See accompanying Notes to Condensed Consolidated
Financial Statements.
See accompanying Notes to Condensed Consolidated
Financial Statements.
See accompanying Notes to Condensed Consolidated
Financial Statements.
See accompanying Notes to Condensed Consolidated
Financial Statements.
See accompanying Notes to Condensed Consolidated
Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – NATURE OF BUSINESS
PharmaCyte Biotech, Inc. (“Company”)
is a biotechnology company focused on developing cellular therapies for cancer, diabetes and malignant ascites based upon a proprietary
cellulose-based live cell encapsulation technology known as “Cell-in-a-Box®.” The Cell-in-a-Box®
technology is intended to be used as a platform upon which therapies for several types of cancer, including locally advanced, inoperable
pancreatic cancer (“LAPC”) will be developed. The current generation of the Company’s product candidate is referred
to as “CypCaps™.”
The Company is a Nevada corporation incorporated
in 1996. In 2013, the Company restructured its operations to focus on biotechnology. The Company acquired licenses from SG Austria Pte.
Ltd., a Singapore corporation (“SG Austria”) to treat cancer and Austrianova Singapore Pte. Ltd., a Singapore corporation
(“Austrianova Singapore”) to treat diabetes using the Cell-in-the-Box technology. The restructuring resulted in the Company
focusing all its efforts upon the development of a novel, effective and safe way to treat cancer and diabetes. In January 2015, the Company
changed its name from Nuvilex, Inc. to PharmaCyte Biotech, Inc. to reflect the nature of its current business. In October 2021, the Company
moved its headquarters from Laguna Hills, California to Las Vegas, Nevada.
On September 1, 2020, the Company submitted an
Investigational New Drug Application (“IND”) to the United States Food and Drug Administration (“FDA”) for a planned
clinical trial in LAPC. On October 1, 2020, the Company received notice from the FDA that it had placed the IND on clinical hold. On October
30, 2020, the FDA sent a letter to the Company setting forth the reasons for the clinical hold and specific guidance on what the Company
must do to have the clinical hold lifted.
To lift the clinical hold, the FDA informed the
Company that it needs to conduct several additional preclinical studies. The FDA also requested additional information regarding several
topics, including DNA sequencing data, manufacturing information and product release specifications. The Company has been in the process
of conducting these studies and gathering additional information to submit to the FDA. See “Investigational New Drug Application
and Clinical Hold” below.
On August 15, 2022, the Company entered into a
Cooperation Agreement (“Cooperation Agreement”) with Iroquois Master Fund Ltd. and its affiliates, pursuant to which the Company
elected a reconstituted Board of Directors (”Board”). The Board has formed a Business Review Committee to evaluate, investigate
and review the Company’s business, affairs, strategy, management and operations and in its sole discretion to make recommendations
to the Company’s management and Board with respect thereto. The Business Review Committee is also reviewing many of the risks relative
to the Company’s business. In addition, the Board is reviewing the Company’s development programs and its relationship with
SG Austria, including that all licensed patents have expired, that know-how relating to the Company’s Cell-in-a-Box® technology
solely resides with SG Austria, and that the incentives of SG Austria and its management may not be currently aligned with those of the
Company. The Board has curtailed spending on the Company’s programs, including pre-clinical and clinical activities, until the review
by the Business Review Committee and the Board is complete and the Board has determined the actions and plans to be implemented. The Business
Review Committee’s recommendations will include potentially seeking a new framework for the Company’s relationship with SG
Austria and its subsidiaries. In the event the Company is unsuccessful in seeking an acceptable new framework, the Company will reevaluate
whether it should continue those programs which are dependent on SG Austria, including its development programs for LAPC, diabetes and
malignant ascites. The issues involving SG Austria have delayed the Company’s timeline for addressing the FDA clinical hold for
its planned clinical trial in LAPC and could result in other delays or termination of the development activities. In addition, the curtailment
of spending on the Company’s programs pending the review by the Business Review Committee and the Board may cause additional delays.
The Cell-in-a-Box® encapsulation
technology potentially enables genetically engineered live human cells to be used as a means to produce various biologically active molecules.
The technology is intended to result in the formation of pinhead sized cellulose-based porous capsules in which genetically modified live
human cells can be encapsulated and maintained. In a laboratory setting, this proprietary live cell encapsulation technology has been
shown to create a micro-environment in which encapsulated cells survive and flourish. They are protected from environmental challenges,
such as the sheer forces associated with bioreactors and passage through catheters and needles, which the Company believes enables greater
cell growth and production of the active molecules. The capsules are largely composed of cellulose (cotton) and are bioinert.
The Company has been developing therapies for
pancreatic and other solid cancerous tumors by using genetically engineered live human cells that it believes are capable of converting
a cancer prodrug into its cancer-killing form. The Company encapsulates those cells using the Cell-in-a-Box® technology
and places those capsules in the body as close as possible to the tumor. In this way, the Company believes that when a cancer prodrug
is administered to a patient with a particular type of cancer that may be affected by the prodrug, the killing of the patient’s
cancerous tumor may be optimized.
The Company has also been developing a way to
delay the production and accumulation of malignant ascites that results from many types of abdominal cancerous tumors. The Company’s
therapy for malignant ascites involves using the same encapsulated cells it employs for pancreatic cancer but placing the encapsulated
cells in the peritoneal cavity of a patient and administering ifosfamide intravenously.
In addition to the two cancer programs discussed
above, the Company has been working on 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, the Company has been developing a potential
therapy for Type 1 diabetes and insulin-dependent Type 2 diabetes. The Company’s 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 have them function as a bio-artificial pancreas for purposes
of insulin production.
Until the review by the Business Review Committee
and the Board is complete and the Board has determined the actions and plans to be implemented, spending on the Company’s programs
has been curtailed.
Investigational New Drug Application and
Clinical Hold
On September 1, 2020, the Company submitted an
IND to the FDA for a planned clinical trial in LAPC. On October 1, 2020, the Company received notice from the FDA that it had placed the
Company’s IND on clinical hold. On October 30, 2020, the FDA sent the Company a letter setting forth the reasons for the clinical
hold and providing specific guidance on what the Company must do to have the clinical hold lifted.
In order to address the clinical hold, the FDA requested that the Company:
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Provide additional sequencing data and genetic stability studies; |
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Conduct a stability study on the Company’s final formulated product candidate as well as the cells from the Company’s Master Cell Bank; |
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Evaluate the compatibility of the delivery devices (the prefilled syringe and the microcatheter used to implant the CypCaps™) with the Company’s product candidate for pancreatic cancer; |
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Provide additional detailed description of the manufacturing process of the Company’s product candidate for pancreatic cancer; |
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Provide additional product release specifications for the Company’s encapsulated cells; |
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Demonstrate comparability between the 1st and 2nd generation of the Company’s product candidate for pancreatic cancer and ensure adequate and consistent product performance and safety between the two generations; |
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Conduct a biocompatibility assessment using the Company’s capsules material; |
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Address specified insufficiencies in the Chemistry, Manufacturing and Controls information in the cross-referenced Drug Master File; |
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Conduct an additional nonclinical study in a large animal (such as a pig) to assess the safety, activity, and distribution of the product candidate for pancreatic cancer; and |
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Revise the Investigators Brochure to include any additional preclinical studies conducted in response to the clinical hold and remove any statements not supported by the data the Company generated. |
The FDA also requested that the Company address
the following issues as an amendment to the Company’s IND:
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Provide a Certificate of Analysis for pc3/2B1 plasmid that includes tests for assessing purity, safety, and potency; |
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Perform qualification studies for the drug substance filling step to ensure that the Company’s product candidate for pancreatic cancer remains sterile and stable during the filling process; |
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Submit an updated batch analysis for the Company’s product candidate for the specific lot that will be used for manufacturing all future product candidates; |
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Provide additional details for the methodology for the Resorufin (CYP2B1) potency and the PrestoBlue cell metabolic assays; |
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Provide a few examples of common microcatheters that fit the specifications in the Company’s Angiography Procedure Manual; |
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Clarify the language in our Pharmacy Manual regarding proper use of the syringe fill with the Company’s product candidate for pancreatic cancer; and |
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Provide a discussion with data for trial of the potential for cellular and humoral immune reactivity against the heterologous rat CYP2B1 protein and potential for induction of autoimmune-mediated toxicities in our study population. |
The Company assembled a scientific and regulatory
team of experts to address the FDA requests. That team has been working diligently to complete the items requested by the FDA. The Company
is in the latter stages of conducting the studies and providing the information requested by the FDA. The Company has completed the pilot
study of two pigs and is evaluating the preliminary data before commencing the larger study of 90 pigs.
Impact of COVID-19 on the Company’s Financial
Condition and Results of Operations
In March 2020, the World Health Organization declared
an outbreak of COVID-19 as a pandemic, and the world’s economies have experienced pronounced effects. Despite the multiple COVID-19
vaccines globally, there remains uncertainty around the extent and duration of disruption and any future related financial impact cannot
reasonably be estimated at this time. COVID-19 has caused and may continue to cause significant, industry-wide delays in clinical trials.
Although the Company is not yet in a clinical trial, the Company has filed an IND with the FDA to commence a clinical trial in LAPC, and
this clinical trial may experience delays relating to COVID-19 once commenced, including but not limited to: (i) delays or difficulties
in enrolling patients in the Company’s clinical trial if the FDA allows the Company to go forward with the trial; (ii) delays or
difficulties in clinical site activation, including difficulties in recruiting clinical site investigators and clinical site personnel;
(iii) delays in clinical sites receiving the supplies and materials needed to conduct the clinical trial, including interruption in global
shipping that may affect the transport of the Company’s clinical trial product; (iv) changes in local regulations as part of a response
to COVID-19 which may require the Company to change the ways in which its clinical trial is to be conducted, which may result in unexpected
costs, or to discontinue the clinical trial altogether; (v) diversion of healthcare resources away from the conduct of clinical trials,
including the diversion of hospitals serving as the Company’s clinical trial sites and hospital staff supporting the conduct of
the Company’s clinical trial; (vi) interruption of key clinical trial activities, such as clinical trial site monitoring, due to
limitations on travel imposed or recommended by federal or state governments, employers and others, or interruption of clinical trial
subject visits and study procedures, the occurrence of which could affect the integrity of clinical trial data; (vii) risk that participants
enrolled in our clinical trials will acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical
trial, including by increasing the number of observed adverse events; (viii) delays in necessary interactions with local regulators, ethics
committees, and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees;
(ix) limitations in employee resources that would otherwise be focused on the conduct of the Company’s clinical trial because of
sickness of employees or their families or the desire of employees to avoid contact with large groups of people; (x) refusal of the FDA
to accept data from clinical trials in affected geographies; and (xi) interruption or delays to the Company’s clinical trial activities.
Many of these potential delays may be exacerbated by the impact of COVID-19 in foreign countries where the Company is conducting these
preclinical studies, including India, Europe, Singapore and Thailand.
Further, the various precautionary measures taken
by many governmental authorities around the world in order to limit the spread of COVID-19 has had and may continue to have an adverse
effect on the global markets and global economy, including on the availability and pricing of employees, resources, materials, manufacturing
and delivery efforts and other aspects of the global economy. COVID-19 could materially disrupt the Company’s business and operations,
hamper its ability to raise additional funds or sell securities, continue to slow down the overall economy, curtail consumer spending,
interrupt the Company’s supply chain, and make it hard to adequately staff the Company’s operations.
Nasdaq Listing
The Company’s common stock began trading
on Nasdaq on August 10, 2021, under the symbol “PMCB.” Prior to that, the Company’s common stock was quoted on the OTCQB
Market under the symbol “PMCB.”
Reverse Stock Split
Effective July 12, 2021, the Company filed a Certificate
of Change with the Nevada Secretary of State that authorized a 1:1500 reverse stock split of the Company’s common stock. The reverse
stock split resulted in reducing the authorized number of shares of the Company’s common stock from 50 billion to 33,333,334 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 warrant, option, share and per share information in this Quarterly Report gives retroactive effect to such 1:1500 reverse stock split.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Principles of Consolidation and Basis of Presentation
The Condensed Consolidated Financial Statements
include the accounts of the Company and its wholly owned subsidiaries. The Company operates independently and through four wholly owned
subsidiaries: (i) Bio Blue Bird; (ii) PharmaCyte Biotech Europe Limited; (iii) PharmaCyte Biotech Australia Pty. Ltd.; and (iv) Viridis
Biotech, Inc. and are prepared in accordance with U.S. GAAP and the Rules and Regulations of the Commission. Upon consolidation, intercompany
balances and transactions are eliminated. The Company’s 14.3% investment in SG Austria is presented on the cost method of accounting.
Use of Estimates in the Preparation of Financial
Statements
The Condensed Consolidated Financial Statements
are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). U.S. GAAP requires the use of
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities
known to exist as of the date the financial statements are published and the reported amounts of revenues and expenses during the reporting
period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s Condensed
Consolidated Financial Statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions,
which could have a material effect on the reported amounts of the Company’s consolidated financial position and results of operations.
The severity, magnitude and duration, as well as the economic consequences of COVID-19, are uncertain, rapidly changing and difficult
to predict. Therefore, the Company’s accounting estimates and assumptions may change over time in response to COVID-19 and may change
materially in future periods.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks
and short-term liquid investments purchased with maturities of three months or less.
Intangible Assets
The Financial Accounting Standards Board (“FASB”)
standard on goodwill and other intangible assets prescribes a two-step process for impairment testing of goodwill and indefinite-lived
intangibles, which is performed annually, as well as when an event triggering impairment may have occurred. The first step tests for impairment,
while the second step, if necessary, measures the impairment. The Company has elected to perform its annual analysis at the end of its
reporting year.
The Company’s intangible assets are licensing
agreements related to the Cell-in-a-Box® technology for $1,549,427 and diabetes license for $2,000,000 for an aggregate
total of $3,549,427.
These intangible assets have an indefinite life;
therefore, they are not amortizable.
The Company concluded that there was no impairment
of the carrying value of the intangible assets for the nine months ended January 31, 2023, and 2022.
Impairment of Long-Lived Assets
The Company evaluates long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable. If the estimated
future cash flows (undiscounted and without interest charges) from the use of an asset are less than carrying value, a write-down would
be recorded to reduce the related asset to its estimated fair value. No impairment was identified or recorded during the nine months ended
January 31, 2023, and 2022.
Fair Value of Financial Instruments
For certain of the Company’s non-derivative
financial instruments, including cash, accounts payable and accrued expenses, the carrying amount approximates fair value due to the short-term
maturities of these instruments.
Accounting Standards Codification (“ASC”)
Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held
by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy
for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported
in the consolidated balance sheets for current liabilities qualify as financial instruments and are a reasonable estimate of their fair
values because of the short period between the origination of such instruments and their expected realization and their current market
rate of interest. The three levels of valuation hierarchy are defined as follows:
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Level 1. Observable inputs such as quoted prices in active markets; |
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Level 2. Inputs, other than the quoted prices in active markets, which are observable either directly or indirectly; and |
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Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Income Taxes
Deferred taxes are calculated using the liability
method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards,
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
A valuation allowance is provided for deferred income tax assets when,
in management’s judgment, based upon currently available information and other factors, it is more likely than not that all or a
portion of such deferred income tax assets will not be realized. The determination of the need for a valuation allowance is based on an
on-going evaluation of current information including, among other things, historical operating results, estimates of future earnings in
different taxing jurisdictions and the expected timing of the reversals of temporary differences. The Company believes the determination
to record a valuation allowance to reduce a deferred income tax asset is a significant accounting estimate because it is based on, among
other things, an estimate of future taxable income in the U.S. and certain other jurisdictions, which is susceptible to change and may
or may not occur, and because the impact of adjusting a valuation allowance may be material. In determining when to release the valuation
allowance established against the Company’s net deferred income tax assets, the Company considers all available evidence, both positive
and negative. Consistent with the Company’s policy, and because of the Company’s history of operating losses, the Company
does not currently recognize the benefit of all its deferred tax assets, including tax loss carry forwards, which may be used to offset
future taxable income. The Company continually assesses its ability to generate sufficient taxable income during future periods in which
deferred tax assets may be realized. When the Company believes it is more likely than not that it will recover its deferred tax assets,
the Company will reverse the valuation allowance as an income tax benefit in the condensed consolidated statements of operations.
The U.S. GAAP method of accounting for uncertain
tax positions utilizes a two-step approach to evaluate tax positions. Step one, recognition, requires evaluation of the tax position to
determine if based solely on technical merits it is more likely than not to be sustained upon examination. Step two, measurement, is addressed
only if a position is more likely than not to be sustained. In step two, the tax benefit is measured as the largest amount of benefit,
determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement with tax authorities.
If a position does not meet the more likely than not threshold for recognition in step one, no benefit is recorded until the first subsequent
period in which the more likely than not standard is met, the issue is resolved with the taxing authorities or the statute of limitations
expires. Positions previously recognized are derecognized when the Company subsequently determines the position no longer is more likely
than not to be sustained. Evaluation of tax positions, their technical merits and measurements using cumulative probability are highly
subjective management estimates. Actual results could differ materially from these estimates.
On March 27, 2020, Congress enacted the Coronavirus
Aid, Relief and Economic Security ("CARES") Act to provide certain relief as a result of the Coronavirus Disease 2019 outbreak.
The Company maintains a full valuation allowance on its U.S. net deferred tax assets. Deferred tax asset remeasurement (tax expense) was
offset by a net decrease in valuation allowance, which resulted in no impact on the Company's income tax expense. Therefore, the Company
does not expect the provisions in the CARES Act will impact the Company’s Condensed Consolidated Financial Statements.
On March 11, 2021, Congress enacted the American
Rescue Plan Act of 2021. The Company does not expect the provisions of this Act will impact the Company’s Condensed Consolidated
Financial Statements.
Research and Development
Research and development (“R&D”)
expenses consist of costs incurred for direct and overhead-related research expenses and are expensed as incurred. Costs to acquire technologies,
including licenses, which are utilized in research and development and that have no alternative future use are expensed when incurred.
Technology developed for use in the Company’s product candidates is expensed as incurred until technological feasibility has been
established.
R&D costs for the three months ended January
31, 2023, and 2022 were $45,393 and $158,039, respectively, and for the nine months ended January 31, 2023, and 2022, were $382,662 and
$436,872, respectively.
Stock-Based Compensation
The Company recognizes stock-based compensation
expense for only those awards ultimately expected to vest on a straight-line basis over the requisite service period of the award. The
Company estimates the fair value of stock options using a Black-Scholes-Merton valuation model. This model requires the input of highly
subjective assumptions, including the option's expected term and stock price volatility. In addition, judgment is also required in estimating
the number of stock-based awards that are expected to be forfeited. Forfeitures are estimated based on historical experience at the time
of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The assumptions used in calculating
the fair value of share-based payment awards represent management's best estimates, but these estimates involve inherent uncertainties
and the application of management's judgment. Thus, if factors change and the Company uses different assumptions, the stock-based compensation
expense could be materially different in the future.
Concentration of Credit Risk
The Company has no significant off-balance-sheet
concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company
maintains most of its cash balance at financial institutions located throughout the United States. Accounts at these institutions are
insured by the Federal Deposit Insurance Corporation up to $250,000. Uninsured balances aggregated approximately $1,100,000 and $36,356,000
at January 31, 2023 and 2022, respectively. The Company has not experienced any losses in such accounts. Management believes it is not
exposed to any significant credit risk on cash.
Foreign Currency Translation
The Company translates the financial statements
of its foreign subsidiaries from the local (functional) currencies to U.S. dollars in accordance with FASB ASC 830, Foreign Currency
Matters. All assets and liabilities of the Company’s foreign subsidiaries are translated at year-end exchange rates, while revenue
and expenses are translated at average exchange rates prevailing during the year. Adjustments for foreign currency translation fluctuations
are excluded from net loss and are included in other comprehensive income (loss). Gains and losses on short-term intercompany foreign
currency transactions are recognized as incurred.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference
Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) and also
issued subsequent amendments to the initial guidance (collectively, “Topic 848”). Topic 848 is effective for all entities
as of March 12, 2020, through December 31, 2024, and provides optional guidance for contract modifications and certain hedging relationships
associated with the transition from reference rates that are expected to be discontinued. The Company’s adoption of Topic 848 during
the period ended January 31, 2023, did not result in an impact on the Company’s Condensed Consolidated Financial Statements.
NOTE 3 – ACCRUED EXPENSES
Accrued expenses at January 31, 2023, and April
30, 2022, are summarized below:
Schedule of accrued expenses | |
| | |
| |
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January 31, 2023 | | |
April 30, 2022 | |
Payroll related costs | |
$ | 89,697 | | |
$ | 118,062 | |
R&D costs | |
| 287,310 | | |
| 377,155 | |
Other | |
| 4,892 | | |
| 3,792 | |
Total | |
$ | 381,899 | | |
$ | 499,009 | |
The Director and Officer Insurance Policy for
the policy term of September 8, 2021, through September 8, 2022, was paid in full on August 8, 2021. The Company financed the Director
and Officer Insurance Policy for the policy term of March 8, 2021, through September 8, 2021. The financing agreement had an interest
rate of 4.85% per annum and required eight monthly payments of $12,829. There were no unpaid balances as of January 31, 2023, and 2022.
NOTE 4 – COMMON STOCK TRANSACTIONS
A summary of the Company’s compensatory
stock activity and related weighted average grant date fair value information for the three and nine months ended January 31, 2023, and
2022 is as follows:
During the nine months ended January 31, 2021,
three non-employee members of the Board were issued 1,334 shares of common stock pursuant to their Director Letter Agreements (“DLAs”)
in respect of their service during that year. The shares were fully vested upon issuance. The Company recorded a non-cash expense of $0
and $0 for the three months ended January 31, 2023, and 2022, respectively, and $0 and $4,342 for the nine months ended January 31, 2023,
and 2022, respectively. There were zero unvested shares remaining related to such DLAs as of January 31, 2023.
In September 2020, a consultant was issued 333
shares of common stock in respect of his services as the Chairman of the Company’s Medical and Scientific Advisory Board with vesting
subject to the consultant continuing to provide services to the Company. The Company recorded a non-cash consulting expense in the amount
of $0 and $0 for the three months ended January 31, 2023, and 2022, respectively, and $0 and $3,542 for the nine months ended January
31, 2023, and 2022, respectively. There were zero unvested shares remaining related to his compensation arrangement as of January 31,
2023, and 2022, respectively.
In January 2021, the Company awarded 4,400 shares
of common stock to the executive officers of the Company as part of their compensation agreements for 2021. During the three months ended
January 31, 2023, and 2022, the Company recorded a non-cash compensation expense in the amount of $0 and $7,370, respectively, and $0
and $29,480 for the nine months ended January 31, 2023, and 2022, respectively. There were zero unvested shares as of January 31, 2023,
and 2022, respectively.
During the nine months ended January 31, 2022,
three non-employee members of the Board were issued 1,336 shares of common stock pursuant to their DLAs in respect of their service during
that year. The shares were fully vested upon issuance. The Company recorded a non-cash expense of $0 and $6,056 for the three months ended
January 31, 2023, and 2022, respectively, and $0 and $16,792 for the nine months ended January 31, 2023, and 2022, respectively. There
were zero unvested shares remaining related to such DLAs as of January 31, 2023, and 2022, respectively.
During the nine months ended January 31, 2022,
two consultants were issued 334 shares of common stock pursuant to their consulting agreements with the Company. The shares vest monthly
over a twelve-month period and are subject to the consultants continuing to provide services under their consulting agreements. The Company
recorded a non-cash consulting expense in the amount of $0 and $2,442 for the three months ended January 31, 2023, and 2022, respectively,
and $0 and $6,504 for the nine months ended January 31, 2023, and 2022, respectively. There were zero and 84 unvested shares remaining
related to these consulting agreements as of January 31, 2023, and 2022, respectively.
In September 2021, a consultant was issued 334
shares of common stock in respect of his services as the Chairman of the Company’s Medical and Scientific Advisory Board with vesting
subject to the consultant continuing to provide services to the Company. The Company recorded a non-cash consulting expense in the amount
of $0 and $265 for the three months ended January 31, 2023, and 2022, respectively, and $0 and $353 for the nine months ended January
31, 2023, and 2022, respectively. There were zero unvested shares remaining related to his compensation arrangement as of January 31,
2023, and 2022, respectively.
In January 2022, the Company awarded 4,400 shares
of common stock to the executive officers of the Company as part of their compensation agreements for 2022. During the three months ended
January 31, 2023, and 2022, the Company recorded a non-cash compensation expense in the amount of $666 and $916, respectively, and $7,333
and $916 for the nine months ended January 31, 2023, and 2022, respectively. There were zero unvested shares as of January 31, 2023, and
2022, respectively. Two of the executive officers terminated their services in October 2022 and pursuant to their separation agreements
the shares were fully vested.
During the nine months ended January 31, 2023,
three non-employee members of the Board were issued 1,002 shares of common stock pursuant to their DLAs in respect of their service during
that year. The shares were fully vested upon issuance. The Company recorded a non-cash expense of $0 and $0 for the three months ended
January 31, 2023, and 2022, respectively, and $2,278 and $0 for the nine months ended January 31, 2023, and 2022, respectively. There
were zero unvested shares remaining related to such DLAs as of January 31, 2023, and 2022, respectively.
All shares were issued without registration under
the Securities Act of 1933 as amended (“Securities Act”) in reliance upon the exemption afforded by Section 4(a)(2) of the
Securities Act.
On April 14, 2021, the Company’s Registration
Statement on Form S-3 (File No. 333-255044) (“Third S-3”) was declared effective by the Commission, registering up to $100
million of the Company’s securities. During August 2021, the Company sold and issued approximately 19.1 million shares of common
stock, at prices ranging from $4.25 to $5.00 per share. Net of underwriting discounts, legal, accounting, and other offering expenses,
the Company received approximately $87.4 million from the sale of these shares and the exercise of approximately 2.5 million warrant shares.
On August 9, 2021, the Company entered into an
underwriting agreement to offer and sell shares of common stock, pre-funded warrants to purchase common stock and warrants to purchase
common stock in a public offering (“First Offering”). The gross proceeds of the First Offering were $15 million, before deducting
underwriting discounts, commissions, and offering expenses.
In August 2021, the Company received twenty-seven
(27) cash exercise notices relating to the common warrants with respect to the First Offering totaling 2,522,387 warrant shares (“Warrant
Exercises”). The Company received approximately $10,720,000 and issued 2,522,387 shares of common stock as a result of the exercise
notices.
On August 19, 2021, the Company entered into a
securities purchase agreement (“Securities Purchase Agreement”) with certain institutional investors (“Purchasers”)
pursuant to which the Company agreed to sell in a registered direct offering (“Registered Direct Offering”), shares of the
Company’s common stock and pre-funded warrants to purchase shares of common stock. Further, pursuant to the Securities Purchase
Agreement, in a concurrent private placement (together with the Registered Direct Offering, “Second Offering”), the Company
also agreed to issue to the Purchasers unregistered warrants (“Series A Warrants”) to purchase shares of common stock. The
Company received gross proceeds from the Second Offering, before deducting placement agent fees and estimated offering expenses payable
by the Company, of approximately $70 million. On November 17, 2021, the Company’s Registration Statement on Form S-3 registering
the resale of the common stock underlying the Series A Warrants was declared effective by the U.S. Securities and Exchange Commission
(“Commission”).
A summary of the Company’s non-vested restricted
stock activity and related weighted average grant date fair value information for the last nine months ended January 31, 2023, are as
follows:
Schedule of non-vested restricted stock activity | |
| | |
| |
| |
Shares | | |
Weighted Average Grant Date Fair Value | |
| |
| | |
| |
Unvested, at April 30, 2022 | |
| 2,933 | | |
| 2.50 | |
Granted | |
| 1,002 | | |
| 2.27 | |
Vested | |
| (3,935 | ) | |
| 2.44 | |
Expired | |
| – | | |
| – | |
| |
| | | |
| | |
Unvested, at January 31, 2023 | |
| – | | |
$ | – | |
NOTE 5 – STOCK OPTIONS AND WARRANTS
The Company maintains two equity incentive plans:
the 2022 Equity Incentive Plan (“2022 Plan”) and the 2021 Equity Incentive Plan (“2021 Plan” and, together with
the 2022 Plan, the “Plans”). The 2022 Plan serves as the successor to the 2021 Plan. The Plans provide for the issuance of
incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), stock grants and stock-based awards to
employees, directors, and consultants of the Company.
2022 Equity Incentive Plan
Effective December 28, 2022, the Company implemented
the 2022 Plan which was approved by the Company’s stockholders. The 2022 Plan is administered by the Compensation Committee of the
Board (“Compensation Committee”) and has 2,750,000 shares available.
2021 Equity Incentive Plan
Effective June 30, 2021, the Company implemented
the 2021 Equity Incentive Plan (“2021 Plan”) which was approved by the Company’s stockholders. The 2021 Equity Plan
is administered by the Compensation Committee and had 166,667 shares available.
Stock Options
As of January 31, 2023, the Company had 281,936
outstanding stock options to its directors and officers (collectively, “Employee Options”) and consultants (“Non-Employee
Options”).
During the nine months ended January 31, 2023,
and 2022, the Company granted 251,002 and 7,334 Employee Options, respectively.
The fair value of the Employee Options at the
date of grant was estimated using the Black-Scholes-Merton option-pricing model, based on the following weighted average assumptions:
Assumptions for options | |
| | |
| |
| |
Nine Months Ended January 31, | |
| |
2023 | | |
2022 | |
Risk-free interest rate | |
| 3.30% | | |
| 1.06% | |
Expected volatility | |
| 133% | | |
| 129% | |
Expected lives (years) | |
| 3.5 | | |
| 2.7 | |
Expected dividend yield | |
| 0.00% | | |
| 0.00% | |
The Company’s computation of expected volatility
is based on the historical daily volatility of its publicly traded stock. For stock option grants issued during the nine months ended
January 31, 2023, and 2022, the Company used a calculated volatility for each grant. The Company lacks adequate information about the
exercise behavior now and has determined the expected term assumption under the simplified method provided for under ASC 718, which averages
the contractual term of the Company’s stock options of five years with the average vesting term of two and one-half years for an
average of three years. The dividend yield assumption of zero is based upon the fact the Company has never paid cash dividends and presently
has no intention of paying cash dividends. The risk-free interest rate used for each grant is equal to the U.S. Treasury rates in effect
at the time of the grant for instruments with a similar expected life.
During the nine months ended January 31, 2023,
the Company granted no Non-Employee Options.
A summary of the Company’s stock option
activity and related information for the nine months ended January 31, 2023, are shown below:
Schedule of stock option activity | |
| | |
| |
Options | |
Weighted Average Exercise Price per Share | | |
Weighted Average Grant Date Fair Value per Share | |
Outstanding, April 30, 2022 | |
| 40,900 | | |
$ | 53.05 | |
Issued | |
| 251,002 | | |
| 2.97 | |
Forfeited | |
| (9,966 | ) | |
| 91.30 | |
Outstanding, January 31, 2023 | |
| 281,936 | | |
$ | 7.11 | |
Exercisable, January 31, 2023 | |
| 281,936 | | |
$ | 7.11 | |
Vested and expected to vest | |
| 281,936 | | |
$ | 7.11 | |
A summary of the activity for unvested stock options
during the nine months ended January 31, 2023, is as follows:
Unvested stock option activity | |
| | |
| |
| |
Options | | |
Weighted Average Grant Date Fair Value per Share | |
| |
| | |
| |
Unvested, April 30, 2022 | |
| 4,000 | | |
$ | – | |
Issued | |
| 251,002 | | |
| 2.97 | |
Vested | |
| (255,002 | ) | |
| – | |
Forfeited | |
| – | | |
| – | |
Unvested, January 31, 2023 | |
| – | | |
$ | – | |
The Company recorded $629,265
and $7,365
of stock-based compensation related to the issuance of Employee Options to certain officers and directors in exchange for services
during the three months ended January 31, 2023, and 2022, respectively, and $638,072
and $41,893
during the nine months ended January 31, 2023, and 2022, respectively. At January 31, 2023, there remained $0
of unrecognized compensation expense related to unvested Employee Options granted to officers and directors.
The following table summarizes the outstanding
stock options by exercise price at January 31, 2023:
Schedule of options by exercise price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise Price |
|
|
Number of
Options
Outstanding |
|
|
Weighted
Average
Remaining
Contractual Life
(Years) of
Outstanding
Options |
|
|
Weighted
Average
Exercisable
Price Per Share |
|
|
Number of
Options
Exercisable |
|
|
Weighted Average
Exercise Price Per Share
of Exercisable
Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
80.10 |
|
|
|
800 |
|
|
|
0.59 |
|
|
$ |
80.10 |
|
|
|
800 |
|
|
$ |
80.10 |
|
$ |
80.85 |
|
|
|
667 |
|
|
|
0.12 |
|
|
$ |
80.85 |
|
|
|
667 |
|
|
$ |
80.85 |
|
$ |
102.45 |
|
|
|
333 |
|
|
|
0.21 |
|
|
$ |
102.45 |
|
|
|
333 |
|
|
$ |
102.45 |
|
$ |
97.35 |
|
|
|
333 |
|
|
|
0.34 |
|
|
$ |
97.35 |
|
|
|
333 |
|
|
$ |
97.35 |
|
$ |
74.25 |
|
|
|
6,000 |
|
|
|
0.68 |
|
|
$ |
74.25 |
|
|
|
6,000 |
|
|
$ |
74.25 |
|
$ |
57.00 |
|
|
|
800 |
|
|
|
1.65 |
|
|
$ |
57.00 |
|
|
|
800 |
|
|
$ |
57.00 |
|
$ |
60.60 |
|
|
|
667 |
|
|
|
0.62 |
|
|
$ |
60.60 |
|
|
|
667 |
|
|
$ |
60.60 |
|
$ |
55.50 |
|
|
|
333 |
|
|
|
0.71 |
|
|
$ |
55.50 |
|
|
|
333 |
|
|
$ |
55.50 |
|
$ |
51.00 |
|
|
|
333 |
|
|
|
0.85 |
|
|
$ |
51.00 |
|
|
|
333 |
|
|
$ |
51.00 |
|
$ |
61.20 |
|
|
|
6,000 |
|
|
|
1.15 |
|
|
$ |
61.20 |
|
|
|
6,000 |
|
|
$ |
61.20 |
|
$ |
36.00 |
|
|
|
667 |
|
|
|
1.12 |
|
|
$ |
36.00 |
|
|
|
667 |
|
|
$ |
36.00 |
|
$ |
37.05 |
|
|
|
333 |
|
|
|
1.21 |
|
|
$ |
37.05 |
|
|
|
333 |
|
|
$ |
37.05 |
|
$ |
15.75 |
|
|
|
333 |
|
|
|
1.35 |
|
|
$ |
15.70 |
|
|
|
333 |
|
|
$ |
15.70 |
|
$ |
10.05 |
|
|
|
6,000 |
|
|
|
1.75 |
|
|
$ |
10.05 |
|
|
|
6,000 |
|
|
$ |
10.05 |
|
$ |
26.55 |
|
|
|
667 |
|
|
|
1.62 |
|
|
$ |
26.55 |
|
|
|
667 |
|
|
$ |
26.55 |
|
$ |
16.20 |
|
|
|
334 |
|
|
|
1.71 |
|
|
$ |
16.20 |
|
|
|
334 |
|
|
$ |
16.20 |
|
$ |
3.19 |
|
|
|
334 |
|
|
|
1.84 |
|
|
$ |
3.19 |
|
|
|
334 |
|
|
$ |
3.19 |
|
$ |
2.50 |
|
|
|
6,000 |
|
|
|
2.35 |
|
|
$ |
2.50 |
|
|
|
6,000 |
|
|
$ |
2.50 |
|
$ |
2.29 |
|
|
|
668 |
|
|
|
2.12 |
|
|
$ |
2.29 |
|
|
|
668 |
|
|
$ |
2.29 |
|
$ |
2.24 |
|
|
|
334 |
|
|
|
2.21 |
|
|
$ |
2.24 |
|
|
|
334 |
|
|
$ |
2.24 |
|
$ |
2.97 |
|
|
|
250,000 |
|
|
|
9.79 |
|
|
$ |
2.97 |
|
|
|
250,000 |
|
|
$ |
2.97 |
|
|
Total |
|
|
|
281,936 |
|
|
|
8.84 |
|
|
$ |
7.11 |
|
|
|
281,936 |
|
|
$ |
7.11 |
|
The aggregate intrinsic value of outstanding options
as of January 31, 2023, was $2,958. This represents options with exercise prices less than the $2.89 per share closing price of the Company’s
common stock on January 31, 2023.
Warrants
The warrants issued by the Company are equity
classified. The fair value of the warrants was recorded as additional paid-in-capital, and no further adjustments are made.
The Company concluded the following warrants met
the permanent equity criteria classification as they are freestanding financial instruments that are legally detachable and separately
exercisable from the shares of common stock with which they were issued. The warrants are immediately exercisable and do not embody an
obligation for the Company to repurchase the shares. The warrants also permit the holders to receive a fixed number of shares upon exercise
and do not provide any guarantee of value or return.
The Company elected to early adopt ASU No. 2020-06
Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity
(Subtopic 815-40) as of May 1, 2021. The early adoption of ASU No. 2020-06 had an immaterial effect on the Company’s consolidated
financial statements.
Effective August 12, 2021, the Company issued
common stock purchase warrants (“Common Warrants”) with respect to the First Offering. The Company issued Common Warrants
to purchase 4,028,528 shares of common stock pursuant to the underwriting agreement with H.C. Wainwright & Co., LLC (“Wainwright”).
The Common Warrants expire August 12, 2026, have an exercise price of $4.25 per share, were fully exercisable upon issuance and have a
cashless exercise feature. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value of these
Common Warrants was approximately $9,385,000 which was included in the non-cash equity issuance costs as presented on the Consolidated
Statements of Cash Flows of $34,477,000.
Additionally, with respect to the First Offering,
the Company issued common stock purchase warrants to Wainwright (“Underwriter Warrants”) to purchase 264,706 shares of common
stock. The Underwriter Warrants expire August 12, 2026, have an exercise price of $5.3125 per warrant share, were fully exercisable upon
issuance and have a cashless exercise feature. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate
fair value of these Underwriter Warrants was approximately $601,000 which was included in the non-cash equity issuance costs as presented
on the Consolidated Statements of Cash Flows of $34,477,000.
Effective August 12, 2021, the Company issued
899,027 pre-funded warrants (“Pre-funded Warrants”) to purchase common stock and Common Warrants pursuant to the underwriting
agreement with Wainwright with respect to the First Offering. The Pre-funded Warrants were sold for $4.249 per Pre-funded Warrant share.
The Company received approximately $3,820,000 from the issuance of the Pre-funded Warrants. The Pre-funded Warrants have an exercise price
of $0.001 per share, were exercisable immediately, have a cashless exercise feature and do not have an expiration date. In August 2021,
all 899,027 of the Pre-funded Warrants issued under the underwriting agreement were exercised. As a result of the exercise, the Company
received $899 and issued 899,027 shares of common stock.
Effective August 23, 2021, the Company issued
additional common stock purchase warrants (“Series A Warrants”) with respect to the Second Offering. The Company issued Series
A Warrants to purchase 7,000,000 shares of common stock pursuant to the Securities Purchase Agreement with certain institutional investors.
The Series A Warrants expire August 23, 2026, have an exercise price of $5.00 per warrant share, were fully exercisable upon issuance
and have a cashless exercise feature. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate fair value
of these Series A Warrants was approximately $21,340,000 which was included in the non-cash equity issuance costs as presented on the
Consolidated Statements of Cash Flows of $34,477,000.
Effective August 23, 2021, the Company issued
additional common stock purchase warrants (“Placement Agent Warrants”) with respect to the Second Offering. The Company issued
Placement Agent Warrants to purchase 1,050,000 shares of common stock to Wainwright or its designees pursuant to Wainwright acting as
placement agent. The Placement Agent Warrants expire August 23, 2026, have an exercise price of $6.25 per warrant share, were fully exercisable
upon issuance, and have a cashless exercise feature. Using the Black-Scholes-Merton option pricing model, the Company determined the aggregate
fair value of these Placement Agent Warrants was approximately $3,151,000 and which was included in the non-cash equity issuance costs
as presented on the Consolidated Statements of Cash Flows of $34,477,000.
Effective August 23, 2021, the Company issued
Pre-funded Warrants pursuant to the Second Offering to purchase 5,570,000
shares of common stock for approximately $27,844,000
or $4.999 per warrant share. The Pre-funded Warrants have an exercise price of $0.001
per share, were fully exercisable upon issuance, have a cashless exercise feature and do not have an expiration date. As of January
31, 2023, 5,500,000
of the Pre-funded Warrants have been exercised for aggregate gross proceeds of $5,500,
which resulted in the issuance of 5,500,000 shares. As of January 31, 2023, Pre-funded Warrants were exercisable for 70,000
shares of common stock remained outstanding. The Company received a total of $4,749,930 pursuant to the issuance of the Pre-funded
Warrants as of January 31, 2023.
In August 2021, the Company received twenty-seven
cash exercise notices relating to the Common Warrants with respect to the First Offering totaling 2,522,387 warrant shares. The Company
received approximately $10,720,000 and issued 2,522,387 shares of common stock as a result of the exercise notices.
Series A Warrants and Placement Agent Warrants
were issued pursuant to the Securities Purchase Agreement dated as of August 19, 2021. At the time, the Series A Warrants and the Placement
Agent Warrants were issued, neither the Series A Warrants, the Placement Agent Warrants nor the underlying common stock for such warrants
was registered pursuant to the Securities Act. The Company registered the common stock underlying the Series A Warrants and the Placement
Agent Warrants pursuant to a Registration Statement on Form S-3 (“Registration Statement”) filed with the Commission on November
8, 2021. The Registration Statement was declared effective by the Commission on November 17, 2021.
A summary of the Company’s warrant activity
and related information for the nine months ended January 31, 2023, are shown below:
Schedule of warrant activity | |
| | |
| |
| |
Warrants | | |
Weighted Average Exercise Price Per Share | |
Outstanding, April 30, 2022 | |
| 10,772,736 | | |
$ | 4.59 | |
Issued | |
| – | | |
| – | |
Exercised | |
| (880,000 | ) | |
| – | |
Expired | |
| (1,889 | ) | |
| – | |
Outstanding, January 31, 2023 | |
| 9,890,847 | | |
| – | |
Exercisable, January 31, 2023 | |
| 9,890,847 | | |
$ | 4.99 | |
The following table summarizes additional information
concerning warrants outstanding and exercisable at January 31, 2023:
Schedule of warrants outstanding and exercisable |
|
|
|
|
|
|
|
|
|
Exercise Prices |
|
Number of
Warrant Shares
Exercisable at
January 31, 2023 |
|
|
Weighted
Average
Remaining
Contractual
Life Years |
|
|
Weighted
Average
Exercise Price Per Share |
|
|
|
|
|
|
|
|
|
|
|
$4.25 |
|
|
1,506,141 |
|
|
|
3.53 |
|
|
|
|
|
$5.3125 |
|
|
264,706 |
|
|
|
3.52 |
|
|
|
|
|
$5.00 |
|
|
7,000,000 |
|
|
|
3.56 |
|
|
|
|
|
$6.25 |
|
|
1,050,000 |
|
|
|
3.55 |
|
|
|
|
|
$0.001 |
|
|
70,000 |
|
|
|
– |
|
|
|
|
|
|
|
|
9,890,847 |
|
|
|
3.56 |
|
|
$ |
4.99 |
|
NOTE 6 – LEGAL PROCEEDINGS
The Company is not currently a party to any pending
legal proceedings, material or otherwise. There are no legal proceedings to which any property of the Company is subject.
NOTE 7 – OTHER RELATED PARTY TRANSACTIONS
The Company had the following related party transactions
during the three and nine months ended January 31, 2023, and 2022, respectively.
The Company owns 14.3% of the equity in SG Austria
and is reported on the cost method of accounting. SG Austria has two subsidiaries: (i) Austrianova; and (ii) Austrianova Thailand. The
Company purchased products and services from these subsidiaries in the approximate amounts of $0 and $64,300 in the three and nine months
ended January 31, 2023, respectively, and $63,000 and $174,000 for the three and nine months ended January 31, 2022, respectively.
In April 2014, the Company entered the Vin-de-Bona
Consulting Agreement pursuant to which it agreed to provide professional consulting services to the Company. Vin-de-Bona is owned by Prof.
Günzburg and Dr. Salmons, both of whom are involved in numerous aspects of the Company’s scientific endeavors relating to cancer
and diabetes (Prof. Günzburg is the Chairman of Austrianova, and Dr. Salmons is the Chief Executive Officer and President of Austrianova).
The term of the agreement is for 12 months and is automatically renewable for successive 12-month terms. After the initial term, either
party can terminate the agreement by giving the other party 30 days’ written notice before the effective date of termination. To
date, the agreement has been automatically renewed annually. The amounts incurred for the three and nine months ended January 31, 2023,
were approximately $0 and $47,500, respectively, and for the three and nine months ended January 31, 2022, were approximately $29,000
and $79,000, respectively.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
The Company acquires assets still in development
and enters R&D arrangements with third parties that often require milestone and royalty payments to the third-party contingent upon
the occurrence of certain future events linked to the success of the asset in development. Milestone payments may be required, contingent
upon the successful achievement of an important point in the development lifecycle of the pharmaceutical product (e.g., approval of the
product for marketing by a regulatory agency). If required by the license agreements, the Company may have to make royalty payments based
upon a percentage of the sales of the pharmaceutical products if regulatory approval for marketing is obtained.
Office Lease
On December 2, 2020, the Company entered into
a lease for its office space in Laguna Hills, California for a six-month term commencing on March 1, 2021, which expired on August 31,
2021.
On May 24, 2021, the Company entered into an additional
six-month lease of this office space, commencing on September 1, 2021, which expired on February 28, 2022.
In October 2021, the Company moved the Company’s
headquarters from Laguna Hills, California to Las Vegas, Nevada. In doing so, the Company entered into a lease for office space in Las
Vegas, Nevada. The term of the lease expired on April 30, 2022.
In January 2022, the Company entered into an additional
six-month lease of the Las Vegas, Nevada office space, commencing on May 1, 2022, which expired on October 31, 2022.
In July 2022, the Company entered into an additional
six-month lease of the Las Vegas, Nevada office space, commencing on November 1, 2022, which expires on April 30, 2023.
Rent expenses for the offices for the three and
nine months ended January 31, 2023, were $1,398 and $3,867, respectively, and for the three and nine months ended January 31, 2022, were
$6,103 and $13,995, respectively.
The following table summarizes the Company’s
aggregate future minimum lease payments required under the operating lease as of:
Schedule of future minimum lease payments | |
| |
Year Ending April 30, | |
Amount | |
2023 | |
$ | 1,158 | |
| |
$ | 1,158 | |
Compensation Agreements
The Company entered into executive compensation
agreements with Kenneth L. Waggoner, Gerald W. Crabtree and Carlos A. Trujillo in March 2015, each of which was amended in December 2015
and March 2017. The Company’s compensation agreements with Mr. Waggoner and Mr. Trujillo were amended and restated effective January
1, 2022. The compensation agreements with Dr. Crabtree had a term of two years and the compensation agreements for Mr. Waggoner and Mr.
Trujillo had a term of three years, with automatic renewals unless the Company or the officer provides written notice of termination at
least ninety days prior to the end of the current term.
Effective October 6, 2022, Mr. Waggoner signed
the Separation, Consulting and Release Agreement (“Separation Agreement”), whereby he resigned from all positions with the
Company and its subsidiaries. The Separation Agreement contains a consulting services agreement covering a twelve-month period, whereby
Mr. Waggoner will serve as an independent contractor for the Company in exchange for a monthly consulting fee of approximately $36,000
for the duration of such period.
Effective October 11, 2022, Dr. Crabtree signed
a release agreement with the Company, whereby he resigned from all Company positions, including all positions with the Company’s
subsidiaries.
In May 2017, the Company amended the compensation
agreements with each of the then-current independent Board members, and the terms of such amended agreements continue in effect until
a member is no longer on the Board.
As of January 31, 2023, the Company had five directors.
Each director was entitled to receive $12,500 in cash for each calendar quarter of service on the Board.
On August 15, 2022, the Company and the Board:
(i) accepted the previously tendered irrevocable resignation of each of Dr. Matthias Löhr, Dr. Raymond C.F. Tong, Thomas Liquard,
Dr. Gerald W. Crabtree, and Carlos A. Trujillo, as members of the Board, and (ii) appointed Jonathan L. Schechter, Joshua N. Silverman,
Daniel Allen, Daniel S. Farb, and Jack E. Stover as independent members of the Board, effective immediately, each with a term expiring
at the Company’s 2022 annual meeting of shareholders or until such person’s earlier death, resignation, disqualification or
removal.
On November 1, 2022, Jack E. Stover notified the
Company of his decision to resign from the Board effective immediately. On November 14, 2022, in accordance with the recommendation of
the Company’s Nominating Committee, Robert Weinstein was appointed to serve as a director of the Board and the Chairperson of the
Audit Committee, with a term expiring at the Company’s annual meeting of shareholders or until death, resignation, disqualification
or removal.
On November 14, 2022, the Board approved the employment
of Mr. Joshua Silverman as the Interim Chief Executive Officer, Interim President and Interim Chairman of the Board on a month-to-month
basis. Upon Mr. Silverman accepting employment he was no longer an independent director.
On December 28, 2022, the Company held its annual
meeting of stockholders. The stockholders voted to elect the following directors to serve one-year terms expiring in 2023: Joshua N. Silverman,
Jonathan L. Schechter, Michael M. Abecassis, Robert Weinstein and Wayne R. Walker.
Service Agreements
The Company has entered into several service agreements
with independent and related parties pursuant to which services will be provided over a specified period-of-time related to the IND which
the FDA has placed on clinical hold. The services include regulatory affairs strategy, advice and follow up work on the IND and services
related to having the clinical hold lifted. The total cost is estimated to be approximately $214,000, of which the related party (SG Austria
and its subsidiaries) portion will be approximately $157,000. These amounts take into account some of the cost associated with the work
and preclinical studies required to lift the clinical hold.
NOTE 9 – INCOME TAXES
At January 31, 2023, the Company had federal and
state net operating loss carryforwards of approximately $55,936,000 and $52,187,000, respectively, available to offset against future
taxable income; these operating loss carryforwards expire in 2021 through 2038. Internal Revenue Code Section 382 imposes an annual limitation
for the utilization of tax attributes if there is an “ownership change”. Based upon the equity activity during the nine months
ended January 31, 2023, the Company had an ownership change in August 2021. As a result of the change in-control that occurred in the
Company’s shareholder base in August 2021, approximately $37,083,000 and $40,838,000 federal and state net operating loss carryforwards,
respectively, became limited in their availability. The remaining net operating loss carryforwards are approximately $18,853,000 and $11,350,000
for federal and state purposes, respectively.
Current tax laws limit the amount of loss available
to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future
taxable income may be limited. Based on the assessment of all available evidence including, but not limited to, the Company’s limited
operating history in its core business and lack of profitability, uncertainties of the commercial viability of its technology, the impact
of government regulations and healthcare reform initiatives and other risks normally associated with biotechnology companies, the Company
has concluded that is more likely than not that these operating loss carryforwards will not be realized. Accordingly, 100% of the deferred
tax valuation allowance has been recorded against these assets.
The Company’s policy is to recognize any
interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of the nine months ended January
31, 2023, and 2022, the Company had accrued no interest or penalties related to uncertain tax positions.
See Note 10 of Notes to the Consolidated Financial
Statements included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2022, for additional information regarding
income taxes.
NOTE 10 – EARNINGS PER SHARE
Basic earnings (loss) per share is computed by
dividing earnings available to common stockholders by the weighted average number of shares outstanding during the period. Diluted earnings
per share is computed by dividing net income by the weighted average number of shares and potentially dilutive shares of common stock
outstanding during the period increased to include the number of additional shares of common stock that would be outstanding if the potentially
dilutive securities had been issued. Potential shares of common stock outstanding principally include stock options and warrants. During
the three and nine months ended January 31, 2023, and 2022, the Company incurred losses. Accordingly, the effect of any common stock equivalent
would be anti-dilutive during those periods and are not included in the calculation of diluted weighted average number of shares outstanding.
The tables below set forth the basic loss per
share calculations:
Earnings per share calculations | |
| | |
| |
| |
Three Months Ended January 31, | |
| |
2023 | | |
2022 | |
Net loss | |
$ | (764,136 | ) | |
$ | (811,290 | ) |
Basic weighted average number of shares outstanding | |
| 18,995,442 | | |
| 21,667,239 | |
Diluted weighted average number of shares outstanding | |
| 18,995,442 | | |
| 21,667,239 | |
Basic loss per share | |
$ | (0.04 | ) | |
$ | (0.04 | ) |
Diluted loss per share | |
$ | (0.04 | ) | |
$ | (0.04 | ) |
| |
| | | |
| | |
| |
Nine Months Ended January 31, | |
| |
2023 | | |
2022 | |
Net loss | |
$ | (4,189,655 | ) | |
$ | (2,816,454 | ) |
Basic weighted average number of shares outstanding | |
| 20,051,617 | | |
| 13,538,792 | |
Diluted weighted average number of shares outstanding | |
| 20,051,617 | | |
| 13,538,792 | |
Basic loss per share | |
$ | (0.21 | ) | |
$ | (0.21 | ) |
Diluted loss per share | |
$ | (0.21 | ) | |
$ | (0.21 | ) |
The table below set forth these potentially dilutive
securities:
Schedule of potentially dilutive securities | |
| | |
| |
| |
Nine Months Ended January 31, | |
| |
2023 | | |
2022 | |
Excluded options | |
| 281,936 | | |
| 48,667 | |
Excluded warrants | |
| 9,890,847 | | |
| 10,773,315 | |
Total excluded options and warrants | |
| 10,172,783 | | |
| 10,821,982 | |
NOTE 11 – PREFERRED STOCK
The Company has authorized 10,000,000 shares of
preferred stock, with a par value of $0.0001, of which one share has been designated as "Series A Preferred Stock". As of January
31, 2023, there are no shares of preferred stock issued and outstanding.
The description of the Series A Preferred Stock
below is qualified in its entirety by reference to the Company’s Articles of Incorporation, as amended.
The Series A Preferred Stock has the following
features:
|
· |
There is one share of preferred stock designated as Series A Preferred Stock; |
|
|
|
|
· |
The Series A Preferred Stock has a number of votes at any time equal to the number of votes then held by all other shareholders of the Company having a right to vote on any matter plus one. The Certificate of Designations that designated the terms of the Series A Preferred Stock cannot be amended without the consent of the holder of the Series A Preferred Stock; |
|
|
|
|
· |
The Company may redeem the Series A Preferred Stock at any time for a redemption price of $1.00 paid to the holder of the share of Series A Preferred Stock; and |
|
|
|
|
· |
The Series A Preferred Stock has no rights of transfer, conversion, dividends, preferences upon liquidation or participation in any distributions to shareholders. |
NOTE 12 – TREASURY STOCK
In May 2022, the Board authorized a share repurchase
program to acquire its outstanding common stock for up to $10 million. In January 2023, the Board authorized an additional share repurchase
program to acquire up to an additional $10 million of the Company’s outstanding common stock (“the New Program”). In
conjunction with the share repurchase programs, the Company selected a broker to repurchase shares on behalf of the Company. The amount
of common stock repurchased on any given trading day is determined by a formula, which is based on the market price of the common stock
and average daily volumes. Shares repurchased are held in treasury for general corporate purposes. During the nine months ended January
31, 2023, the Company repurchased 3,393,060 shares at a total cost, including commissions, of $9,254,005. These shares are treated as
Treasury Stock using the cost method. The 3,393,060 shares repurchased are included in Treasury Stock in the accompanying Condensed Consolidated
Balance Sheets. At January 31, 2023, including the New Program, $10,745,995 remains available to repurchase the Company’s common
stock pursuant to the share repurchase programs.
NOTE 13 – SUBSEQUENT EVENTS
In February and March 2023, pursuant to the share
repurchase programs, the Company repurchased 765,633 shares at a total cost, including commissions of approximately $2,294,000. Subsequent
to these transactions there remained approximately $8,452,000 available to purchase additional shares of the Company’s common stock.
Increase to Authorized Shares
On March 14, 2023, pursuant to stockholder approval
received at the Annual Meeting of Stockholders, the Company filed with the Secretary of State of the State of Nevada a Certificate of
Change to its Articles of Incorporation, as amended, to increase the number of authorized shares of common stock from 33,333,334 to 133,333,334.
The Certificate of Change had no impact on the number of authorized shares of preferred stock, which remains at 10,000,000.