitted IND. However, work at UTS onIND, which the Melligen cells continues. Melligen cells are human liver cells that have been genetically engineered to produce, store and release insulin in response to the levels of blood sugar in the body.FDA has placed a clinical hold.
Finally, we havehad licensed from Hai Kang the right to certain technology owned or controlled by Hai Kang related to COVID-19 diagnostic kits (“Kits”).Kits. Our license is both for the sale of Kits as well as for the use of the technology underlying the Kits. Pursuant to the Hai Kang License Agreement, we may directly (or through a third party) conduct research, use, develop, market, sell, distribute, import and export Kits and utilize their underlying technology for human and veterinary uses in North America, the United Kingdom and certain other European sites collectively, (“Territory”). A “Product” is defined as any existing Kit of Hai Kang or any future Kit derived from Hai Kang’s Kits and includes an in vitro diagnostic test.
We are required to use its commercially reasonable efforts to develop and commercialize at least one Product in the Territory. This obligation to develop and commercialize a Product includes, among other things, the performance of non-clinical and clinical studies of any Product, the preparation, filing and prosecution of certain regulatory requests for authorization or approval for such Product (including to allow the Company to market and sell the Product and to get the Product approved for reimbursement). Hai Kang is responsible for all aspects of the manufacture and supply of the Products to be developed and sold underOn November 19, 2020, we terminated the Hai Kang License Agreement.
DuringClinical Hold
On September 1, 2020, we submitted an IND to the term of the Hai Kang License Agreement,FDA for a planned Phase 2b clinical trial in LAPC. Shortly thereafter, we are required to pay a monthly fee to Hai Kang in the amount of $6,000, which monthly fee increases to $50,000 once the first Product receives regulatory authorization or approvalreceived Information Requests from the FDA. In addition, upon the first commercial sale of a Product, the Company is required to make quarterly royalty payments equal to 10% of Net Sales (as defined in the Hai Kang License Agreement) of any Product sold pursuantFDA related to the Hai Kang License Agreement.IND. We timely responded to all information requests.
With respect toOn October 1, 2020, we received notice that the Hai Kang License Agreement and related products, including the Kits, we may not be able to (i) develop a related product candidate withFDA had placed our current resources,IND on a timely basis, or at all; (ii) obtain the necessary regulatory authorizations or approvals for such a product candidate or for a Kit; (iii) commercialize any such product candidate or Kit; or (iv) obtain reimbursement for such a product candidate or Kit in the U.S. and elsewhere. It is uncertain that any such product candidates or Kit will comply with U.S. regulatory requirements or that any health care facility or provider will be willing or able to use such product candidates or Kits.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.
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 the Master Cell Bank; |
| · | Evaluate the compatibility of the delivery devices (i.e., the prefilled syringe and microcatheter) with our drug product; |
| · | Provide additional detailed description of the manufacturing process; |
| · | Provide additional product release specifications for the encapsulated cells; |
| · | Demonstrate comparability between the 1st and 2nd generation products and ensure adequate and consistent product performance and safety between the two generations of product; |
| · | 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 to assess the safety, activity and distribution of the drug product; |
| · | 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 data; and |
| · | Provide data from a new and extensive pig study. |
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The FDA also requested that we address several issues not related to the clinical hold in an amendment to the IND, including:
| · | Providing a Certificate of Analysis for pc3/2B1 plasmid that includes tests for assessing purity, safety, and potency; |
| · | Performing qualification studies for the drug substance filling step to ensure that the product remains sterile and stable during the filling process; |
| · | Submitting an updated batch analysis for the drug product for the specific lot that will be used for manufacturing all future drug product; |
| · | Providing additional details for the methodology for the Resorufin (CYP2B1) potency and the PrestoBlue cell metabolic assays; |
| · | Providing a few examples of common microcatheters that fit the specifications in the Angiography Procedure Manual; |
| · | Clarifying the language in the Pharmacy Manual regarding proper use of the syringe fill with the drug product; and |
| · | Providing a discussion with data for the potential for cellular and humoral immune reactivity against the heterologous rat CYP2B1 protein and potential for induction of autoimmune-mediated toxicities in the Company’s study population. |
Since October 31, 2020, there has been no further communication with the FDA regarding the clinical hold.
We have assembled a scientific team to address the FDA requests related to the clinical hold. That team is working to complete the items requested by the FDA. We have not yet determined the estimated cost or the time necessary to complete these items. The cost and time associated with completing these items will be significant.
Thus far, we 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.
COVID-19 Potential Impact on the Financial Condition and Results of Operations
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, 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 development of ourFDA and other healthcare providers are making product candidates could be disrupted and materially adversely affected infor the future bytreatment of COVID-19 a pandemic like the recent outbreak ofpriority over product candidates unrelated to COVID-19. For example, as a result of measures imposed by the governments in states affected by COVID-19, businesses and schools have been suspended due to quarantines or stay at home orders intended to contain the pandemic. COVID-19 continues to spread globally and, as of July 31, 2020, has spread to over 150 countries, including the U.S. While the COVID-19 pandemic is thought to be in its early stages, international stock markets continue to reflect the uncertainty associated with the slow-down in the world economies and the reduced levels of international travel experienced since the beginning of January 2020. As of the date of this Report, the COVID-19 pandemic has had an impact upon our operations, although we believe that impact is not material. The impact primarily relates to delays in tasks associated with the preparation of our 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.
We are still assessing our business plans and
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As a result of the impact COVID-19 may have on our ability to advance the developmentpandemic, commencement of our product candidates or to raise financing to support the development of our product candidates, but no assurances can be given that this assessment will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in the business sector generally or in our sector in particular. The spread of COVID-19 may also result in the inability of our suppliers to deliver components or raw materials on a timely basis or materially and adversely affect our collaborators’ and potential strategic partners’ ability to conduct our 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 LAPC andthe 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 other operations. The recent and ongoingclinical 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.
It is highly speculative in projecting the effects of COVID-19 on our clinical development program and on us 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.
COVID-19 could materially affect 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 reasonsrisk 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 cGMPcurrent Good Manufacturing Practices 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 ensurebe lifted and 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 JulyJanuary 31, 20202021 compared to three and nine months ended JulyJanuary 31, 20192020
Revenue
We had no revenues for the three and nine months ended JulyJanuary 31, 20202021 and 2019.
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 JulyJanuary 31, 20202021 and 2019,2020, respectively:
| Three Months Ended July 31, | ||||||
| 2020 | 2019 | |||||
| $ | 881,676 | $ | 1,134,075 | |||
| Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||
| $ | 756,847 | $ | 875,308 | $ | 2,588,038 | $ | 3,076,505 | |||||||
The total operating expenses for the three-month period ended JulyJanuary 31, 20202021 decreased by $252,399$118,461 from the three months ended JulyJanuary 31, 2019.2020. The decrease is attributable to a decrease in general and administrative (“G&A”) expenses of $304,400,$75,215, a decrease in director fees of $3,618,$13,316, a decrease in legal and professional expense of $20,811 a decrease in compensation expense of $174,224$69,911, net of an increase in R&D expense of $60,792. The decrease in G&A expenses were mainly attributable to reductions 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 $31,599 and$16,254, net of an increase in R&D expense of $198,244.$392,410. The decrease in G&A expenses were mainly attributable to reductions in consulting fees and travel expenses.
Other expense
The following table sets forth our other expense for the three and nine months ended JulyJanuary 31, 20202021 and 2019:2020:
| Three Months Ended July 31, | ||||||
| 2020 | 2019 | |||||
| $ | 2,268 | $ | – | |||
| Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||
| $ | 249 | $ | – | $ | 3,194 | $ | – | |||||||
Total other expense for the three months ended JulyJanuary 31, 20202021 increased by the amount of $2,268$249 from the three months ended JulyJanuary 31, 2019.2020. The increase is attributable to the increase of interest expense in the amount of $388,$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, an increase in income taxes of $800 and an increase in foreign exchange losses of $1,080.$388.
Discussion of Operating, Investing and Financing Activities
The following table presents a summary of our sources and uses of cash for the threenine months ended JulyJanuary 31, 20202021 and 2019,2020, respectively:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| July 31, 2020 | July 31, 2019 | January 31, 2021 | January 31, 2020 | |||||||||||||
| Net cash used in operating activities: | $ | (551,002 | ) | $ | (763,140 | ) | $ | (2,390,586 | ) | $ | (1,698,981 | ) | ||||
| Net cash used in investing activities: | – | – | ||||||||||||||
| Net cash provided by (used in) investing activities: | – | – | ||||||||||||||
| Net cash provided by financing activities: | 1,820,060 | 582,500 | 4,586,002 | 1,333,500 | ||||||||||||
| Effect of currency rate exchange | 2,677 | (6,862 | ) | 694 | (7,530 | ) | ||||||||||
| Net increase (decrease) in cash | $ | 1,271,735 | $ | (187,502 | ) | $ | 2,196,110 | $ | (373,011 | ) | ||||||
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Operating Activities:
The net cash used in operating activities for the threenine months ended JulyJanuary 31, 20202021 is a result of our net losses, increasesdecreases in accounts payable, accrued expenses and a decrease in prepaid expenses and an increase in securities issued for services and compensation, net of a decrease in accrued expenses.compensation. The cash used in operating activities for the threenine months ended JulyJanuary 31, 20192020 is a result of our net losses, offset by an increase in stock issued, an increase toa decrease in prepaid expenses and decreasesincreases in accounts payable and accrued expenses. See Condensed Consolidated Statements of Cash Flows on page 7.8.
Investing Activities:
There were no investing activities in the threenine months ended JulyJanuary 31, 20202021 and 2019.2020.
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.
Liquidity and Capital Resources
As of JulyJanuary 31, 2020,2021, our cash totaled approximately $2,167,000,$3,091,000, compared to approximately $328,000$142,000 at JulyJanuary 31, 2019.2020. Working capital was approximately $1,116,000$2,492,000 at JulyJanuary 31, 20202021 and approximately a negative $130,000$810,000 at JulyJanuary 31, 2019.2020. The increase in cash is attributable to a higher beginning cash balance, an increase in proceeds from the sale of our common stock offset by a decrease in our operating expenses. As of August 31, 2020, our cash totaled approximately $4,537,000.
During the threenine months ended JulyJanuary 31, 2020,2021, 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. During the threenine months ended JulyJanuary 31, 2019,2020, we continued to acquire funds through our 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.
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.
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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 condition,conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
On May 14, 2018, we entered into the Amendments to all of the material agreements with SG. Austria and Austrianova. See “Company Background and Material Agreements” above for a description of these Amendments.
Service Agreements
We entered into several service agreements with both independent and related parties pursuant to which services will be provided over the next twenty-four monthsa 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 ofon the IND submission to the FDA and services related to having the planned LAPC trial.clinical hold lifted. They also cover a 24-month stability study, which includesis approximately fifty percent complete. including the container closure integrity testing of the clinical trial product syringes. The total cost is estimated to be approximately $195,000,$437,000, of which the related party portion will be approximately $80,000.$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.
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. 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.
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 Rule 13a-15(e)Rules 13a - 15(e) and 15d - 15(e) promulgated under the Securities Exchange Act.Act of 1934, as amended, (“Exchange 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 JulyJanuary 31, 2020,2021, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting.
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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.
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 JulyJanuary 31, 20202021 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 procedures and control documentation to implement control procedures including lack of timely contract preparation and review. We have developed procedures to provide ample review time of financial information, including contract preparation and review by qualified personnel as well as management. We have implemented these procedures, determined they are still insufficient and will continue to review these procedures to determine ways to further improve them. | |
| · | 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 JulyJanuary 31, 2020,2021, our internal controls over financial reporting were not effective based on the COSO criteria.
We are in the process of investigating new procedures and controls for the balance of fiscal year 2021. WeAt the appropriate time 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.
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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 controls 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 are no material legal proceedings to which any property of ours is subject.
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 calledset 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 IND 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 IND 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 Item 1Aus 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 required for a smaller reporting company.lifted or if the lifting takes an extended period of time, our business and prospects will likely suffer material adverse consequences.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended JulyJanuary 31, 2020,2021, we issued an aggregate of 1.56.6 million unregistered shares of common stock to three of our directorsexecutive officers pursuant to their respective 2021 executive compensation agreement as disclosed in this Report. The non-cash expense for thesethis share issuancesissuance totaled $7,029.$44,220.
During the three months ended JulyJanuary 31, 2020,2021, we issued an aggregate of 1.59 million stock options to our three of our directorsexecutive officers pursuant to their DLAs. The non-cash expense for stock options totaled $19,201.
During the three months ended July 31, 2020, we issued an aggregate of 1 million unregistered shares of common stock to four independent contractors pursuant to their professional services agreements.respective 2021 executive compensation agreement. The non-cash expense for these share issuancesstock options totaled $4,199.
During the three months ended July 31, 2020, we issued four Common Stock Purchase Warrants to Aeon for Block Trades transactions. The warrants provide Aeon the right to purchase 11,433,333 shares of common stock based upon these Block Trades pursuant to the Aeon Engagement Agreement. We 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, we determined the aggregate value of these warrants to be approximately $67,000. The warrants have a cashless exercise feature.$38,344.
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.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosure.
Not applicable.
None.
| Exhibit No. | Description | Location |
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) |