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 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.
We are engaged preparing for a clinical trial
in LAPC using encapsulated live cells.
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.
Private Placement
On May 9, 2023, we entered
into a securities purchase agreement with certain accredited investors, pursuant to which we issued and sold, in a private placement (the
“PIPE”), an aggregate of (i) 35,000 Series B Preferred Shares, initially convertible into up to 8,750,000 shares of common
stock at a conversion price of $4.00 per share, and (ii) warrants (the “PIPE Warrants”) to acquire up to 8,750,000 shares
of common stock at an exercise price of $4.00 per share. Each Series B Preferred Share and accompanying PIPE Warrants were sold together
at a combined offering price of $1,000. The terms of the Preferred Shares are as set forth in the Certificate of Designations of Series
B Convertible Preferred Stock of PharmaCyte Biotech, Inc. (the “Certificate of Designations”), which was filed and became
effective with the Secretary of State of the State of Nevada on May 10, 2023. The PIPE Warrants are immediately exercisable and expire
5 years from issuance.
In connection with the
PIPE, we entered into a registration rights agreement, pursuant to which we filed a Registration Statement on Form S-3 (File No. 333-272569)
to register the resale of the shares underlying the Series B Preferred Shares and the PIPE Warrants. Such Registration Statement was declared
effective by the Commission on September 29, 2023.
For descriptions of the
Series B Preferred Shares and the PIPE Warrants, see “Note 12 – Preferred Stock” and Note 6 – Stock Options and
Warrants,” respectively.
Femasys Transaction
On November 14, 2023,
we entered into a securities purchase agreement (the “Femasys Purchase Agreement”) with Femasys Inc. (“Femasys”),
pursuant to which we purchased from Femasys (i) senior unsecured convertible notes (the “Notes”) in an aggregate principal
amount of $5,000,000, convertible into shares of Femasys common stock, par value $0.001 per share (the “Femasys Shares”) at
a conversion price of $1.18 per share, (ii) Series A Warrants (the “Series A Warrants”) to purchase up to an aggregate of
4,237,288 Femasys Shares at an exercise price of $1.18 per share, and (iii) Series B Warrants (the “Series B Warrants” and,
together with the Series A Warrants, the “Femasys Warrants”) to purchase up to an aggregate of 4,237,288 Femasys Shares at
an exercise price of $1.475 per share (collectively, the “Femasys Transaction”).
The Femasys Purchase
Agreement contains certain representations and warranties, covenants and indemnities customary for similar transactions. Pursuant to the
Femasys Purchase Agreement, we have the right to nominate one individual to serve on Femasys’ board of directors (the “Femasys
Board”) until the earlier of (a) when the Company beneficially owns less than 4.99% of the number of Femasys Shares outstanding
and (b) the repayment of the Notes in full (such time, the “Investor Board Seat Fall-Away”). In addition, we agreed to a standstill
until the later of (a) our nominee remaining on the Femasys Board and (b) 12 months after the Investor Board Seat Fall-Away, during which
period we may not, among other things, acquire additional securities of Femasys other than pursuant to the Notes or Femasys Warrants.
The Notes are senior
unsecured obligations of Femasys and accrue interest at a rate of 6.00% per annum, payable annually, in cash or Femasys Shares at Femasys’
option, and mature two years after the date of issuance. The Notes are convertible into Femasys Shares at our election at any time at
an initial conversion price of $1.18. The conversion price is subject to customary adjustments for stock dividends, stock splits, reclassifications
and similar corporate events. Femasys agreed in the Femasys Purchase Agreement and the Notes not to issue or sell any of its equity securities
at a price below the then-current conversion price for a period of 18 months after closing, subject to certain exceptions.
Beginning six months
after issuance, Femasys may require us to convert our Notes into Femasys Shares if the closing price of the Femasys Shares exceeds $2.36
per share (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) for
10 consecutive trading days and the daily dollar trading volume of the Femasys Shares exceeds one million dollars ($1,000,000) per day
during the same period and certain equity conditions described in the Notes are satisfied.
The Notes provide for
certain events of default, including, among other things, Femasys’ failure to file and maintain an effective registration statement
covering the sale of the securities registrable pursuant to a registration rights agreement and Femasys’ failure to pay any amounts
due to us when due. In connection with an event of default, we will be able to require Femasys to redeem in cash any or all of our Notes
at a premium of 115%.
Under the terms of the Notes, Femasys is subject
to certain affirmative and negative covenants regarding the incurrence of indebtedness, acquisition and investment transactions, the existence
of liens, the repayment of indebtedness, the payment of cash in respect of dividends, distributions or redemptions, and the transfer of
assets, among other matters.
The Series A Warrants
are exercisable for Femasys Shares immediately at an exercise price of $1.18 per share and expire five years from the date of issuance.
Femasys has the right to call the exercise of the Series A Warrants if the closing price of the Femasys Shares exceeds 200% of the exercise
price for 10 consecutive trading days and the daily dollar trading volume of the Femasys Shares exceeds one million dollars ($1,000,000)
per day during the same period and certain equity conditions are satisfied. The Series B Warrants are exercisable for Femasys Shares immediately
at an exercise price of $1.475 per share and expire one year from the date of issuance. Femasys has the right to call the exercise of
the Series B Warrants if the closing price of the Femasys Shares exceeds 200% of the exercise price for 10 consecutive trading days and
the daily dollar trading volume of the Femasys Shares exceeds one million dollars ($1,000,000) per day during the same period and certain
equity conditions are satisfied.
In connection with the
Femasys Transaction, we entered into a registration rights agreement with Femasys, pursuant to which Femasys was required to file a resale
registration statement with the Commission, registering 100% of the shares issuable pursuant to the Notes and the Femasys Warrants.
In connection with the
Femasys Transaction, we entered into a collaboration agreement with Femasys, dated November 14, 2023, whereby, if the Company and Femasys
agree to conduct research activities or enter into a research plan in connection with discussing, evaluating and seeking technology that
may be available to in-license or acquire with a view to enhancing the existing products of Femasys or adding new complementary products,
we will establish a joint research committee with two representatives of Femasys and one representative of the Company to oversee the
execution of the research plan and coordinate research activities.
TNF Transaction
On May 20, 2024, we entered
into a securities purchase agreement (the “TNF Purchase Agreement”) with TNF Pharmaceuticals, Inc. (f/k/a MyMD Pharmaceuticals,
Inc.) (“TNF”), pursuant to which we purchased from TNF (i) shares of TNF’s Series G Convertible Preferred Stock (the
“TNF Preferred Shares”), convertible into 3,854,626 shares of TNF’s common stock, par value $0.001 per share (the “TNF
Common Shares”), (ii) warrants to purchase up to 3,854,626 TNF Common Shares with a five-year term (the “Long-Term Warrants”)
and (iii) warrants to purchase up to 3,854,626 TNF Common Shares with an 18-month term (the “Short-Term Warrants” and, together
with the Long-Term Warrants, the “TNF Warrants”) for an aggregate purchase price of $7,000,000 (the purchase of the TNF Preferred
Shares, the Long-Term Warrants and the Short-Term Warrants, the “TNF Transaction”).
Pursuant to the TNF Purchase
Agreement, we have the right to participate in future sales of TNF’s equity and equity-linked securities until the second anniversary
of the closing or the date on which no TNF Preferred Shares remain outstanding, whichever is earlier. Additionally, we have the right
to nominate one individual to serve on TNF’s board of directors until the Company no longer beneficially owns 20% of the TNF Common
Shares on an as-converted basis.
The terms of the TNF
Preferred Shares are as set forth a certificate of designations (the “TNF Certificate of Designations”), which TNF filed with
the Secretary of State for the State of Delaware on May 21, 2024. The TNF Preferred Shares are convertible into TNF Common Shares at our
election at any time at an initial conversion price of $1.816. The conversion price is subject to customary adjustments for stock dividends,
stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of TNF Common Shares,
or securities convertible, exercisable or exchangeable for TNF Common Shares, at a price below the then-applicable conversion price (subject
to certain exceptions). At any time after the issuance date of the TNF Preferred Shares, TNF has the option to redeem in cash all or any
portion of the outstanding TNF Preferred Shares then outstanding at a premium upon notice to the Company.
Pursuant to the TNF Certificate
of Designations, we will be entitled to dividends of 10% per annum, compounded monthly, which will be payable in cash or in TNF Common
Shares at our option. Upon the occurrence and during the continuance of a Triggering Event (as defined in the TNF Certificate of Designations),
the TNF Preferred Shares will accrue dividends at the rate of 15% per annum. Upon conversion or redemption, we are entitled to receive
a dividend make-whole payment. We will be entitled to vote with holders of the TNF Common Shares on as as-converted basis, with the number
of votes to which we are entitled to be calculated assuming a conversion price of $2.253 per share. TNF’s ability to settle conversions
and make dividend make-whole payments by issuing TNF Common Shares is subject to certain limitations set forth in the TNF Certificate
of Designations.
The TNF Certificate of
Designations includes certain triggering events, including, among other things, the failure by TNF to file and maintain an effective registration
statement covering the sale of the securities registrable pursuant to a registration rights agreement and the failure by TNF to pay any
amounts to us when due. In connection with a triggering event, we will be able to require TNF to redeem in cash any or all of its TNF
Preferred Shares at a premium set forth in the TNF Certificate of Designations.
TNF is subject to certain
affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the repayment of indebtedness, the
payment of cash in respect of dividends (other than dividends pursuant to the TNF Certificate of Designations), distributions or redemptions,
and the transfer of assets, among other matters.
The Long-Term Warrants
are exercisable for TNF Common Shares immediately, at an exercise price of $1.816 per share and expire five years from the date of issuance.
The Short-Term Warrants are exercisable for TNF Common Shares immediately, at an exercise price of $1.816 per share and expire 18 months
from the date of issuance. The exercise price of each TNF Warrant is subject to customary adjustments for stock dividends, stock splits,
reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances
of TNF Common Shares or securities convertible, exercisable or exchangeable for TNF Common Shares at a price below the then-applicable
exercise price (subject to certain exceptions).
In connection with the
TNF Transaction, we entered into a registration rights agreement with TNF, pursuant to which TNF was required to file a resale registration
statement with the Commission, registering 200% of the shares issuable pursuant to the TNF Preferred Shares and the TNF Warrants.
Increase in Authorized Shares
On September 6, 2023, pursuant to stockholder
approval received at a special meeting of stockholders, we filed with the Secretary of State of the State of Nevada a Certificate of Change
to our Articles of Incorporation, as amended, to increase the number of authorized shares of common stock from 133,333,334 to 200,000,000.
The Certificate of Change had no impact on the number of authorized shares of preferred stock, which remains at 10,000,000.
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, 2024, our cash and cash equivalents
totaled approximately $50.2 million, compared to approximately $68 million as of April 30, 2023. Working capital was approximately $43
million as of April 30, 2024, and approximately $67.6 million as of April 30, 2023. 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.
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 Second Repurchase Program, see “Note 13 – 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, 2024, compared to year
ended April 30, 2023
Revenue
We had no revenues in the fiscal years ended April
30, 2024, and 2023.
Operating Expenses
Our total operating expenses during the year ended
April 30, 2024 were $8,520,008, representing an increase of $2,064,514 compared to the year ended April 30, 2023. The increase is mainly
attributable to increases in compensation expenses, director fees and general and administrative expenses, net of decreases in R&D
and legal and professional expenses.
–
Loss from Operations
Loss from operations during the year ended April
30, 2024 was $8,520,008, an increase of $2,064,514 compared to the year ended April 30, 2023. The increase is mainly attributable to increases
in compensation expenses, director fees and general and administrative expense, impairment of asset, net of decreases in R&D and legal
and professional expenses. See the table under “Operating Expenses” above for more detail.
Other Income (Expenses), Net
Other income, net for the year ended April 30,
2024, was $8,853,771, as compared to other income, net of $2,139,501 in the year ended April 30, 2023. Other income, net for the year
ended April 30, 2024 is attributable to interest income of $3,398,819, changes in fair values of warrant liability of $3,343,000, derivative
liability of $586,000, convertible note receivable of $1,089,000 and warrant asset of $1,818,000, less loss on write-off of long term
asset of $1,572,193 net of other income of $191,145. Other income is attributable to recovery of accrued expenses of $195,000 less income
taxes and foreign exchange loss. 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.
Loss on write-off of long-term asset
For the year ended April 30, 2024, the Company
recorded an asset loss of $1,572,193, related to the Company’s investment in SG Austria, reducing the carrying value of such investment
to zero. See Note 2 of the Consolidated Financial Statements to this Report for more information.
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, 2024 and 2023.
Net cash used in investing activities: $ (5,000,000 ) $ –
Effect of currency rate exchange $ (508 ) $ (7,246 )
Operating Activities:
The cash and cash equivalents used in operating
activities for the years ended April 30, 2024 and 2023 is a result of our net losses from operations offset by securities issued, assets
impaired, changes in fair values of warrant liability, derivative liability, note receivable, warrant asset, changes to prepaid expenses,
accounts payable and accrued expenses.
Investing Activities:
On November 14, 2023, we entered into a securities
purchase agreement, pursuant to which agreed to purchase a convertible note receivable in the amount of $5 million, convertible into common
stock and warrants (Series A and B) to purchase additional common stock. See Note 3 – Investment in Debt and Equity Securities.
We had no investing activities for the year ended April 30, 2023.
Financing Activities:
The cash and cash equivalents used in financing
activities for the year ended April 30, 2024 was mainly attributable to the Repurchase Programs of approximately $28,198,000, redemption
of preferred stock of approximately $16,161,000, and the cash provided by proceeds from the issuance of preferred stock of approximately
$33,650,000, net of transaction costs. For the year ended April 30, 2023, the cash and cash equivalents used is mainly attributable to
the Repurchase Programs of approximately $13,561,000.
Critical Accounting Estimates
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.
Fair Value of Financial Instruments
Fair value measurements
are based upon certain market assumptions and pertinent information available as of and during the year ended April 30, 2024. The fair
value of the bifurcated embedded derivative related to the convertible preferred stock was estimated using a Monte Carlo simulation model,
which uses as inputs the fair value of our common stock and estimates for the equity volatility and traded volume volatility of our common
stock, the time to maturity of the convertible preferred stock, the risk-free interest rate for a period that approximates the time to
maturity, dividend rate, a penalty dividend rate, and our probability of default. The fair value
of the warrant liability was estimated using the Black Scholes Model which uses as inputs the following weighted average assumptions:
dividend yield, expected term in years; equity volatility; and risk-free interest rate.
In addition, the Company elects to account for
its convertible note receivable, which meets the required criteria, at fair value at inception and at each subsequent reporting date.
Subsequent changes in fair value, including interest, are recorded as a component of non-operating income (loss) in the consolidated statements
of operations. The Company estimates the fair value of the convertible note receivable using the income approach, which uses as inputs
the fair value of debtor’s common stock and estimates for the equity volatility and volume volatility of debtor’s common stock,
the time to expiration of the convertible note, the discount rate, the stated interest rate compared to the current market rate, the risk-free
interest rate for a period that approximates the time to expiration, and probability of default. Therefore, the estimate of expected future
volatility is based on the actual volatility of debtor’s common stock and historical volatility of debtor’s common stock utilizing
a lookback period consistent with the time to expiration. The time to expiration is based on the contractual maturity date. The risk-free
interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of measurement for time periods approximately
equal to the time to expiration. The probability of default is estimated using the S&P Global default rate for companies with a similar
credit rating to debtors. The fair value in our warrant asset investment is estimated using a Monte Carlo simulation model, which uses
as inputs the fair value of the underlying common stock, and estimates for the equity volatility and traded volume volatility of the investee’s
common stock, the risk-free interest rate for a period that approximates the expected life of the warrants, and the expected life of the
warrants.
Impairment of Assets
We determined that the diabetes licensed asset
technology would likely not prove to be a viable technique for the production of insulin producing cells and the treatment of diabetes.
We believe that a buyer of this technology would ascribe a de minimis value to this asset. Therefore, we determined that there should
be a full impairment of the $2 million carrying value. We determined that research in the treatment of diabetes would no longer be pursued
until the Cell-in-a-Box® use in pancreatic cancer treatment can be substantiated in a clinical trial and a viable cell line is acquired.
We determined that due to the SG Austria financial
position, negative book value and viability make for an inconclusive determination of a specific value range of our minority interest
in SG Austria and the value as of the present time is likely minimal. Therefore, we determined that there should be a full impairment
of the approximately $1.6 million carrying value.
New Accounting Pronouncements Effective in Future Periods
For a discussion
of new accounting pronouncements effective in future periods, 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,
2024 and 2023, and our Consolidated Statements of Operations, Comprehensive Loss, Stockholders Equity and Cash Flows for each of the years
in the years ended April 30, 2024 and April 30, 2023, 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, 2024, 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, 2024, 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, 2024, 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
There were no changes to our internal control
over financial reporting during the fiscal year ended April 30, 2024, 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
During
the year ended April 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1
trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of
Regulation S-K.
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, 2024, our directors and executive
officers are:
Age Position
Carlos A. Trujillo 66 Chief Financial Officer
Jonathan L. Schechter 50 Director
Robert Weinstein 64 Director
Wayne R. Walker 64 Director
Michael M. Abecassis 66 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 U.S. Mr. Silverman currently serves
as a director of AYRO, Inc. (Nasdaq: AYRO), TNF Pharmaceuticals, Inc. (Nasdaq: TNFA), 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. 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. Mr. Weinstein also serves on the Board of Directors
of Oblong, Inc. (Nasdaq: OBLG), a company providing multi-stream collaboration technologies and managed services for video collaboration
and network applications. 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, 2024, 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 Report.
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. Walker.
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 April 2024.
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, 2024, our
Named Executive Officers and their positions were as follows:
· Carlos A. Trujillo, Chief Financial Officer.
We have the same number of Named Executive Officers
as we do “executive officers” as defined by Rule 3b-7 promulgated under the Exchange Act. The following tables provide information
about compensation earned by our Named Executive Officers during our fiscal years ended April 30, 2024, and 2023.