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, diabetes and malignant ascites 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 preparing for a 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, we submitted an IND to the
FDA for our planned clinical trial in LAPC. On October 1, 2020, we 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.
To address our clinical hold, we 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 us and the efforts we have undertaken to lift the clinical
hold, see Item 1. Business under the Section entitled, “Clinical Hold” of this Report.
We are also developing a way to delay the production
and accumulation of malignant ascites that results from many types of abdominal cancerous tumors. Our therapy for malignant ascites involves
using the same encapsulated cells we employ for pancreatic cancer but placing the encapsulated cells in the peritoneal cavity of a patient
and administering ifosfamide intravenously.
In addition to these cancer programs, 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. However, until the FDA allows us to commence our clinical
trial in LAPC and we are able to validate our Cell-in-a-Box® encapsulation technology in a clinical trial, we are not spending
any further resources developing our Cannabis Program.
Finally, we have 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 encapsulated cells in the body is designed to function as a bio-artificial pancreas for purposes of insulin production.
Reverse Stock Split
Effective July 12, 2021, we filed a Certificate
of Change to our Articles of Incorporation, as amended (the “Articles of Incorporation”) with the Nevada Secretary of State
that authorized a 1:1500 reverse stock split of our common stock. The reverse stock split resulted in reducing the authorized number of
shares of our common stock from 50 billion to thirty-three million three hundred thirty-three thousand three hundred thirty-four with
a par value of $0.0001 per share. Any fractional shares resulting from the reverse stock split were rounded up to the next whole share.
All warrants, option, share and per share information in this Report gives retroactive effect to such 1:1500 reverse stock split.
Increase in Authorized Shares
On March 14, 2023, we filed a Certificate of Change
with the State of Nevada, Secretary of State, to increase the number of authorized shares of our common stock to 133,333,334 shares effective
immediately. The par value remained $0.0001 per share.
COVID-19 Impact on Our Financial Condition
and Results of Operations
We face the ongoing risk that the coronavirus
pandemic may slow our operations, our preclinical studies or the eventual enrollment of our planned clinical trial. In order to prioritize
patient health and that of the investigators at clinical trial sites, we may need monitor enrollment of patients in our clinical study.
In addition, some patients may be unwilling to enroll in our trials or be unable to comply with clinical trial protocols if quarantines
or travel restrictions impede patient movement or interrupt healthcare services. These and other factors outside of our control could
delay our ability to conduct clinical trials or release clinical trial results. In addition, the effects of the ongoing coronavirus pandemic
may also increase non-trial costs such as insurance premiums, increase the demand for and cost of capital, increase loss of work time
from key personnel, and negatively impact our key clinical trial vendors.
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) 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 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
As of April 30, 2023, our cash and cash equivalents
totaled approximately $68 million, compared to approximately $85.4 million as of April 30, 2022. Working capital was approximately $67.6
million as of April 30, 2023, and approximately $84.8 million as of April 30, 2022. The decrease in cash is attributable to the repurchase
of our common stock pursuant to the Repurchase Programs, recorded as treasury stock and an increase in our operating expenses.
2021 Underwritten Offering
On August 9, 2021, we entered into an underwriting
agreement with H.C. Wainwright & Co. (“Wainwright”), pursuant to which we offered and sold an aggregate of 2,630,385 shares
of common stock, and 899,027 pre-funded warrants to purchase common stock, and common warrants to purchase 4,028,528 shares of common
stock (the “First 2021 Offering”). The common warrants sold in the First 2021 Offering have an exercise price of $4.25 per
share, were exercisable immediately upon issuance, and expire five years following the date of issuance. The pre-funded warrants sold
in the First 2021 Offering have an exercise price of $0.001 per share, were exercisable immediately upon issuance, and do not have an
expiration date. The gross proceeds of the First 2021 Offering were $15 million, before deduction of underwriting discounts, commissions,
and estimated offering expenses.
Wainwright acted as the exclusive placement agent
for the Second 2021 Offering pursuant to an engagement letter with the Company dated April 26, 2021 (the “Wainwright Engagement
Letter”). Pursuant to the Wainwright Engagement Letter and in connection with the First 2021 Offering, we paid Wainwright a placement
agent fee equal to 7.5% of the aggregate gross proceeds and a management fee equal to 1.0% of the gross proceeds, and we issued Wainwright
warrants to purchase up to [ ] shares of common stock (the “Placement Agent Warrants”). The Placement Agent Warrants have
an exercise price of $6.25 per share, were exercisable immediately upon issuance, and expire five years following the date of issuance.
In August 2021, we received twenty-seven (27)
exercise notices from holders of the common warrants issued in the First 2021 Offering, pursuant to which we received approximately $10,720,000
and issued 2,522,387 shares of common stock (the “2021 Warrant Exercises”).
2021 Registered Direct Offering and Concurrent
Private Placement
On August 19, 2021, we entered into a securities
purchase agreement with certain institutional investors, pursuant to which we sold (i) 8,430,000 shares of common stock and pre-funded
warrants to purchase up to 5,570,000 shares of common stock in a registered direct offering and (ii) unregistered warrants to purchase
up to 7,000,000 shares of common stock (the “Series A Warrants”) in a concurrent private placement (collectively, the “Second
2021 Offering”). The pre-funded warrants sold in the Second 2021 Offering have an exercise price of $0.001 per share, were exercisable
immediately upon issuance, and do not have an expiration date. The Series A Warrants have an exercise price of $5.00 per share, were exercisable
immediately upon issuance, and expire five years following the date of issuance.
Wainwright acted as the exclusive placement agent
for the Second 2021 Offering pursuant to the Wainwright Engagement Letter. Pursuant to such engagement letter and in connection with the
Second 2021 Offering, we paid Wainwright a placement agent fee equal to 7.5% of the aggregate gross proceeds and a management fee equal
to 1.0% of the gross proceeds, and we issued Wainwright an additional 1,050,000 Placement Agent Warrants. We received gross proceeds from
the Second 2021 Offering, before deducting placement agent fees and other estimated offering expenses payable by the Company, of approximately
$70 million. On November 17, 2021, our Registration Statement on Form S-3 registering the resale of the shares of common stock underlying
the Series A Warrants and the Placement Agent Warrants was declared effective by the U.S. Securities and Exchange Commission (“Commission”).
During the year ended April 30, 2022, we received
approximately $87.4 million from the First 2021 Offering, the Second 2021 Offering and the 2021 Warrant Exercises.
Repurchase Programs
Pursuant to the First Repurchase Program, we may
acquire up to $10 million of our outstanding shares of common stock, as determined by a formula based on the market price of the common
stock and average daily volumes. Pursuant to the Second Repurchase Program, we may acquire up to $10 million of our outstanding shares
of common stock from time to time in open market transactions, privately negotiated block transactions or other means in accordance with
applicable securities laws. For more information on the Repurchase Programs, see “Note 12 – Treasury Stock.”
Other Liquidity Matters
We have no other 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.
To meet our short and long-term liquidity needs,
we expect to use existing cash balances and a variety of other means. Other sources of liquidity could include additional potential issuances
of debt or equity securities in public or private financings, partnerships, collaborations and sale of assets. Our history of operating
losses and liquidity challenges may make it difficult for us to raise capital on acceptable terms or at all. The demand for the equity
and debt of pharmaceutical companies like ours is dependent upon many factors, including the general state of the financial markets. During
times of extreme market volatility, capital may not be available on favorable terms, if at all. Our inability to obtain such additional
capital could materially and adversely affect our business operations. Our future capital requirements are difficult to forecast and will
depend on many factors, but we believe that our cash on hand will enable us to fund operating expenses for at least the next 12 months
following the issuance of our consolidated financial statements.
Year ended April 30, 2023, compared to year
ended April 30, 2022
Revenue
We had no revenues in the fiscal years ended April
30, 2023, and 2022.
Operating Expenses
Our total operating expenses during the year ended
April 30, 2023 were $6,455,494, representing an increase of $2,063,480 compared to the year ended April 30, 2022. The increase is mainly
attributable to increases in director fees and legal and professional expenses, net of decreases in R&D costs and compensation expense.
Loss from Operations
Loss from operations during the year ended April
30, 2023 was $6,455,494, an increase of $2,063,480 compared to the year ended April 30, 2022. The increase is mainly attributable to increases
in director fees and legal and professional expenses, and consulting expenses in 2023 from 2022, net of decreases in R&D costs and
compensation expense. See the table under “Operating Expenses” above for more detail.
Other Income (Expenses), Net
Other income, net for the year ended April 30,
2023, was $2,139,501, as compared to other income, net of $152,853 in the year ended April 30, 2022. Other income, net for the year ended
April 30, 2023 is attributable to interest income of $1,937,499 net settlement of accounts payable of $152,976 and net of other income
and expense of $49,026. Other income, net for the year ended April 30, 2022 is attributable to interest income of $157,645 net of interest
expense and other expenses of $4,792.
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, 2023 and 2022.
Net cash used in investing activities: $ – $ –
Effect of currency rate exchange $ (7,246 ) $ 4,625
Operating Activities:
The cash used in operating activities for the
years ended April 30, 2023 and 2022 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, 2023, and 2022.
Financing Activities:
The cash used in financing activities for the
year ended April 30, 2023 was mainly attributable to the Repurchase Programs, and the cash provided for the year ended April 30, 2022,
is mainly attributable to the proceeds from the First 2021 Offering and the Second 2021 Offering.
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, which 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.
Net Income (Loss) Per Share
Basic net income (loss) per share of common stock
is computed using the weighted-average number of shares of common stock 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 10,172,116 and 10,813,635 post reverse stock split shares of common stock at April 30,
2023 and 2022, respectively, were excluded from the computation of diluted net income (loss) per share because the effect would be anti-dilutive.
New Accounting Pronouncements
During the current and prior year, there were
no new accounting pronouncements that need to be disclosed in the Company’s consolidated financial statements.
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,
2023 and 2022, and our Consolidated Statements of Operations, Comprehensive Loss, Stockholders Equity and Cash Flows for each of the years
in the years ended April 30, 2023 and April 30, 2022, 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
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our Interim Chairman, Interim Chief Executive
Officer and Interim President, 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, 2023, certain of our disclosure controls and procedures were not effective due to the material weaknesses in internal
control over financial reporting. This is described below in Management’s Report on Internal Control over Financial Reporting.
Management’s Report on Internal Controls
over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal controls over financial reporting as that term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
A material weakness is a deficiency, or a combination
of deficiencies, in internal controls over financial reporting such that there is a reasonable possibility that a material misstatement
of our 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, 2023, 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 this material weakness, our Interim
Chief Executive Officer and our Chief Financial Officer concluded that, as of April 30, 2023, our internal controls over financial reporting
were not effective based on the COSO criteria.
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 our material
weakness, 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
Effective October 6, 2022, the former Chairman
of the Board, Chief Executive Officer, President and General Counsel, Mr. Kenneth L. Waggoner, resigned from all positions with the Company
and its subsidiaries. Also effective October 6, 2022, the Board approved the employment of Mr. Joshua N. Silverman as the Interim Chairman
of the Board, Interim Chief Executive Officer and Interim President.
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, 2023, 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.
Limitations on the Effectiveness of Disclosure
Controls and Procedures
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.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
As of July 15, 2023, our directors and executive
officers are:
Age Position
Carlos A. Trujillo 65 Chief Financial Officer
Jonathan L. Schechter 49 Director
Robert Weinstein 63 Director
Wayne R. Walker 63 Director
Michael M. Abecassis 65 Director
Joshua N. Silverman
Joshua Silverman has served as a director of the Company since August
2022 and as our Interim Chief Executive Officer, Interim President and Interim Chairman of the Board since October 2022. Mr. Silverman
has served as the managing member of Parkfield Funding LLC since August 2016. Mr. Silverman co-founded Iroquois Capital Management, LLC
(“Iroquois”), an investment advisory firm, in 2003 and served as its principal, managing partner and co-chief investment officer
until July 2016. While at Iroquois, he designed and executed complex transactions, structuring and negotiating investments in both public
and private companies and has often been called upon by the companies solve inefficiencies as they relate to corporate structure, cash
flow, and management. From 2000 to 2003, Mr. Silverman served as co-chief investment officer of Vertical Ventures, LLC, a merchant bank.
Prior to forming Iroquois, Mr. Silverman was a director of Joele Frank, a boutique consulting firm specializing in mergers and acquisitions.
Previously, Mr. Silverman served as assistant press secretary to the president of the United States. Mr. Silverman currently serves as
a director of AYRO, Inc. (Nasdaq: AYRO), MyMD Pharmaceuticals, Inc. (Nasdaq: MYMD), Synaptogenix, Inc. (Nasdaq: SNPX) and Petros Pharmaceutical,
Inc. (Nasdaq: PTPI). He previously served as a director of Marker Therapeutics, Inc. (Nasdaq: MRKR) from 2016 until 2018 and Protagenic
Therapeutics, Inc. (Nasdaq: PTIX) from 2016 to 2022. Mr. Silverman received his B.A. from Lehigh University in 1992. Mr. Silverman was
chosen as a director of the Company because of his experience as an investment banker, as a management consultant and as a director of
numerous public companies.
Jonathan L. Schechter
Jonathan L. Schechter has served as a director
of the Company since August 2022. Mr. Schechter has served as the Director of Investment Banking at Chardan Capital Markets, a full-service
investment bank, since February 2008. He has served as a partner of The Special Equities Group, a division of Dawson James Securities,
Inc., a full-service investment bank specializing in healthcare, biotechnology, technology, and clean-tech sectors, since April 2021.
Mr. Schechter is one of the founding partners of The Special Equities Opportunity Fund, a long-only fund that makes direct investments
in micro-cap companies and has served in this capacity since August 2019. He currently serves on the board of directors of Synaptogenix,
Inc., (Nasdaq: SNPX), a clinical-stage biopharmaceutical company, and previously served as a director of DropCar, Inc. He has received
formal education in finance and accounting and has extensive experience analyzing and evaluating the financial statements of public companies.
Mr. Schechter earned his A.B. in Public Policy/Political Science from Duke University and his J.D. from Fordham University School of Law.
Mr. Schechter was chosen as a director of the Company because of his lengthy public company, legal and investment banking experience.
Michael M. Abecassis
Michael M. Abecassis, MD has served as a director
of the Company since July 2017. Since November 2019, Dr. Abecassis has been Dean of the University of Arizona College of Medicine –
Tucson, and following postgraduate training at the University of Toronto, Dr. Abecassis began his professional career as Assistant Professor
of Surgery and Director of Liver Transplantation and Hepatobiliary Surgery at the University of Iowa. In 1992, 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, and the James Roscoe Miller Distinguished Professor
with Tenure at Feinberg. He then became Founding Director of the Comprehensive Transplant Center at Northwestern in 2009. He was appointed
Dean for Clinical Affairs at the Feinberg School of Medicine in 2008, serving until 2011. Dr. Abecassis received continuous funding from
the National Institutes of Health (“NIH”) for 20+ consecutive years as principal investigator in research studies that include
both laboratory and clinical studies. Dr. Abecassis is a member in good standing of several important professional societies, including
the Society of University Surgeons and the American Surgical Association, and was elected President of the American Society of Transplant
Surgeons from 2010-2011. He has served on the Editorial Boards of major scientific journals related to the fields of Hepato-pancreatico-biliary
(HPB) and transplant surgery. He has served as a member of NIH grant study sections and special emphasis panels relating to both transplantation
and virology. He served as 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
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. 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. Dr. Abecassis was also a co-founder of Transplant Genomics Inc., a company
focused on developing, validating and commercializing molecular biomarkers for transplant rejection, and currently a subsidiary of Eurofins
Diagnostics. Dr. Abecassis was chosen as a director of the Company because of the combination of his clinical training and experience
in HPB diseases (e.g. liver and pancreatic cancer), his research background in related areas, and his experience with the regulatory and
business aspects of translation and commercialization of research efforts.
Robert Weinstein
Robert Weinstein has served as a director of the
Company since November 2022. Mr. Weinstein has served as chief financial officer of Synaptogenix, Inc. (Nasdaq: SNPX since October 2013.
In addition, Mr. Weinstein performs work as a consultant for Petros Pharmaceuticals, Inc. (Nasdaq: PTPI). He has extensive accounting
and finance experience, spanning more than 30 years, as a public accountant, investment banker, healthcare private equity fund principal
and chief financial officer. From September 2011 to the present, Mr. Weinstein has also been an independent consultant for several healthcare
companies in the pharmaceutical and biotechnology industries. From March 2010 to August 2011, he was the chief financial officer of Green
Energy Management Services Holdings, Inc., an energy consulting company. From August 2007 to February 2010, Mr. Weinstein served as chief
financial officer of Xcorporeal, Inc., a development-stage medical device company which was sold in March 2010 to Fresenius Medical USA,
a leading provider of dialysis equipment and services worldwide. Mr. Weinstein also serves as a member of the Board of Directors of XWELL,
Inc. (formerly XpresSpa Group, Inc.) (Nasdaq: XWEL), a health and wellness company whose core assets, XpresSpa and XpresCheck®, is
a leading airport retailer of spa services and related health and wellness products and Oblong, Inc. which provides multi-stream collaboration
technologies and managed services for video collaboration and network applications in the United States and internationally. Mr. Weinstein
received his MBA degree in finance and international business from the University of Chicago Graduate School of Business, is a Certified
Public Accountant (inactive), and received his BS degree in accounting from the State University of New York at Albany. Mr. Weinstein
was chosen as a director of the Company because of his public company and financial expertise.
Wayne R. Walker
Wayne R. Walker has served as a director of the
Company since December 2022. Mr. Walker has over 35 years of experience in corporate governance, turnaround management, corporate restructuring
and bankruptcy matters. In 1998, Mr. Walker founded Walker Nell Partners, Inc., an international business consulting firm, and has served
as its president from its founding to the present. Before founding Walker Nell Partners, Inc., Mr. Walker worked for 15 years at the DuPont
Company in Wilmington, Delaware in the Securities and Bankruptcy group, where he worked in the Corporate Secretary’s office and
served as Senior Counsel. From 2022 to present, Mr. Walker has served as a director of AMMO, Inc. (Nasdaq: POWW), a designer, producer,
and marketer of ammunition products. From December 2020 to the present, Mr. Walker has served as a director of AYRO, Inc. (Nasdaq: AYRO),
a designer and manufacturer of compact, sustainable electric vehicles. From 2018 to the present, Mr. Walker has served as a director of
Wrap Technologies, Inc. (Nasdaq: WRAP), an innovator of modern policing solutions, where he also serves as chairman of the board. From
2018 to the present, Mr. Walker has served as a director of Pitcairn Company and as the Chair of its Compensation Committee. From 2013
to 2014, Mr. Walker served as chairman of the board of directors of BridgeStreet Worldwide, Inc., a global provider of extended corporate
housing. From 2016 to 2018, Mr. Walker served as chairman of the board of directors of Last Call Operating Companies, an owner of various
national restaurants. From 2013 to 2020, Mr. Walker served as chairman of the board of trustees of National Philanthropic Trust, a public
charity. From 2018 to 2020, Mr. Walker served as Vice President of the Board of Education of the City of Philadelphia. From 2020 to the
present, Mr. Walker has served as a director of Petros Pharmaceuticals, Inc. (Nasdaq: PTPI), which focuses on men’s health. Mr.
Walker has also served on the board of directors for numerous other companies and foundations including Seaborne Airlines, Inc., Green
Flash Brewery, Inc., and Eagleville Hospital and Foundation. Mr. Walker has a J.D. from Catholic University (Washington, DC) and a Bachelor
of Arts from Loyola University (New Orleans). He is an attorney licensed by the State Bar of Georgia. He is a member of the State Bar
Association of Georgia, American Bar Association, American Bankruptcy Institute and Turnaround Management Association. Mr. Walker was
chosen as a director of the Company because of his extensive board experience.
Carlos A. Trujillo
Carlos A. Trujillo has been our Chief Financial
Officer 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.
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
for a 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 fifteen 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 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.
Family Relationships
There are no family relationships among our executive
officers, directors and significant employees.
Legal Proceedings
As of April 30, 2023, our personnel do not have
any involvement in legal proceedings requiring disclosure pursuant to the rules and regulations of the Commission.
Code of Ethics
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.
Corporate Governance and Committees
Board Leadership and Structure
The Chairman of the Board presides at all meetings
of the Board. Mr. Silverman serves as the Interim Chairman of the Board and as our Interim Chief Executive Officer, and Interim President.
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
Robert Weinstein, Wayne R. Walker, and Jonathan L. Schechter. The Chairman of the Audit Committee is Mr. Weinstein. 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. Weinstein, is an “audit committee financial expert,” as that term is defined in Item 407(d) of Regulation S-K under the
Exchange Act.
A copy of the Audit Committee’s written
charter is publicly available on our website at ir.pharmacyte.com/governance-docs.
Compensation Committee
The Compensation Committee is currently comprised
of Mr. Walker, Dr. Abecassis and Mr. Schechter. The Chairperson of the Compensation Committee is Mr. Schechter. 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.
The Compensation Committee, which is composed
of independent directors, provides overall guidance for our executive compensation policies and determines the value and elements of compensation
for our executive officers.
A copy of the Compensation Committee’s written charter is publicly
available on our website at ir.pharmacyte.com/governance-docs.
Nominating Committee
The Nominating Committee is currently comprised
of Mr. Walker, Mr. Schechter, and Mr. Weinstein. The Chairperson of the Nominating Committee is Mr. Weinstein.
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.
The Nominating Committee does not set specific,
minimum qualifications that nominees for director must meet in order for the Nominating Committee to recommend them to the Board, but
rather believes that each nominee should be evaluated based on his or her individual merits, considering our needs and the composition
of the Board. Members of the Nominating Committee discuss and evaluate possible candidates in detail and suggest individuals to explore
in more depth. Once a candidate is identified whom the Nominating Committee wants to seriously consider and move toward nomination, the
Chairman of the Nominating Committee enters into a discussion with that nominee candidate. Subsequently, the Chairperson will discuss
the qualifications of the candidate with the other members of the Nominating Committee, and the Nominating Committee will then make a
final recommendation with respect to that candidate to the Board.
If a stockholder wishes to propose a candidate
for consideration as a nominee for election to our Board, it must follow the procedures described in “Stockholder Proposals and
Nominations for Director” at the end of this proxy statement. In general, persons recommended by stockholders will be considered
in accordance with our Nominating Committee’s written charter. Any such recommendation should be made in writing to the Nominating
Committee, care of our Interim President at our principal office and should be accompanied by the following information concerning each
recommending stockholder and the beneficial owner, if any, on whose behalf the nomination is made:
The recommendation must also be accompanied by
the following information concerning the proposed nominee:
· certain biographical information concerning the proposed nominee;
The recommendation must also be accompanied by the following information
concerning the proposed nominee:
· certain biographical information concerning the proposed nominee;
A copy of the Nominating Committee’s written charter is publicly
available on our website at ir.pharmacyte.com/governance-docs.
Board Practices
Our business and affairs are managed under the
direction of our Board. The primary responsibilities of our Board are to provide oversight, strategic guidance, counseling and direction
to our senior management.
Policy Regarding Board Attendance
Our directors are expected to attend meetings
of the Board as frequently as necessary to properly discharge their responsibilities and to spend the time needed to prepare for each
such meeting. If an annual meeting of stockholders is held, our directors are expected to attend that meeting, but we do not have a formal
policy requiring them to do so. One director attended our annual meeting of stockholders held in December 2022.
Shareholder Communications
We have a process for shareholders who wish to
communicate with our Board. Shareholders who wish to communicate with our Board may write to the Board at 3960 Howard Hughes Parkway,
Suite 500, Las Vegas, NV 89169. These communications will be reviewed by our Interim Chief Executive Officer and Chief Financial Officer.
Communications will be then distributed to our board of directors, or to any individual director or directors as appropriate, depending
on the facts and circumstances outlined in the communications. Items that are unrelated to the duties and responsibilities of the Board
may be excluded, such as:
· junk mail and mass mailings;
· resumes and other forms of job inquiries;
· surveys; and
· solicitations or advertisements
In addition, any material that is unduly hostile,
threatening, or illegal in nature may be excluded, in which case it will be made available to any outside director upon request.
ITEM 11. EXECUTIVE COMPENSATION
This section discusses the material components
of the executive compensation program for our executive officers who are named in the “Summary Compensation Table” below (each
a “Named Executive Officer”), as well as the director compensation program for our directors. As a smaller reporting company,
we are not required to include a Compensation Discussion and Analysis and have elected to comply with the scaled disclosure requirements
applicable to smaller reporting companies.
For our fiscal year ended April 30, 2023, our
Named Executive Officers and their positions were as follows:
· Gerald W. Crabtree, Former Chief Scientific Officer and Director (3); and
· Carlos A. Trujillo, Chief Financial Officer and Director.
The following tables provide information about
compensation earned by our Named Executive Officers during our fiscal years ended April 30, 2023, and 2022.
Summary Compensation Table
Officer and Interim President 2022 $ – $ – $ – $ – $ –
General Counsel
(1) The amounts in the columns titled “Stock
Awards” and “Option Awards” reflect the grant date fair values of awards made during the identified fiscal year, as
computed in accordance with FASB ASC Topic 718 and the assumptions stated in Note 4 and Note 5 of the Consolidated Financial Statements
to this Report.
(2) Includes $10,417 of compensation for Mr. Silverman’s
service as a member of the board of directors.
(3) Mr. Waggoner resigned from all positions with
the Company and its subsidiaries effective October 6, 2022.
(4) Dr. Crabtree resigned from all positions with
the Company and its subsidiaries effective October 12, 2022.
Narrative Disclosure to Summary Compensation
Table
Employment Arrangements
Joshua N. Silverman
On November 14, 2022, the Board approved employment
of Mr. Silverman as the Interim Chief Executive Officer, Interim President and Interim Chairman of the Board on a month-to-month basis,
and it further approved paying Mr. Silverman a monthly salary of $31,250.
Kenneth L. Waggoner
On May 8, 2022, we entered into an Amended and
Restated Executive Compensation Agreement with Mr. Waggoner (the “Waggoner Compensation Agreement”), effective as of January
1, 2022. The Waggoner Compensation Agreement provided that Mr. Waggoner would serve as a member of our Board, as our Chief Executive Officer,
President and General Counsel and as the Chief Executive Officer and General Counsel of our subsidiary Viridis Biotech, Inc. Under this
agreement, Mr. Waggoner was paid a base salary of $520,000 subject to annual increases in the discretion of our Compensation Committee
and was eligible to receive cash incentive compensation (“Bonus”). Mr. Waggoner was eligible to participate in the 2021 Plan.
On May 20, 2022, the Compensation Committee granted Mr. Waggoner (i) a stock option grant to purchase 529,000 shares of common stock exercisable
over a ten-year term at an exercise price per share equal to the closing price of the common stock on the date of grant, vesting at the
rate of 25% immediately and the remaining vesting monthly over three years from the date of grant (approximately 11,000 option shares
per month), and (ii) a grant of 150,800 restricted stock units, vesting at the rate of 25% immediately and an additional 25% on each anniversary
of the grant date.
On October 6, 2022, Mr. Waggoner resigned from
all positions with the Company and its subsidiaries, effective immediately. In connection with Mr. Waggoner’s departure, on October
6, 2022, the Company entered into a Separation, Consulting and Release Agreement with Mr. Waggoner (the “Separation Agreement”).
The Separation Agreement became effective on October 13, 2022 (the “Effective Date”). Pursuant to the Separation Agreement,
the Company agreed to pay Mr. Waggoner a lump sum payment of $216,667. Mr. Waggoner is entitled to continued medical and health benefits
at his sole expense and retains his option to purchase 15,000 shares of common stock of the Company and 23,000 restricted stock units
previously granted to Mr. Waggoner. The Separation Agreement includes mutual releases of claims, by Mr. Waggoner in favor of the Company
and certain Company Parties (as defined therein) and by the Company in favor of Mr. Waggoner, and mutual non-disparagement obligations
on Mr. Waggoner and on the Company. Mr. Waggoner remains subject to certain restrictive covenants, including any confidentiality, non-compete,
non-solicit, invention assignment, or similar agreement or arrangement to which he is a party with any member of the Company Group and
other provisions of the Waggoner Compensation Agreement. During the twelve months immediately following the Separation Date (the “Consulting
Period”), Mr. Waggoner agreed to serve as a consultant to facilitate the orderly transfer of work to other employees of the Company.
In consideration for Mr. Waggoner’s consulting services, the Company agreed to pay Mr. Waggoner $433,333, payable in twelve installments
at the end of each month of the Consulting Period in arrears.
Gerald W. Crabtree
On March 10, 2015, we entered into an Executive
Compensation Agreement with Dr. Crabtree, effective as of January 1, 2015 (as amended on December 30, 2015, March 10, 2017 and October
14, 2020, the “Crabtree Compensation Agreement”). The Crabtree Compensation Agreement provided that Dr. Crabtree would serve
as a member of our Board, as our Chief Scientific Officer and as the Chief Scientific Officer of our subsidiary Viridis Biotech. Dr. Crabtree
was paid a base salary of $84,000 subject to annual increases in the discretion of our Compensation Committee. The Crabtree Compensation
Agreement also provided that, during his continued employment, Dr. Crabtree would receive annual stock grants of 400 shares of restricted
common stock, vesting at the rate of 33 shares per month, and an annual stock option grant to purchase 1,000 shares of common stock exercisable
over a five-year term at an exercise price per share equal to the closing price of the common stock on the date of grant, vesting at the
rate of 83 option shares per month.
On August 15, 2022, Mr. Crabtree resigned from
his position as a director, effective immediately, and on October 12, 2022, Mr. Crabtree resigned from his position as Chief Scientific
Officer, effective immediately. In connection with Mr. Crabtree’s departure, on October 12, 2022, the Company entered into a Release
Agreement with Mr. Crabtree (the “Release Agreement”). The Release Agreement became irrevocable seven days after execution
of the Release Agreement and became effective on October 20, 2022 (the “Effective Date”). Pursuant to the Release Agreement,
the Company agreed to pay Mr. Crabtree the aggregate sum of $29,695, which consisted of accrued wages, expense reimbursements, accrued
unused paid time off (less applicable withholdings and deductions), and three months of Mr. Crabtree’s base salary as of the separation
date, which salary is payable in substantially equal installments over a three-month period in accordance with the Company’s regular
payroll practices. The Release Agreement includes releases of claims by Mr. Crabtree in favor of the Company and certain Released Parties
(as defined therein). Mr. Crabtree remains subject to certain continuing obligations, including a confidentiality agreement to which he
is a party.
Carlos A. Trujillo
On May 8, 2022 we entered into an Amended and
Restated Executive Compensation Agreement with Mr. Trujillo (“Trujillo Compensation Agreement”) effective as of January 1,
2022. The current term of the Trujillo Compensation Agreement extends until December 31, 2024, with annual extensions at the end of the
term (or any extension of the term) unless we or Mr. Trujillo provide 90-days written notice of termination.
The Trujillo Compensation Agreement provided that
Mr. Trujillo will serve as a member of our Board, from which he resigned on August 15, 2022, and as our Chief Financial Officer. Mr. Trujillo
is paid an annual base salary of $380,000, subject to annual increases at the discretion of the Compensation Committee and shall be eligible
to receive an annual Bonus. Mr. Trujillo is eligible to participate in the 2021 Plan. On May 20, 2022, the Compensation Committee granted
Mr. Trujillo (i) a stock option grant to purchase 201,860 shares of common stock exercisable over a ten-year term at an exercise price
per share equal to the closing price of the common stock on the date of grant, vesting at the rate of 25% immediately and the remaining
vesting monthly over three years from the date of grant, approximately 4,200 option shares per month, and (ii) a grant of 57,540 restricted
stock units, vesting at the rate of 25% immediately and an additional 25% on each anniversary of the grant date.
If Mr. Trujillo’s employment is terminated
by us without “Cause” or by him for “Good Reason” (as such terms are defined in the Trujillo Compensation Agreement),
then subject to his execution of a timely release, he is entitled to: (i) severance equal to two times the sum of his base salary at the