ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion may contain forward-looking
statements that involve risks and uncertainties. As described under the caption “Cautionary Note Regarding Forward-Looking Statements,”
our actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include,
but are not limited to, any factors discussed in this section as well as factors described in Part II, Item 1A. “Risk Factors”
and under the caption “Cautionary Note Regarding Forward-Looking Statements.”
Overview
We are a biotechnology company focused on developing
and preparing to commercialize cellular therapies for cancer and diabetes based upon our proprietary cellulose-based live cell encapsulation
technology we refer to as Cell-in-a-Box®. We are working to advance clinical research and development of new cellular-based
therapies in oncology and diabetes.
We are actively engaged with Austrianova and other
entities in preparation for a Phase 2b clinical trial in LAPC using encapsulated live cells like those used in the previous Phase 1/2
and Phase 2 clinical trials discussed above.
On September 1, 2020, the Company submitted an
IND to the FDA for our planned Phase 2b clinical trial in LAPC. On October 1, 2020, the Company received notice from the FDA that it had
placed our IND on clinical hold. On October 30, 2020, the FDA sent a letter to us setting forth the reasons for the clinical hold and
specific guidance on what we must do to have the clinical hold lifted.
For the purpose of addressing the clinical hold,
the Company has assembled a team of regulatory and scientific experts to respond to the items requested by the FDA. That team has been
working to complete the list of items requested by the FDA. For a complete discussion of what the FDA requires of the Company
and the efforts undertaken to lift the clinical hold, see Item 1. Business under the Section entitled, “Our Investigational New
Drug Application and the Clinical Hold” of this Report.
We have also been
considering 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”.
In addition, we have been exploring
ways to delay the production and accumulation of malignant ascites fluid that results from many types of abdominal cancerous tumors.
Malignant ascites fluid is secreted by abdominal cancerous tumors into the abdomen after the tumors have reached a certain stage of growth.
This fluid contains cancer cells that can seed and form new tumors throughout the abdomen. This fluid accumulates in the abdominal cavity,
causing swelling of the abdomen, severe breathing difficulties and extreme pain.
We have also been developing a potential
therapy for Type 1 diabetes and insulin-dependent Type 2 diabetes Our product candidate for the treatment of diabetes consists of
encapsulated genetically modified insulin-producing cells. The encapsulation will be done using the Cell-in-a-Box®
technology. Implanting these cells in the body is designed to function as a bio-artificial pancreas for purposes of insulin
production.
However, with respect to our programs involving
cannabinoids, malignant ascites fluid and diabetes, until: (i) the FDA allows us to commence a clinical trial in LAPC described in our
IND for which the FDA has placed a clinical hold; (ii) we validate our Cell-in-a-Box® encapsulation technology in our planned
Phase 2b clinical trial in LAPC and (iii) the availability of sufficient additional funding, we are not spending any further resources
developing these programs.
Reverse stock split
Effective July 12, 2021, the Company filed a
Certificate of Change with the Nevada Secretary of State that authorized a 1-for-1,500 reverse stock split. The reverse stock split
resulted in the Company reducing the authorized number of shares of common stock to 33,333,334 and the issued shares of common stock
to 1,611,671 (subject to adjustment based on issuances of additional shares as
applicable due to the rounding up of fractional shares resulting from the 1:1,500 reverse stock split). All warrants, option, share
and per share information in this Report gives retroactive effect to such one-for-fifteen hundred reverse stock split.
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.
As of the date of this Report, we believe the COVID-19 pandemic has had an impact upon our operations, primarily relating to delays in
tasks associated with the preparation of the Company’s responses to the FDA’s clinical hold, including all requested preclinical
studies and assays. There may be further delays in generating responses to the requests from the FDA related to the clinical hold. Many
of these delays are due to the impact of the COVID-19 pandemic in foreign countries where we are conducting these preclinical studies
and assays, including India, Europe, Singapore and Thailand. There have also been supply chain interruptions due to the COVID-19 pandemic.
Further, many clinical trials
have been delayed due to COVID-19. There are numerous reasons for these delays. For example, patients have shown a reluctance to enroll
or continue in a clinical trial due to fear of exposure to COVID-19 when they are in a hospital or doctor’s office. There are local,
regional and state-wide orders and regulations restricting usual normal activity by people. These discourage and interfere with patient
visits to a doctor’s office if the visit is not COVID-19 related. Healthcare providers and health systems have shifted their resources
away from clinical trials toward the care of COVID-19 patients. The FDA and other healthcare providers are making product candidates for
the treatment of COVID-19 a priority over product candidates unrelated to COVID-19.
As a result of COVID-19
and the mitigation efforts to address it, we may experience additional disruptions that could adversely impact our business and
clinical trial, if allowed to proceed, including: (i) delays or difficulties in enrolling patients in our Phase 2b clinical trial if the FDA
allows us to go forward with the trial; (ii) delays or difficulties in clinical site activation, including difficulties in
recruiting clinical site investigators and clinical site personnel; (iii) delays in clinical sites receiving the supplies and
materials needed to conduct our clinical trial, including interruption in global shipping that may affect the transport of our
clinical trial product; (iv) changes in local regulations as part of a response to the COVID-19 pandemic which may require us to
change the ways in which our clinical trial is to be conducted, which may result in unexpected costs, or to discontinue the clinical
trial altogether; (v) diversion of healthcare resources away from the conduct of clinical trials, including the diversion of
hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trial; (vi) interruption of
key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by
federal or state governments, employers and others, or interruption of clinical trial subject visits and study procedures, the
occurrence of which could affect the integrity of clinical trial data; (vii) risk that participants enrolled in our clinical trials
will acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial, including by
increasing the number of observed adverse events; (viii) delays in necessary interactions with local regulators, ethics committees,
and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees;
(ix) limitations in employee resources that would otherwise be focused on the conduct of our clinical trial because of sickness of
employees or their families or the desire of employees to avoid contact with large groups of people; (x) refusal of the FDA to
accept data from clinical trials in affected geographies; and (xi) interruption or delays to our clinical trial activities.
As a result of the COVID-19
pandemic, commencement of our planned clinical trial to treat LAPC may be delayed beyond the lifting of the clinical hold by the FDA should
that occur. Also, enrollment may be difficult for the reasons discussed above. In addition, after enrollment in the trial, if patients
contract COVID-19 during their participation in the trial or are subject to isolation or shelter in place restrictions, this may cause
them to drop out of our clinical trial, miss scheduled therapy appointments or follow-up visits or otherwise fail to follow the clinical
trial protocol. If patients are unable to follow the clinical trial protocol or if the trial results are otherwise affected by the consequences
of the COVID-19 pandemic on patient participation or actions taken to mitigate COVID-19 spread, the integrity of data from the clinical
trial may be compromised or not be accepted by the FDA. This could further adversely impact or delay our clinical development program
if the FDA allows it to proceed.
It is highly speculative in
projecting the effects of COVID-19 on our proposed clinical development program and the Company generally. Moreover, the various precautionary
measures taken by many governmental authorities around the world in order to limit the spread of COVID-19 has had and may continue to
have an adverse effect on the global markets and global economy, including on the availability and pricing of employees, resources, materials,
manufacturing and delivery efforts and other aspects of the global economy. The continuation of the COVID-19 pandemic could materially
disrupt our business and operations, hamper our ability to raise additional funds or sell or securities, continue to slow down the overall
economy, curtail consumer spending, interrupt our sources of supply, and make it hard to adequately staff our operations. The effects
of COVID-19 quickly and dramatically change over time. Its evolution is difficult to predict, and no one is able to say with certainty
when the pandemic will cease to have an impact on our operations.
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 Phase 2b clinical trial in LAPC; (iv) have
regulatory work completed to enable studies and 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; (vi) ensure completion of the production of encapsulated
cells according to cGMP regulations to use in our planned clinical trial; (vii) complete
all of the tasked the FDA requires of us in order to have the clinical hold lifted; and (viii) obtain approval from the FDA to lift the
clinical hold on our IND that we may commence our planned Phase 2b clinical trial in LAPC.
There are numerous items required to be completed
successfully to ensure our final product candidate is ready for use in our planned clinical trial in 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.
Liquidity and Capital Resources
Our Consolidated Financial statements and related
Notes have been prepared on a going-concern basis; however, the following conditions raise substantial doubt about the Company's ability
to do so. We have not generated any revenues and have not yet achieved profitable operations. There is no assurance that profitable operations,
if ever achieved, could be sustained on a continuing basis. The Consolidated Financial Statements do not include any adjustments that
might be necessary should we be unable to continue in existence. We have not generated any revenues and have not yet achieved profitable
operations. Also, development activities, preclinical studies, clinical trials and commercialization of our product candidates will require
significant additional capital resources. Our deficit accumulated through April 30, 2021 was $107,409,493. We expect to incur substantial
and increasing losses in future periods. Our total cash in the bank was $2,202,106 and $894,861 as of April 30, 2021 and 2020, respectively.
Our net loss was $3,551,236 and $3,826,888 for the years ended April 30, 2021 and 2020, respectively. Cash flows from investing activities
were $0 for the years ended April 30, 2021 and 2020. Net cash provided by financing activities was $4,636,807 and $2,725,848 for the years
ended April 30, 2021 and 2020, respectively. For more information, see the discussion under the caption “—Discussion of Operating,
Investing and Financing Activities” in this Item 7.
Our ability to successfully pursue our business
is subject to certain risks and uncertainties, including, among other things, uncertainty of product development, uncertainty that the
FDA will lift the clinical hold, uncertainty that the FDA will approve our IND after we have submitted our responses to the FDA’s
clinical hold, need to raise additional capital to fund our various studies and FDA submissions, competition from third parties, uncertainty
of capital availability, in particular, when we lose the ability to utilize our currently active S-3 registration statement upon the filing
of this Report, uncertainty in our ability to enter agreements with collaborative partners, dependence on third parties and dependence
on key personnel. We plan to finance future operations with a combination of proceeds from the issuance of equity, debt, licensing fees
and revenues from future product sales, if any. We have not generated positive cash flows from operations. There are no assurances that
we will be successful in obtaining an adequate level of funding for the development and commercialization of our product candidates.
We do not believe there are trends, events or
uncertainties that have, or are reasonably likely to have, a material effect on our short-term or long-term liquidity. Our R&D activities
are scalable. This means that we can increase or decrease the expenses associated with our planned preclinical studies and clinical trials
based on our available cash. We have no contractual obligations to perform preclinical studies or clinical trials. For the time being,
the principal source of our cash is the sale of our common stock in registered offerings and private placements. However, there are no
assurances that such sales will be sufficient to fund our planned clinical trial and other R&D costs.
The Statement of Cash Flow is the focal point
for our liquidity, although the exercising of warrants and/or options at appropriate times by our investors, consultants, officers and
directors will have potentially important positive effects on our liquidity. We also believe that the relationship between changes in
operating results may induce changes in liquidity. For example, we may experience material changes in working capital components due to
the acquisition of new capital through the sale of our common stock and the conversion of warrants and/or options by our investors, consultants,
officers and directors. We rely solely on working capital as our liquidity indicator, since we do not presently have any open credit lines;
however, we may try to obtain credit lines or other credit facility in the future. Further, as has often been a part of our mechanism
to maintain overall liquidity, internal sources of liquidity from others associated with us may be utilized when needed.
We do not utilize any advanced methodology of
cash management beyond paying our normal expenses.
On February 22, 2018, we entered into a financial
advisory offering and an “at the market offering” engagement agreement (“Aeon Agreement”) with Aeon Capital, Inc.
(“Aeon”) pursuant to which Aeon agreed to use its reasonable best efforts to act as our agent for the sale of up to $25,000,000
of our common stock in “at-the-market,” or privately negotiated transactions, or transactions structured as a public offering
of a distinct block or blocks of the shares of our common stock (“Block Trades”). In connection with a transaction deemed
to be an “at the market offering”, we agreed to pay Aeon a cash fee of 3% of the aggregate sales price from the sale of shares
of our common stock. In connection with a transaction structured as a Block Trade, we agreed to pay Aeon a cash fee of 7% of the aggregate
sales price of any Block Trade sold under the Aeon Agreement unless the Company introduced the investor to Aeon, in which event the fee
is 4%, plus five-year warrants representing 5% of the number of shares of common stock sold at an exercise price equal to the price per
share at which the shares were sold in the Block Trade. We also agreed to reimburse certain expenses of Aeon in an amount not to exceed
$10,000. In addition, we agreed to provide Aeon with customary indemnification rights. On February 4, 2021, the Aeon Agreement was terminated.
From May 1, 2020 to April 30, 2021, the Company
sold approximately 462,000 shares of our common stock structured as a Block Trade. The issuance of these shares resulted in gross proceeds
of approximately $4.7 million. Pursuant to the Aeon Agreement, we incurred fees of approximately $472,000 and provided warrant coverage
of 5% of the number of shares sold with a five-year term of approximately 23,000 warrant shares.
On April 26, 2021 we entered into an engagement
letter with H.C. Wainwright & Co., LLC, as underwriter, with respect to the securities to be offered in a proposed public offering
We require substantial additional capital to finance
our planned business operations and expect to incur operating losses in the future due to the expenses related to our core businesses.
We have not realized material revenue since we commenced doing business as a biotechnology company, and there can be no assurance that
we will be successful in generating revenues in the future in this sector.
As of April 30, 2021, we had approximately $2,202,000
in cash in our bank account at that time the cash expenditures were approximately $200,000 per month.
We believe our cash on hand, potential future
sales of registered and unregistered shares of our common stock and the proceeds of the offering led by H.C. Wainwright & Co., LLC
will provide sufficient capital to meet our capital requirements and to fund our operations through August 31, 2022.
We will continue to be dependent on outside capital
to fund our research and operating expenditures for the foreseeable future. If we fail to generate positive cash flows or fail to obtain
additional capital when required, we may need to modify, delay or abandon some or all our business plans.
Subsequent Events
On August 9, 2021, we entered into an underwriting
agreement with H.C. Wainwright & Co., LLC with respect to a public offering of 2,630,385 shares of our common stock, 899,027 prefunded
warrants and 3,529,412 accompanying common warrants. The total gross proceeds of the offering before deduction of underwriting discounts,
commissions and estimated offering expenses are expected to be $15 million.
In such offering, we granted the underwriter an
option for a period of 30 days commencing on August 9, 2021 to purchase additional shares of our common stock and/or accompanying warrants.
If the underwriter exercises such option in full, the total gross proceeds of the offering before deduction of underwriting discounts,
commissions and estimated offering expenses are expected to be $17,249,998.
Year ended April 30, 2021 compared to year
ended April 30, 2020
Revenue
We had no revenues in the fiscal years ended April
30, 2021 and 2020.
Operating Expenses
The total operating expenses during the year ended
April 30, 2021 decreased by $203,414 to $3,622,981 from $3,826,395 in the year ended April 30, 2020. The decrease is mainly attributable
to a decrease in compensation expense and in consulting expense as we awarded less stock-based consulting fees and compensation in 2021
than in 2020, net of increases in R&D costs and legal and professional expense.
Loss from Operations
Loss from operations during the year ended April
30, 2021 decreased by $203,414 to $3,622,981 from $3,826,395 in the year ended April 30, 2020. The decrease is mainly attributable to
decreases in compensation expense, director fees and in consulting expense net of increases in R&D costs and legal and professional
expense.
Other Income (Expenses), Net
Other income, net for the year ended April 30,
2021 was $71,745 as compared to other expense, net of $493 in the year ended April 30, 2020. Other income, net for the year ended April
30, 2021, is attributable to the forgiveness of the Paycheck Protection Program (“PPP”) loan and accrued interest of $75,979
net of interest and other expenses of $4,234.
Discussion of Operating, Investing and Financing
Activities
The following table presents a summary of our
sources and uses of cash for the years ended April 30, 2021 and 2020.
Net cash used in investing activities: $ – $ –
Effect of currency rate exchange $ 1,327 $ (7,867 )
Operating Activities:
The cash used in operating activities for the
years ended April 30, 2021 and 2020 is a result of our net losses offset by securities issued for services and compensation, changes
to prepaid expenses, accounts payable and accrued expenses.
Investing Activities: We had no
investing activities for the years ended April 30, 2021 and 2020.
Financing Activities:
The cash provided from financing activities for
the years ended April 30, 2021 and 2020 is mainly attributable to the proceeds from the sale of our common stock.
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, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
On May 14, 2018, we entered into amendments to
all of the material agreements with SG Austria and Austrianova. See Section entitled, History of the Business” in Item 1. Business.
above for a description of these amendments.
Critical Accounting Estimates and Policies
Our Consolidated Financial Statements are prepared
in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). We are required to make assumptions and estimates
about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the related
disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management
believes to be relevant at the time our Consolidated Financial Statements are prepared. On a regular basis, management reviews the accounting
policies, assumptions, estimates and judgments to ensure that our Consolidated Financial Statements are presented fairly and in accordance
with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from
our assumptions and estimates, and such differences could be material.
Our significant accounting policies are discussed
in Note 2 of the Notes to our Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data”
of this Report. Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating
our reported financial results and require management’s most difficult, subjective or complex judgments resulting from the need
to make estimates about the effects of matters that are inherently uncertain. Management has reviewed these critical accounting estimates
and related disclosures with our Board.
Research and Development Expenses
R&D expenses consist of costs incurred for
direct and overhead-related research expenses and are expensed as incurred. Costs to acquire technologies, including licenses, that are
utilized in R&D and that have no alternative future use are expensed when incurred. Technology developed for use in our product candidates
is expensed as incurred until technological feasibility has been established.
Stock-Based Compensation
Our stock-based compensation plans are described
in Note 4 and 5 of the Notes of the Consolidated Financial Statements to this Report. We follow the provisions of ASC 718, Compensation
- Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based
awards made to employees. Effective August 1, 2018, we adopted ASU 2018-07 Compensation - Stock Compensation (Topic 718): - Improvements
to Nonemployee Share-Based Payment Accounting, which simplified the guidance for accounting for nonemployee share-based payment transactions
for acquiring goods and services from nonemployees.
Net Income (Loss) Per Share
Basic net income (loss) per share of common stock
is computed using the weighted-average number of common stock shares outstanding. Diluted net income (loss) per share of common stock
is computed using the weighted-average number of shares of common stock and shares of common stock equivalents outstanding. Potentially
dilutive stock options and warrants to purchase 44,314 and 76,727 post reverse stock split shares of common stock at April 30, 2021 and
2020, respectively, were excluded from the computation of diluted net income (loss) per share because the effect would be anti-dilutive.
New Accounting Pronouncements
For a discussion of all recently adopted and recently
issued but not yet adopted accounting pronouncements, see “Recent Accounting Pronouncements” in Note 2 of our Notes to our
Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data” of this Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
We are a smaller reporting company and are not
required to include information called for by this Item 7A.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
Our Consolidated Balance Sheets, as of April
30, 2021 and 2020, and our Consolidated Statements of Operations, Comprehensive Loss, Stockholders Equity and Cash Flows for each of
the two years in the period ended April 30, 2021 and associated Notes and Schedules, together with the reports thereon of our independent
registered public accounting firm, are set forth on pages F-1 to F-27
of this Report and are incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
Our principal independent public accountant is
Armanino LLP (“Armanino”). During our fiscal years ended April 30, 2021 and 2020, there have been no disagreements with Armanino
on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved
to Armanino’s satisfaction, would have caused Armanino to refer to the subject matter in its report on our Consolidated Financial
Statements for such periods.
During our fiscal years ended April 30, 2021 and
2020, there were no “reportable events” requiring disclosure pursuant to Item 304(a)(1)(v) of Regulation S-K. As used herein,
the term “reportable event” means any of the items listed in paragraphs (a)(1)(v)(A) - (D) of Item 304 of Regulation S-K.
ITEM 9A. 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) promulgated under the 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 April
30, 2021, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial
reporting, below described in Management’s Report on Internal Control over Financial Reporting.
A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Also, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The
design of any system of controls is also based in part upon certain assumptions about the likelihood of future events. There can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Controls
over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal controls over financial reporting as that term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United
States of America (“U.S. GAAP”).
A material weakness is a deficiency, or a combination
of deficiencies, in internal controls over financial reporting such that there is a reasonable possibility that a material misstatement
of the company’s annual or interim financial statements will not be prevented or detected in a timely basis.
Under the supervision and with the participation
of our Chief Executive Officer and our Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal
controls over financial reporting as of April 30, 2021 based on the criteria outlined in Internal Control-Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and identified the following material
weaknesses in internal controls over financial reporting:
Because of these material weaknesses, our Chief
Executive Officer and our Chief Financial Officer concluded that, as of April 30, 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 fiscal year 2022. We plan to make changes to our procedures and controls that we believe are reasonably likely to strengthen
and materially affect our internal controls over financial reporting.
Prior to the remediation of these material weaknesses,
there remains risk that the processes and procedures on which we currently rely will fail to be sufficiently effective, which could result
in material misstatement of our financial position or results of operations and require a restatement. Because of the inherent limitations
in all control systems, no evaluation of controls - even where we conclude the controls are operating effectively - can provide absolute
assurance that all control issues, including instances of fraud, if any, have been detected. These inherent limitations include the realities
that judgments in decision making can be faulty, and breakdowns can occur because of simple error or mistake. Additionally, controls can
be circumvented by the individual acts of a person, by collusion of two or more people, or by management override of the controls. The
design of any system of controls also is based in part upon certain assumptions about the likelihood of future events; accordingly, there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, our control
systems, as we develop them, may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures
may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur
and not be detected and could be material to our financial statements.
Remediation of a Material Weakness
Throughout the year ended
April 30, 2021, the Company undertook remediation measures related to a previously reported material weakness in internal control over
financial reporting. The previously reported material weakness related to insufficient procedures and control documentation including
lack of timely contract preparation and review by qualified personnel and management. We completed this remediation measures during the
year ended April 30, 2021, including testing of the design and implementation of the related controls. Specifically, we implemented a
more rigorous process to provide ample review time of financial information, including contract preparation and review by qualified personnel
as well as management. Based on these procedures, we believe that the previously reported material weakness has been remediated.
Changes in Internal Controls over Financial
Reporting
Other than described
above in this Item 9A, there were no changes to our internal control over financial reporting during the fiscal year ended April 30, 2021
that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
The Certifications of our Principal Executive
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 9A 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 9A for a
more complete understanding of the matters covered by the Certifications.
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
As of August 9, 2021, our directors and executive
officers are:
Age Position
Gerald W. Crabtree, PhD. 80 Director and Chief Scientific Officer
Carlos A. Trujillo, CPA 63 Director and Chief Financial Officer
Thomas Liquard 48 Director
Thomas C. K. Yuen 69 Director
Michael M. Abecassis, MD 63 Director
Raymond C.F. Tong, MD. 62 Director
Kenneth L. Waggoner, JD
He became our Chief Executive Officer and President
in November 2013. Shortly thereafter, Mr. Waggoner assumed the additional position of General Counsel. In April 2014, Mr. Waggoner became
a full-time employee as the Chief Executive Officer, President and General Counsel of both PharmaCyte and Viridis Biotech, a wholly owned
subsidiary of PharmaCyte. Mr. Waggoner has been a member of the Board since September 2014. Mr. Waggoner has over forty-five years of
experience in management, business, operations and the practice of law. It was his education, training, experience and leadership skills
that led us to elect him to the Board and appoint him Chairman.
Mr. Waggoner began his professional career as
an attorney in private practice. From 1986 to 2003, he was a senior partner with Brobeck, Phleger and Harrison (“Brobeck”),
where he was the Managing Partner of Brobeck’s Los Angeles office. While at Brobeck, Mr. Waggoner served as a member of the Executive
Committee and on the Policy Committee. Mr. Waggoner was the co-Chairman of Brobeck’s worldwide Environmental Law Group.
Mr. Waggoner’s career included leadership
and legal positions with Fortune 100 companies most of his professional career. From 2003 to 2005, Mr. Waggoner served as the Vice President
and General Counsel of Chevron’s global downstream operations where he was responsible for the overall management of legal services
to the North American, Latin American, European and Asian Products Companies. While at Chevron, Mr. Waggoner led the successful restructuring
of Chevron’s global Legal Department following Chevron’s acquisition of Texaco.
From 2005 until September 2013, Mr. Waggoner was
the principal of the Law Offices of Kenneth L. Waggoner & Associates. During that time, he held leadership and legal positions with
several start-up companies and provided legal counsel and business advice to his clients.
Mr. Waggoner received his Juris Doctorate with
honors from Loyola University School of Law in Los Angeles in 1973.
Gerald W. Crabtree, PhD
Dr. Crabtree is our Chief Scientific Officer
and has been a member of the Board since February 2013. He has served as Chief Scientific Officer since October 14, 2020. Prior to
that, Dr. Crabtree was our Chief Operating Officer. Given the major importance to developing treatments for cancer and diabetes
coupled with Dr. Crabtree’s education, training and experience, Dr. Crabtree was appointed to the Board.
Dr. Crabtree’s background in the biomedical
sciences has been substantial, having been involved with various biopharmaceutical companies where he has alternatively supervised and
coordinated the development of multiple drug candidates, prepared clinical protocols, investigator brochures, monographs, and research
and review articles.
Dr.
Crabtree has over 50 years of experience in the biomedical sciences sector with the majority of that being in the cancer area. Dr. Crabtree
served as the Director of Project Planning and Management (Oncology and Immunology) at Bristol-Myers Squibb (“BMS”) from 1990
to 1997. While at BMS, Dr. Crabtree established and directed the department that coordinated the development of all oncologic and immunologic
drugs from initial discovery through regulatory approval. He also served as Project Manager for the development of the major anticancer
agent, Taxol. Taxol ultimately became a multi-billion-dollar drug for BMS and is still widely used to treat a variety of cancers. From
1985 to 1990, Dr. Crabtree was the Director of Pharmacology at Viratek, a subsidiary of ICN Pharmaceuticals, in Costa Mesa, California,
where he worked on the development of anticancer drugs first developed at the Nucleic Acid Research Institute, a joint venture between
Eastman Kodak and ICN Pharmaceuticals. He also helped coordinate the development of ribavirin, Viratek's landmark antiviral drug. From
1970 through 1985, Dr. Crabtree was a member of the faculty of Brown University where he was involved in both basic and clinical cancer
research.
Dr. Crabtree received
his Ph.D. in Biochemistry from the University of Alberta, Edmonton, Alberta, Canada, and has published over 80 articles in peer-reviewed
journals. He was a National Cancer Institute of Canada Research Fellow, is currently a member of the American Society of Clinical Oncology
and was a member of the American Association for Cancer Research from the early 1990s until recently and has served on research grant
review committees for the National Institutes of Health and the American Cancer Society.
Carlos A. Trujillo, CPA
Carlos A. Trujillo has been our Chief
Financial Officer and a member of the Board since March 2017. He began working for us as an independent contractor in September
2014. In January 2015, Mr. Trujillo became a full-time employee as the Vice President of Finance of both us and Viridis Biotech, and
in March 2017, Mr. Trujillo was appointed as our Chief Financial Officer. Mr. Trujillo has over three decades of experience in management, business, operations and financial accounting. It was his
education, experience and leadership skills that led us to elect him to the Board.
Mr. Trujillo is a Certified Public Accountant
with an active license from the State of California. He has more than three decades of experience in finance, accounting and management.
Mr. Trujillo started his career in public accounting and was the manager of an audit department a large regional public accounting firm.
Mr. Trujillo then established a consulting and accounting practice which he operated for ten years and provided services as the Chief
Financial Accountant to numerous organizations in several different industries. His experience has extended to companies in the biotechnology,
telecommunications, manufacturing, construction and real estate development sectors.
For the last fourteen years, Mr. Trujillo has
been the Chief Financial Officer for both privately held and publicly traded and multinational companies. From June 2008 through September
2014, Mr. Trujillo was the Chief Financial Officer of VelaTel Global Communications, Inc. As a result, he brings extensive experience
to us in preparing and filing periodic reports with the Commission, in mergers and acquisitions and in the filing of comprehensive financial
statements.
Mr. Trujillo received his Bachelor of Accounting
degree from California State University, Fullerton in 1982.
Thomas Liquard
Thomas Liquard has been a member of the Board
since April 2015. Mr. Liquard has more than 15 years of experience in the pharmaceutical industry,
having held various commercialization, product development and leadership roles with large pharmaceutical and biotechnology companies.
Mr. Liquard
currently serves as the Senior Vice President of Product Development at Neurelis, Inc., a San Diego based biotechnology company. He joined
Neurelis in late 2017. He From August 2015 to August 2017, Mr. Liquard was the Chief Executive Officer of Immuron, a Melbourne, Australia-based
pharmaceutical company. Prior to Immuron, Mr. Liquard served as the Chief Executive Officer and Chief Operating Officer of Alchemia, a
major Australian pharmaceutical company. Mr. Liquard worked for Alchemia from October 2013 to November 2014. Mr. Liquard spent the previous
seven years with Pfizer, Inc. based in New York, where he held various senior commercial positions. His last was as Senior Director, Portfolio
Development Leader and Emerging Markets for the Established Products portfolio. In that role, Mr. Liquard drove business development (M&A,
licensing, partnerships) and internal product development initiatives.
Mr. Liquard was appointed to the Board because
of his experience and expertise in leading positions with life science-based biotech and pharmaceutical companies. We believed that his
seven-year tenure with Pfizer, one of the world’s leading pharmaceutical companies, where he played leading roles in the development
of that company’s portfolio development, was a needed asset to us. Mr. Liquard received his Master of Business Administration in
Finance and Strategy from the Columbia Business School and a Bachelor of Science degree from the University of Southern California.
Thomas C. K. Yuen
Thomas C. K. Yuen was appointed to the Board in
May 2017. Mr. Yuen has more than three decades of experience in entrepreneurship and business leadership, including in the biotech industry.
It was his stellar career in business, leadership skills and business acumen and experience that led us to elect him to the Board.
Mr. Yuen’s career is exemplified by his
global entrepreneurial experience. He co-founded Irvine-based AST Research, Inc. (“AST”) in 1981. AST was an early pioneer
of the computer industry, and the company has been referred to as “the flagship of innovation in the PC era.” Mr. Yuen served
as AST's Co-Chairman and Chief Operating Officer from August 1987 to June 1992. Under his leadership, AST became a Fortune 500 company
in 1991, and its stock was named the “Best Performing NASDAQ Stock” of that year.
Mr. Yuen left AST in 1992 and focused his efforts
on investing in new projects. Mr. Yuen served in various engineering and project management positions with Hughes Aircraft Company, Sperry
Univac and Computer Automation. Later in his career, Mr. Yuen became Chairman and CEO of SRS Labs, a world leader in audio and voice technology.
Currently, Mr. Yuen is Chairman and Chief Executive Officer of PrimeGen Biotech, LLC, a private cell therapy company he founded in 2002.
Mr. Yuen has held numerous director positions.
He served as a Director of AST from 1981 to June 1992. He served as a Director of Valence Technology, Inc., an energy storage company,
from March 1998 to March 2000 and a Director of DTS, Inc., an audio technology company, from April 2012 to July 2013. Mr. Yuen has served
as a Director of SRS Labs since January 1994. He is also an Honorary Professor of China Nationality University in Beijing.
In 1988 and 1991, the Computer Reseller News Magazine
named Mr. Yuen one of the top 25 executives of the computer industry. In 1997, he received the Director of the Year Award from the Orange
County Foundation of Corporate Directors. Mr. Yuen is the recipient of several awards from the University of California, Irvine (“UCI”),
including the UCI Medal in 1990, the Outstanding Engineering Alumni Award in 1987 and the Distinguished Alumnus Award in 1986. Also, Mr.
Yuen has received the prestigious UCI Extraordinarious Award for his exemplary career in business and his philanthropic and volunteer
activities.
Mr. Yuen
received his Bachelor of Science degree in Electrical Engineering from the University of California, Irvine.
Michael M. Abecassis, MD
Dr. Abecassis was appointed to the Board in
July 2017. Since November 2019, Dr. Abecassis has been Dean of the University of Arizona College of Medicine – Tucson. Prior
to that and since 1992, Dr. Abecassis was a transplantation surgeon at the Northwestern University Feinberg School of Medicine. Dr.
Abecassis was appointed to the Board because of his demonstrated leadership qualities in academia, in the clinic and throughout his
career in medicine. These
attributes and his extensive experience in the medical field translate directly to the work being undertaken by us in the
cancer arena.
Dr. Abecassis was the Director of the Comprehensive
Transplant Center of the Feinberg School of Medicine. He was also the Chief of Transplant Surgery in the Department of Surgery at
Feinberg and a James Roscoe Miller Distinguished Professor of Medicine at Feinberg.
Dr. Abecassis received his Medical Degree from
the University of Toronto in 1983 and was awarded a Master of Business Administration degree from the Kellogg School of Management at
Northwestern University in 2000. After his postgraduate tenure in Toronto, Dr. Abecassis began his clinical career as Assistant Professor
of Surgery and Director of Liver Transplantation and Hepatobiliary Surgery at the University of Iowa. In 1993, Dr. Abecassis became Northwestern
University’s Director of Liver Transplantation, where he initiated Northwestern’s liver transplant program. In 2004, Dr. Abecassis
was named Chief of the Division of Transplantation at the Feinberg School of Medicine. He became Founding Director of the Comprehensive
Transplant Center at Northwestern in 2009 and was appointed Dean for Clinical Affairs at the Feinberg School of Medicine in 2008, serving
until 2011.
Dr. Abecassis has received continuous funding
from the National Institutes of Health (“NIH”) for the past 17 years. He is the principal investigator in research that includes
both laboratory and clinical studies. He is also the principal investigator of the clinical core of the NIH Genomics of Transplantation
Cooperative Research Program. Dr. Abecassis has trained numerous clinical and research fellows.
Dr. Abecassis is a member of the Society of University
Surgeons and the American Surgical Association and was President of the American Society of Transplant Surgeons 2010-2011. He has served
and continues to serve on the Editorial Boards of major scientific journals (Hepatology, Surgery, Transplantation and Liver Transplantation)
and is a reviewer for all major journals related to surgery and transplantation. He has served as a member of NIH grant study sections
and special emphasis panels relating to both transplantation and virology. He is a permanent member of the National Institute of Allergy
and Infectious Diseases study section for career development and training grants.
Dr. Abecassis has been a course director for the
American Society of Transplant Surgeons Leadership Development Program since 2010 and was course director for the Advanced Leader Development
Program in 2013 at Northwestern’s Kellogg School of Management. He was a voting member of the Medicare Coverage Advisory Committee
and served on the United HealthCare Group Physician Advisory Board on Healthcare Performance and Quality. Dr. Abecassis has been
a member of various local, regional and national regulatory committees and has published seminal papers on both the regulatory and financial
aspects of transplantation, including the Healthcare Reform and the Affordable Care Act.
Raymond C.K Tong, MD
Dr. Tong serves as Chief Executive Officer of
Harmony Medical Inc., an Asian investment group active in the introduction and distribution of medical and healthcare products and services
in China and throughout Asia. He is also Chairman of the Business Development Committee of Shanghai Kedu Healthcare Group, the largest
medical equipment third-party service provider in China, representing products from GE, Philips, Siemens, Kodak and other multi-nationals
as well as local companies. He was appointed to the Board in October 2017. It was his stellar career in the medical field, as well as
his significant connections to the investment community throughout Asia, leadership skills and business acumen and experience that caused
us to elect him to the Board.
Dr. Tong has been a Director of Medifocus Inc.
since January 27, 2015. He was also a Director of Shanghai CP Guojian Pharmaceutical, one of the first and largest bio-pharmaceutical
manufacturers in China. In addition, Dr. Tong is the founding Director and Chief Executive Officer of VetCell Therapeutics Asia, a cell
therapy company focused on providing cell-based treatments for use in veterinary medicine in Asia.
Dr. Tong’s earlier career includes
senior management positions in China with Pfizer and Ball Corporation. He was also responsible for the Healthcare Investment Division
of CITIC in Hong Kong. CITIC is the largest conglomerate in China and an established global player,
with businesses covering healthcare, financial services, resources, energy, manufacturing, engineering and many others.
Dr. Tong received his medical degree from the
University of Toronto in Ontario, Canada in 1983. He also received a Ph.D. degree in neurophysiology and an M.B.A. degree. After receiving
his medical degree, Dr. Tong founded a chain of medical clinics in the Province of Ontario where he served as Medical Director and Chief
Physician. During this period, he also served as a consultant and an investigator in several clinical trials. In 1989, Dr. Tong returned
to Hong Kong, where he was born and resided before medical school, and spent the next 19 years in prominent corporate appointments with
several multinational medical and pharmaceutical companies discussed above.
Family Relationships
There are no family relationships among our executive
officers, directors and significant employees. As of April 30, 2021, our personnel do not have any involvement in legal proceedings requiring
disclosure pursuant to the Rules and Regulations of the Commission.
Corporate Governance and Committees
Our Board has adopted a written Code of Business
Conduct and Ethics, an Insider Trading Policy and Software Policies that apply to our directors, officers, employees and contractors.
These documents can be viewed and downloaded from the “Governance” dropdown menu of our website under the “Company”
tab. The content of these documents is not incorporated into this Form 10-K.
Board Leadership and Structure
The Chairman of the Board presides at all meetings
of the Board. Mr. Waggoner serves as the Chairman of the Board and as our Chief Executive Officer, President and General Counsel.
The Board does not have a policy on whether or
not the roles of Chief Executive Officer and Chairman of the Board should be separate. The Board believes that it should be free to make
a choice from time to time in any manner that is in the best interests of the Company and our stockholders.
Audit Committee
The Audit Committee is currently comprised of
Dr. Michael Abecassis, Dr. Tong, Mr. Yuen and Mr. Liquard. The Chairman of the Audit Committee is Mr. Liquard. The primary purposes of
our Audit Committee are to assist the Board in fulfilling its legal and fiduciary obligations with respect to matters involving the accounting,
auditing, financial reporting, internal control, legal compliance and risk management functions of the Company, including, assisting the
Board’s oversight of: (i) the integrity of our financial statements; (ii) the effectiveness of our internal control over financial
reporting; (iii) our compliance with legal and regulatory requirements; (iv) the qualifications and independence of our independent registered
public accounting firm; and (v) the performance of our internal audit function and independent registered public accounting firm.
Our Board has determined that each member of our
Audit Committee is independent within the meaning of the rules of Nasdaq. Our Board has determined that the Chairman of the Audit Committee,
Mr. Liquard, is an “audit committee financial expert,” as that term is defined in Item 407(d) of Regulation S-K under the
Exchange Act.
Our Audit Committee charter can be viewed and
downloaded from the “Governance” dropdown menu of our website under the “Company” tab.
Compensation Committee
The Compensation Committee is currently comprised
of Mr. Liquard, Mr. Waggoner and Mr. Yuen. The Chairperson of the Compensation Committee is Mr. Liquard. The primary purposes of our Compensation
Committee are: (i) to establish and maintain our executive compensation policies and compensation consistent with corporate objectives
and stockholder interests; (ii) to oversee the competency and qualifications of our senior management personnel and the provisions of
senior management succession planning; and (iii) to advise the Board with respect to director compensation issues. On July 28, 2021, Mr.
Waggoner resigned from the Compensation Committee.
The Compensation Committee, which is composed
of a majority of independent directors, provides overall guidance for our executive compensation policies and determines the value and
elements of compensation for our executive officers.
Our Compensation Committee charter can be viewed
and downloaded from the “Governance” dropdown menu of our website under the “Company” tab.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee
is currently comprised of Dr. Crabtree, Dr. Tong and Mr. Liquard. The Chairperson of the Nominating and Corporate Governance Committee
is Dr. Crabtree. On July 28, 2021, Dr. Crabtree resigned from the Nominating and Corporate Governances Committee.
The primary purposes of the Nominating Committee
are: (i) to recommend to the Board the nomination of individuals who are qualified to serve as our directors and on committees of the
Board; (ii) to advise the Board with respect to the composition, size, structure and procedures of the Board; (iii) to advise the Board
with respect to the composition, size and membership of the Board’s committees; (iv) to advise the Board with respect to corporate
governance principles applicable to the Company; and (v) to oversee the evaluation of the Board as a whole and the evaluation of its individual
members standing for re-election. The Nominating Committee also has responsibility for reviewing and approving all transactions that are
“related party” transactions under the Commission’s rules.