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.
(“PharmaCyte” or “Company”) is a biotechnology company focused on developing cellular therapies for cancer
and diabetes based upon a proprietary cellulose-based live cell encapsulation technology known as
“Cell-in-a-Box®”. The Cell-in-a-Box® technology is intended to be used as a platform
upon which therapies for several types of cancer, including locally advanced, inoperable pancreatic cancer (“LAPC”) will
be developed. The current generation of the Company’s product candidate is referred to as “CypCaps™”. 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 Phase 2b 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 has 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 is also in the process of conducting these studies and gathering additional information to
submit to the FDA. See “The Investigational New Drug Application and the Clinical Hold” below.
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. The Company believes that this enables
greater cell growth and production of the active molecules. The capsules are largely composed of cellulose (cotton) and are bio inert.
The Company is developing therapies for pancreatic
and other solid cancerous tumors by using genetically engineered live human cells that it believes are capable of converting a cancer
prodrug into its cancer-killing form. 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.
In addition, the Company has been exploring ways
to delay the production and accumulation of malignant ascites that results from many types of abdominal cancerous tumors. Malignant ascites
is secreted by abdominal cancerous tumors into the abdomen after the tumors have reached a certain stage of growth. This fluid contains
cancer cells that can seed and form new tumors throughout the abdomen. This fluid accumulates in the abdominal cavity, causing swelling
of the abdomen, severe breathing difficulties and extreme pain. On November 30, 2021, the Company announced the commencement of a pre-clinical
study to determine if the treatment the Company uses for LAPC can also delay the rate of production and accumulation of malignant ascites.
The Company has also 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 cells in the body is designed to function as a bio-artificial pancreas
for purposes of insulin production.
The Company has also been considering ways to
exploit the benefits of the Cell-in-a-Box® technology to develop therapies for cancer that involve prodrugs based upon
certain constituents of the Cannabis plant (“Cannabis Program”); these constituents are of the class of compounds
known as “cannabinoids”.
Until: (i) the FDA allows the Company to commence
a clinical trial in LAPC described in its IND for which the FDA has placed a clinical hold; and (ii) the Company validates its Cell-in-a-Box®
encapsulation technology in its planned Phase 2b clinical trial in LAPC, the Company is not spending any further resources developing
the Cannabis Program.
The Investigational New Drug Application and the Clinical Hold
On September 1, 2020, the Company submitted an
IND to the FDA for a planned Phase 2b clinical trial in LAPC. Shortly thereafter, the Company received Information Requests from the FDA
related to the IND. The Company timely responded to all Information Requests.
On October 1, 2020, the Company received notice
that the FDA had placed the Company’s 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 providing specific guidance on what the Company must do to have the clinical
hold lifted.
In order to address the clinical hold, the FDA
has 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 final formulated product candidate as well as the cells from PharmaCyte’s Master Cell Bank (“MCB”); |
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Evaluate the compatibility of the delivery devices (the prefilled syringe and the microcatheter used to implant the CypCaps™) with PharmaCyte’s product candidate; |
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Provide additional detailed description of the manufacturing process of PharmaCyte’s product candidate; |
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Provide additional product release specifications for PharmaCyte’s encapsulated cells; |
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Demonstrate comparability between the 1st and 2nd generation products and ensure adequate and consistent product performance and safety between the two generations of PharmaCyte’s product candidate; |
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Conduct a biocompatibility assessment using the final finished capsules after the entire product candidate manufacturing process (but without cells); |
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Address insufficiencies in 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; 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 generated by PharmaCyte. |
The FDA also requested that the Company address
the following issues as an amendment to the 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 product candidate remains sterile and stable during the filling process; |
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Submit an updated batch analysis for the 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 PharmaCyte’s Angiography Procedure Manual; |
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Clarify the language in the Pharmacy Manual regarding proper use of the syringe fill with the product candidate; 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 in the LAPC. |
The Company assembled a scientific and regulatory
team of experts to address the FDA requests. That team is working to complete the items requested by the FDA. The Company is in varying
stages of addressing the studies and acquiring the information requested by the FDA.
The following provides a summary of the activities
in which the Company is engaged to have the clinical hold lifted:
| · | Additional Regulatory Expertise Added to IND Team. In addition
to its established team of experts, the Company has retained Biologics Consulting to perform a regulatory “Gap Analysis” and
to assist with the Company’s IND submission. Biologics Consulting is a full-service regulatory
and product development consulting firm for biologics, pharmaceuticals and medical devices and has personnel with extensive FDA
experience. Although it took a lengthy amount of time to onboard Biologics Consulting, this should augment the Company’s ability
to submit an acceptable IND to the FDA. |
| · | Stability Studies on PharmaCyte’s Clinical Trial Product. The Company has now successfully completed a product stability
study after 3, 6, 9, 12 and 18-months of storage frozen at -80C on the Company’s clinical trial product known as CypCaps™,
including container closure integrity testing for certain timepoints. The next time point in this ongoing stability study will be at 24
months of product stability of the CypCaps. This 24-month time point analysis is ready to commence, and data will be available in the
coming weeks. |
| · | Additional Studies Requested by the FDA. The Company has designed and commenced various additional studies requested by the
FDA, including a stability study on the cells from its MCB used to make the CypCaps™. The Company is already at the 3-year stability
timepoint for the cells from its MCB. The Company is also collating existing information on the reproducibility and quality of the filling
of the MCB cells into vials ready for CypCaps™ manufacturing. |
| · | Determination of the Exact Sequence of the Cytochrome P450 2B1 Gene. The Company has completed the determination of the exact
sequence of the cytochrome P450 2B1 gene inserted at the site previously identified on chromosome 9 using state-of-the-art nanopore sequencing,
a cutting edge, unique and scalable technology that permits real-time analysis of long DNA fragments. The result of this analysis of the
sequence data confirmed that the genes are intact. |
| · | Further Confirmation of the Exact Sequence of the Cytochrome P450 2B1 Gene Insert. An additional,
more finely detailed, analysis of the integration site of the cytochrome P450 2B1 gene from the augmented HEK293 cell clone that is used
in its CypCaps™ product for was found to be intact. In this new study, the Company has been able to confirm the previously elucidated
structure of the integrated transgene sequence using more data points. These studies also set the stage for a next step analysis to determine
the genetic stability of the cytochrome P450 2B1 gene at the DNA level after multiple rounds of cell growth. This new study has been completed
in which the original Research Cell Bank (“RCB”) cells were compared with cells from the MCB, and the analysis confirmed that
the cytochrome P450 2B1 and the surrounding sequence has remained stable with no changes detected at the DNA level. |
| · | Biocompatibility Studies. The Company has designed and commenced 8 biocompatibility studies,
6 of which have been completed successfully. The remaining 2 studies are underway. Those studies are the Acute Systemic Toxicity Study
of Empty Cellulose Sulphate Capsules in Mice and the Skin Sensitization Study of Empty Cellulose Sulphate Capsules in Guinea Pigs. To
enable these studies to be performed, Austrianova manufactured an additional 400 syringes of empty capsules for testing. Some of the data
being generated will also be used to demonstrate comparability with the CypCaps™ successfully used in two earlier clinical trials
for pancreatic cancer. |
| · | Micro-Compression and Swelling Testing. This project is developing and optimizing two reproducible methods for testing and
confirming the physical stability and integrity of the CypCaps™ product candidate. These studies required the acquisition of new
equipment by Austrianova as well as validation and integration into Austrianova’s Quality Control laboratory. |
| · | Break Force and Glide Testing. The Company is in the process of developing a protocol to measure whether the syringe, attached
to the catheter when used to expel the capsules, will still have a break and glide force that is within the specification that the Company
has established. The Company will set this specification based on the syringe/plunger manufacturer’s measured break and glide
forces, or alternatively, accepted ranges for glide forces routinely used in the clinic. |
| · | CypCaps Capsules Compatibility with the Syringe and Other Components of the Microcatheter Delivery System. The Company has
commenced studies designed to show that CypCaps™ are not in any way adversely affected by the catheters used by interventional radiologists
to deliver them into a patient. Compatibility data is being generated to demonstrate that the quality of the CypCaps™ is maintained
after passage through the planned microcatheter systems. |
| · | CypCaps Capsules and Cell Viability after Exposure to Radiological Contrast Medium. The
Company has designed and commenced a project to test the effect of the exposure of CypCaps™ to two routinely used types of contrast
medium that interventional radiologists use to implant the CypCaps™ in a patient. The contrast medium is used to visualize the blood
vessels during implantation of the CypCaps™. |
| · | Master Drug File Information. Austrianova is providing additional detailed confidential information to the FDA on the manufacturing
process, including information on the improvements and advancements made to the product candidate since the last clinical trials were
conducted with respect to reproducibility and safety. However, Austrianova has not changed the overall physical characteristics of the
CypCaps™. The Company is supporting Austrianova financially in this work. |
| · | Additional Documentation Requested by the FDA. The Company is in the process of updating its IND submission documentation,
including extending its discussion on immunological aspects of its treatment for LAPC. |
| · | Pig Study. Finally, the Company has designed a study in pigs to address biocompatibility and long-term implantation
and dispersion of its CypCaps™. We believe this animal study will complement the positive data already available from the previous
human clinical trials showing the safety of CypCaps™ implantation in human patients. |
Impact of the COVID-19 Pandemic on the Company’s Operations
The coronavirus SARS-Cov2 pandemic (“COVID-19”)
is causing significant, industry-wide delays in clinical trials. Although the Company is not yet in a clinical trial, the Company has
filed an IND with the FDA to commence a clinical trial in LAPC. While the IND has been placed on clinical hold by the FDA, the Company
has assessed the impact of COVID-19 on its operations. Currently, many clinical trials are being delayed due to COVID-19. There are numerous
reasons for these delays. For example, patients have shown a reluctance to enroll or continue in a clinical trial due to fear of exposure
to COVID-19 when they are in a hospital or doctor’s office. There are local, regional, and state-wide orders and regulations restricting
usual normal activity by people. These discourage and interfere with patient visits to a doctor’s office if the visit is not COVID-19
related. Healthcare providers and health systems are shifting their resources away from clinical trials toward the care of COVID-19 patients.
The FDA and other healthcare providers are making product candidates for the treatment of COVID-19 a priority over product candidates
unrelated to COVID-19. As of the date of this Report on Form 10-Q (“Report”), the COVID-19 pandemic has had an impact upon
the Company’s operations, although the Company believes that impact is not material. The impact primarily relates to delays in tasks
associated with the preparation of the Company’s responses to the clinical hold, including all requested preclinical studies. There
may be further delays in generating responses to the requests from the FDA related to the clinical hold.
As a result of the COVID-19 pandemic, commencement
of the Company’s planned clinical trial to treat LAPC may be delayed beyond the lifting of the clinical hold by the FDA should that
occur. Also, enrollment may be difficult for the reasons discussed above. In addition, after enrollment in the trial, if a patient contracts
COVID-19 during his or her participation in the trial or is subject to isolation or shelter in place restrictions, this may cause him
or her to drop out of our clinical trial, miss scheduled therapy appointments or follow-up visits or otherwise fail to follow the clinical
trial protocol. If a patient is unable to follow the clinical trial protocol or if the trial results are otherwise affected by the consequences
of the COVID-19 pandemic on patient participation or actions taken to mitigate COVID-19 spread, the integrity of data from the clinical
trial may be compromised or not be accepted by the FDA. This could further adversely impact or delay the Company’s clinical development
program if the FDA allows it to proceed.
It is highly speculative in projecting the effects
of COVID-19 on the Company’s proposed clinical development program and the Company generally. The effects of COVID-19 may quickly
and dramatically change over time. Its evolution is difficult to predict, and no one is able to say with certainty when the pandemic will
subside.
Company Operations
Background
The Company is a Nevada corporation incorporated
in 1996. In 2013, the Company restructured its operations from being a nutraceutical company to being a biotechnology company. The restructuring
resulted in PharmaCyte focusing 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 to Las Vegas, Nevada.
Increase in Authorized Shares
On July 2, 2021, pursuant to stockholder approval
at the Annual Meeting of Stockholders, the Company filed with the Secretary of State of the State of Nevada a Certificate of Amendment
to its Articles of Incorporation, as amended, to increase the number of authorized shares to fifty billion ten million (50,010,000,000), of which fifty billion (50,000,000,000) shares, with a par value of $0.0001 per share, are designated as common stock and of which ten
million (10,000,000) shares, with a par value of $0.0001 per share, are designated as preferred stock. The reverse stock split described
below reduced the number of authorized shares to thirty-three million three hundred thirty-three thousand three hundred thirty-four (33,333,334).
See Reverse Stock Split.
Nasdaq Listing
PharmaCyte’s common stock began trading
on Nasdaq on August 10, 2021, under the symbol “PMCB.” Prior to that, PharmaCyte’s common stock was quoted on the OTCQB
Market under the symbol “PMCB.” Following the reverse stock split (discussed below) of the Company’s common stock on
July 12, 2021, and until August 6, 2021, the OTCQB Market Symbol for the Company’s common stock had temporarily been “PMCBD.”
Reverse Stock Split
Effective July 12, 2021, pursuant to the approval
by the Company’s Board of Directors (“Board”), the Company filed with the Secretary of State of Nevada a Certificate
of Change to the Articles of Incorporation, to cause a 1-for-1,500 reverse stock split of the Company’s common stock. The reverse
stock split decreased the number of authorized shares of common stock from fifty billion (50,000,000,000) shares to thirty-three million
three hundred thirty-three thousand three hundred thirty-four (33,333,334) shares, 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. Except as otherwise indicated, all share and per
share information in the accompanying Condensed Consolidated Financial Statements and related footnotes gives effect to the reverse stock
split of the Company’s common stock.
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 Private Limited; and (iv)
Viridis Biotech, Inc. and are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).
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 preparation of financial statements in accordance
with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities known to exist as of the date the financial statements are published and the reported amounts of revenues
and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation
of the Company’s 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 the COVID-19 pandemic, are uncertain,
rapidly changing, and difficult to predict. Therefore, the Company’s accounting estimates and assumptions may change over time in
response to the COVID-19 pandemic 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 a 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, 2022, and 2021.
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 for the nine months ended
January 31, 2022, and 2021.
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 820, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy
for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported
in the condensed consolidated balance sheets for current liabilities qualify as financial instruments and are a reasonable estimate of
their fair values because of the short period between the origination of such instruments and their expected realization and their current
market rate of interest. The three levels of valuation hierarchy are defined as follows:
|
· |
Level 1. Observable inputs such as quoted prices in active markets; |
|
· |
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
|
· |
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Income Taxes
Deferred taxes are calculated using the liability
method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards,
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more-likely-than-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 United
States (“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 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 Act (“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, that resulted in no impact on the Company's
income tax expense. Therefore, the Company does not expect the provisions in the CARES Act will impact the Company’s consolidated
financial statements.
On March 11, 2021, Congress enacted the American
Rescue Plan Act of 2021 (“Act”). The Company does not expect the provisions of this Act will impact the Company’s consolidated
financial statements.
Research and Development
Research and Development (“R&D”)
expenses consist of costs incurred for direct and overhead-related research expenses and are expensed as incurred. Costs to acquire technologies,
including licenses, that are utilized in R&D and that have no alternative future use are expensed when incurred. Technology developed
for use in the Company’s product candidates is expensed as incurred until technological feasibility has been established.
R&D expenses for the three months ended
January 31, 2022, and 2021 were $158,039
and $174,088, respectively, and for the
nine months ended January 31, 2022, and 2021 were $436,872
and $595,976, 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 U.S. Accounts at these institutions are insured by
the Federal Deposit Insurance Corporation up to $250,000 for each financial institution. Uninsured balances aggregated approximately $36,356,000
as of January 31, 2022, and $1,921,000 as of April 30, 2021. The Company has not experienced any losses in such accounts.
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.
Liquidity
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 deduction
of underwriting discounts, commissions, and estimated offering expenses.
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 other 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”).
Deferred Offering Costs
The Company complies with the requirements
of FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A — “Expenses of Offering.” Offering costs were
$8,362,137
(including $7,116,445
in underwriters' fees and $108,979
in selling concessions), consisting principally of costs incurred in connection with formation and preparation for the Company
offering securities to the public (“Public Offerings”). These costs, together with the
underwriters’ discount, were charged to additional paid-in capital upon closing of the Public Offerings on August 9 and 19,
2021.
Recent Accounting Pronouncements
Accounting Standards Update (“ASU”)
No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU
2016-13”), was issued in June 2016. Under ASU 2016-13, existing guidance on reporting credit losses for trade and other receivables
and available for sale debt securities will be replaced with a new forward-looking “expected loss” model that generally will
result in the earlier recognition of allowances for losses. The Company’s adoption of ASU 2016-13 during the period ended July
31, 2020, did not result in an impact on the Company’s condensed consolidated financial statements. As part of the Company’s
continuing assessment of the adequacy of ASU 2016-13, there are no factors to be considered at this time since the Company does not have
an allowance for credit losses.
ASU No. 2019-12, Simplifying the Accounting
for Income Taxes (“ASU 2019-12”), was issued in December 2019. Under ASU 2019-12, the accounting for income taxes is simplified
by eliminating certain exceptions and implementing additional requirements which result in a more consistent application of ASC 740. The
Company’s adoption of ASU 2019-12 during the period ended July 31, 2021, did not result in an impact on the Company’s Condensed
Consolidated Financial Statements.
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, 2022, 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 will adopt Topic 848 when relevant
contracts are modified upon transition to alternative reference rates. The Company does not expect the adoption of Topic 848 to have a
material impact on the Company’s Condensed Consolidated Financial Statements.
NOTE 3 – ACCRUED EXPENSES
Accrued expenses as of January 31, 2022, and April
30, 2021, are summarized below:
Schedule of accrued expenses | |
| |
|
| |
January 31, 2022 | |
April 30, 2021 |
Payroll related costs | |
$ | 50,100 | | |
$ | 490,904 | |
R&D costs | |
| 467,000 | | |
| – | |
Director and Officer insurance | |
| – | | |
| 50,805 | |
Other | |
| 3,015 | | |
| 10,808 | |
Total | |
$ | 520,115 | | |
$ | 552,517 | |
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. The unpaid balances as of January 31, 2022, and April 30, 2021,
of $0 and $50,805, respectively, are included in accrued expenses.
NOTE 4 – SMALL BUSINESS ADMINISTRATION
– PAYCHECK PROTECTION PROGRAM
On March 27, 2020, the CARES Act was enacted to
provide financial aid to family and businesses impacted by the COVID-19 pandemic. The Company participated in the CARES Act, and
on April 15, 2020, the Company entered into a note payable with a bank under the Small Business Administration (“SBA”), Paycheck
Protection Program (“PPP”) in the amount of $75,200. This PPP loan was to mature on April 15, 2022, with a fixed interest
rate of 1% per annum with interest deferred for six months. The PPP loan has an initial term of two years, is unsecured and guaranteed
by the SBA.
The Company used the proceeds from the PPP loan
for qualifying expenses as defined in the PPP. The Company also applied for forgiveness of the PPP loan in accordance with the terms of
the CARES Act. The SBA issued a notice of PPP loan forgiveness with an effective date of April 28, 2021, forgiving the entire principal
of $75,200 and the accrued interest of $779. The Company recognized the forgiveness of the PPP loan and accrued interest as Gain on forgiveness
of Paycheck Protection Program loan in the fiscal year ended April 30, 2021.
NOTE 5 – COMMON STOCK TRANSACTIONS
A summary of the Company’s compensatory
stock activity and related weighted average grant date fair value information for the three and nine months ended January 31, 2022, and
2021 is as follows:
During the year ended April 30, 2020, four
non-employee members of the Board were issued 1,333 shares
of common stock pursuant to their Director Letter Agreements (“DLAs”) and relating to their services for the prior 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, 2022, and 2021, respectively, and $0 and
$10,561 for
the nine months ended January 31, 2022, and 2021, respectively. There were zero unvested
shares of common stock remaining related to these DLAs as of January 31, 2022, and 2021.
In January 2020, the Company awarded 4,400
shares of common stock to the executive officers of the Company as part of their compensation agreements for 2020. These shares
vested monthly over a twelve-month period and are subject to the executive officers continuing service under their respective employment
agreement with the Company. During the three months ended January 31, 2022, and 2021, respectively, the Company recorded a non-cash compensation
expense in the amount of $0
and $44,881,
respectively, and $0
and $179,521
for the nine months ended January 31, 2022, and 2021, respectively. There were zero
unvested shares as of January 31, 2022, and 2021.
During the nine months ended January 31, 2021,
the four independent directors on the Board were issued 1,334
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 $10,411
for the three months ended January 31, 2022, and 2021, respectively, and $4,342
and $26,859
for the nine months ended January 31, 2022, and 2021, respectively. There were zero
unvested shares remaining related to such DLAs as of January 31, 2022, and 2021.
During the nine months ended January 31, 2021,
four consultants were issued 667 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 $5,409 for the three months ended January 31, 2022, and 2021, respectively,
and $0 and $15,017 for the nine months ended January 31, 2022, and 2021, respectively. There were zero and 167 unvested shares remaining
related to these consulting agreements as of January 31, 2022, and 2021, respectively.
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 $2,125
for the three months ended January 31, 2022, and 2021, respectively, and $3,542
and $2,833
for the nine months ended January 31, 2022, and 2021, respectively. There were zero
unvested shares remaining related to his compensation arrangement as of January 31, 2022, and 2021.
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. These shares vest monthly
over a twelve-month period and are subject to the executive officers continuing to provide service under their compensation agreements.
During the three months ended January 31, 2022, and 2021, the Company recorded a non-cash compensation expense in the amount of $7,370
and $3,685, respectively, and $29,480 and $3,685 for the nine months ended January 31, 2022, and 2021, respectively. There were 0 and
4,033 unvested shares as of January 31, 2022, and 2021, respectively.
During the nine months ended January 31, 2022,
four 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 $6,056 and $16,792 for the three and
nine months ended January 31, 2022, respectively. There were zero unvested shares remaining related to such DLAs as of January 31, 2022.
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 $2,442 and $6,504 for the three and nine months ended January 31, 2022, respectively.
There were 84 unvested shares remaining related to these consulting agreements as of January 31, 2022.
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 $265 and $353 for the three and nine months ended January 31, 2022, respectively. There were zero unvested shares remaining related
to his compensation arrangement as of January 31, 20221.
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. These shares vest monthly
over a twelve-month period and are subject to the executive officers continuing to provide service under their compensation agreements.
During the three and nine months ended January 31, 2022, the Company recorded a non-cash compensation expense in the amount of $916 and
$916, respectively. There were 4,033 unvested shares as of January 31, 2022.
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 September 28, 2017, an S-3 Registration Statement
(“Second S-3”) was declared effective by the Commission for the Company to sell from time to time in one or more public offerings
of up to $50 million of its securities on a “shelf offering” basis. During the nine months ended January 31, 2021, the Company
sold and issued approximately 462,000 shares of common stock, at prices ranging from approximately $15 to $45 per share. Net of underwriting
discounts, legal, accounting, and other offering expenses, the Company received proceeds of approximately $4.7 million from the sale of
these shares for the nine months ended January 31, 2021. On April 9, 2021, the Third S-3 (“Third S-3”) was declared effective
by the Commission for a public offering of up to $100 million on a “shelf offering” basis. During the nine months ended January
31, 2022, 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 for the nine months ended January 31, 2022.
A summary of the Company’s non-vested restricted
stock activity and related weighted average grant date fair value information for the nine months ended January 31, 2022, are as follows:
Schedule of non-vested restricted stock activity | |
| |
|
| |
Shares | |
Weighted Average Grant Date Fair Value |
| |
| |
|
Unvested, on April 30, 2021 | |
| 2,933 | | |
| 10.05 | |
Granted | |
| 6,404 | | |
| 7.05 | |
Vested | |
| (5,221 | ) | |
| 11.94 | |
Forfeited | |
| – | | |
| – | |
Unvested, on January 31, 2022 | |
| 4,116 | | |
| 2.99 | |
NOTE 6 – STOCK OPTIONS AND WARRANTS
Stock Options
As of January 31, 2022, the Company had 48,667
outstanding stock options to its directors and officers (“Employee Options”) and consultants (“Non-Employee Options”).
During the nine months ended January 31, 2022,
and 2021, the Company granted 7,334 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, |
| |
2022 | |
2021 |
Risk-free interest rate | |
| 1.06% | | |
| 0.35% | |
Expected volatility | |
| 129% | | |
| 97% | |
Expected term (years) | |
| 2.7 | | |
| 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, 2022, and 2021, 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.
A summary of the Company’s stock option
activity and related information for the nine months ended January 31, 2022, are shown below:
Stock option activity | |
| |
| |
|
| |
Options | |
Weighted Average Exercise Price per Share | |
Weighted Average Grant Date Fair Value per Share |
| |
| |
| |
|
Outstanding, April 30, 2021 | |
| 41,333 | | |
$ | 79.97 | | |
$ | 79.97 | |
Issued | |
| 7,334 | | |
| 5.34 | | |
| 5.34 | |
Forfeited | |
| – | | |
| – | | |
| – | |
Exercised | |
| – | | |
| – | | |
| – | |
Outstanding, January 31, 2022 | |
| 48,667 | | |
$ | 68.73 | | |
$ | 68.73 | |
Exercisable, January 31, 2022 | |
| 43,167 | | |
$ | 78.76 | | |
$ | – | |
Vested and expected to vest | |
| 48,667 | | |
$ | 68.73 | | |
$ | – | |
A summary of the activity for unvested stock options
during the nine months ended January 31, 2022, is as follows:
Unvested stock option activity | |
| |
|
| |
Options | |
Weighted Average Grant Date Fair Value per Share |
| |
| |
|
Unvested, April 30, 2021 | |
| 4,000 | | |
$ | 10.05 | |
Granted | |
| 7,334 | | |
| 5.34 | |
Vested | |
| (5,834 | ) | |
| – | |
Forfeited | |
| – | | |
| – | |
Unvested, January 31, 2022 | |
| 5,500 | | |
$ | 2.50 | |
The Company recorded $7,365 and $38,606 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, 2022, and 2021, respectively, and $41,893, and $166,982 during the nine months ended January 31, 2022, and 2021, respectively.
On January 31, 2022, there remained $10,695 of unrecognized compensation expense related to unvested Employee Options granted to officers
and directors, to be recognized as expense over a weighted-average period of the remaining eleven months in the calendar year. The unvested
options vest at 500 shares per month and are expected to be fully vested on December 31, 2022.
The following table summarizes the outstanding
stock options by exercise price on January 31, 2022:
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 of Exercisable Options |
$ | 156.00 | | |
| 6,967 | | |
| 0.07 | | |
$ | 156.00 | | |
| 6,967 | | |
$ | 156.00 | |
$ | 87.00 | | |
| 1,634 | | |
| 0.31 | | |
$ | 87.00 | | |
| 1,634 | | |
$ | 87.00 | |
$ | 110.10 | | |
| 800 | | |
| 0.25 | | |
$ | 110.10 | | |
| 800 | | |
$ | 110.10 | |
$ | 109.35 | | |
| 1,200 | | |
| 0.44 | | |
$ | 109.35 | | |
| 1,200 | | |
$ | 109.35 | |
$ | 133.50 | | |
| 800 | | |
| 0.46 | | |
$ | 133.50 | | |
| 800 | | |
$ | 133.50 | |
$ | 82.95 | | |
| 333 | | |
| 0.34 | | |
$ | 82.95 | | |
| 333 | | |
$ | 82.95 | |
$ | 83.70 | | |
| 6,000 | | |
| 0.55 | | |
$ | 83.70 | | |
| 6,000 | | |
$ | 83.70 | |
$ | 80.10 | | |
| 800 | | |
| 1.59 | | |
$ | 80.10 | | |
| 800 | | |
$ | 80.10 | |
$ | 80.85 | | |
| 667 | | |
| 0.62 | | |
$ | 80.85 | | |
| 667 | | |
$ | 80.85 | |
$ | 102.45 | | |
| 333 | | |
| 0.71 | | |
$ | 102.45 | | |
| 333 | | |
$ | 102.45 | |
$ | 97.35 | | |
| 333 | | |
| 0.84 | | |
$ | 97.35 | | |
| 333 | | |
$ | 97.35 | |
$ | 74.25 | | |
| 6,000 | | |
| 1.28 | | |
$ | 74.25 | | |
| 6,000 | | |
$ | 74.25 | |
$ | 57.00 | | |
| 800 | | |
| 2.65 | | |
$ | 57.00 | | |
| 800 | | |
$ | 57.00 | |
$ | 60.60 | | |
| 667 | | |
| 1.12 | | |
$ | 60.60 | | |
| 667 | | |
$ | 60.60 | |
$ | 55.50 | | |
| 333 | | |
| 1.21 | | |
$ | 55.50 | | |
| 333 | | |
$ | 55.50 | |
$ | 51.00 | | |
| 333 | | |
| 1.35 | | |
$ | 51.00 | | |
| 333 | | |
$ | 51.00 | |
$ | 61.20 | | |
| 6,000 | | |
| 1.75 | | |
$ | 61.20 | | |
| 6,000 | | |
$ | 61.20 | |
$ | 36.00 | | |
| 667 | | |
| 1.62 | | |
$ | 36.00 | | |
| 667 | | |
$ | 36.00 | |
$ | 37.05 | | |
| 333 | | |
| 1.71 | | |
$ | 37.05 | | |
| 333 | | |
$ | 37.05 | |
$ | 15.75 | | |
| 333 | | |
| 1.85 | | |
$ | 15.70 | | |
| 333 | | |
$ | 15.70 | |
$ | 10.05 | | |
| 6,000 | | |
| 2.35 | | |
$ | 10.05 | | |
| 6,000 | | |
$ | 10.05 | |
$ | 26.55 | | |
| 667 | | |
| 2.12 | | |
$ | 26.55 | | |
| 667 | | |
$ | 26.55 | |
$ | 16.20 | | |
| 333 | | |
| 2.21 | | |
$ | 16.20 | | |
| 333 | | |
$ | 16.20 | |
$ | 3.19 | | |
| 334 | | |
| 2.34 | | |
$ | 3.19 | | |
| 334 | | |
$ | 3.19 | |
$ | 2.50 | | |
| 6,000 | | |
| 2.95 | | |
$ | 2.50 | | |
| 500 | | |
$ | 2.50 | |
| Total | | |
| 48,667 | | |
| 1.13 | | |
$ | 68.73 | | |
| 43,167 | | |
$ | 77.16 | |
The aggregate intrinsic value of outstanding options
as of January 31, 2022, was $0. This represents options whose exercise price was less than the closing fair market value of the Company’s
common stock on January 31, 2022, of approximately $2.14 per share.
Warrants
The warrants issued by the Company are equity-classified.
The fair value of the warrants was recorded as additional paid-in-capital, and no further adjustments are made.
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 has 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) during the period October 31, 2021, as is effective for fiscal years
beginning after December 15, 2021, including interim periods within those fiscal years, and the Company’s fiscal year began on
May 1, 2021.
Effective August 12, 2021, the Company issued
Common Stock Warrant Agreements (“Common Warrants”) with respect to the First Offering. The Company issued Common Warrants
to purchase 4,028,528 shares of common stock based upon the underwriting agreement with H.C. Wainwright & Co., LLC (“Wainwright”).
The Common Warrants have a term of five years with an exercise price of $4.25 per warrant share, are fully vested 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 to be approximately $9,385,000.
Additionally, with respect to the First Offering,
the Company issued common stock warrant agreements to Wainwright (“Underwriter Warrants”) to purchase 264,706 shares of common
stock. The Underwriter Warrants have a term of five years with an exercise price of $5.3125 per warrant share, are fully vested 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 to be approximately $601,000.
Effective August 12, 2021, the Company issued
899,027 pre-funded warrants (“Pre-funded Warrants”) to purchase common stock and Common Warrants based upon the underwriting
agreement with Wainwright with respect to the First Offering. The Pre-funded Warrants required a payment upon issuance of $4.249 per warrant
share and are fully vested upon issuance. 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, are 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.
The Company received $899 as a result of the exercise of the Pre-funded Warrants and issued 899,027 shares of common stock as a result
of the exercise notices.
Effective August 23, 2021, the Company issued
additional Common Stock Warrant Agreements (“Series A Warrants”) with respect to its Registered Direct Public offering. The
Company issued Series A Warrants to purchase 7,000,000 shares of common stock based upon the Securities Purchase Agreement with certain
institutional investors. The Series A Warrants have a term of five years with an exercise price of $5.00 per warrant share, are fully
vested upon issuance, have a cashless exercise feature and are exercisable immediately. Using the Black-Scholes-Merton option pricing
model, the Company determined the aggregate fair value of these Series A Warrants to be approximately $21,340,000.
Effective August 23, 2021, the Company issued
additional Common Stock Warrant Agreements (“Placement Agent Warrants”) with respect to its Registered Direct Public Offering.
The Company issued Placement Agent Warrants to purchase 1,050,000 shares of common stock to Wainwright or its designees based upon Wainwright
acting as placement agent. The Placement Agent Warrants have a term of five years with an exercise price of $6.25 per warrant share, are
fully vested upon issuance, have a cashless exercise feature and are exercisable immediately. Using the Black-Scholes-Merton option pricing
model, the Company determined the aggregate fair value of these Placement Agent Warrants to be approximately $3,151,000.
Effective August 23, 2021, the Company issued
Pre-funded Warrants pursuant to the Registered Direct Offering to purchase 5,570,000 shares of common stock in the amount of approximately
$27,844,000 which required payments upon issuance of $4.999 per warrant share. The Pre-funded Warrants have an exercise price of $0.001
per share, are fully vested upon issuance, are immediately exercisable, have a cashless exercise feature and do not have an expiration
date. As of January 31, 2022, 4,620,000 of the Pre-funded Warrants have been exercised for aggregate gross proceeds of $4,620.
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 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 became effective on November 17, 2021.
A summary of the Company’s warrant activity
and related information for the nine months ended January 31, 2022, are shown below:
Warrant activity | |
| |
|
| |
Warrants | |
Weighted Average Exercise Price Per Share |
Outstanding, April 30, 2021 | |
| 2,981 | | |
$ | 58.70 | |
Issued | |
| 18,812,261 | | |
| 3.19 | |
Exercised | |
| (8,041,414 | ) | |
| 1.33 | |
Expired | |
| (513 | ) | |
| – | |
Outstanding, January 31, 2022 | |
| 10,773,315 | | |
| – | |
Exercisable, January 31, 2022 | |
| 10,773,315 | | |
$ | 4.59 | |
The following table summarizes additional information
concerning warrants outstanding and exercisable on January 31, 2022:
Schedule of warrants outstanding and exercisable | |
| |
| |
|
Exercise Prices | |
Number of Warrant Shares Exercisable at January 31, 2022 | |
Weighted Average Remaining Contractual Life Years | |
Weighted Average Exercise Price Per Share |
| |
| |
| |
|
$86.25 | |
580 | |
0.17 | |
| | |
$37.50 | |
1,333 | |
0.48 | |
| | |
$45.00 | |
555 | |
0.31 | |
| | |
$4.2500 | |
1,506,141 | |
4.53 | |
| | |
$5.3125 | |
264,706 | |
4.52 | |
| | |
$5.0000 | |
7,000,000 | |
4.56 | |
| | |
$6.2500 | |
1,050,000 | |
4.55 | |
| | |
$0.0010 | |
950,000 | |
– | |
| | |
| |
10,773,315 | |
4.56 | |
$ | 4.59 | |
NOTE 7 – LEGAL PROCEEDINGS
There is no material litigation currently pending
against the Company or any of its subsidiaries or to which any of the subsidiaries’ property is subject. To the Company’s
knowledge, there is no material litigation against any of its officers or directors in their capacity as such, and no such litigation
is contemplated by any governmental authorities.
NOTE 8 – RELATED PARTY TRANSACTIONS
The Company had the following related party transactions
during the three and nine months ended January 31, 2022, and 2021.
The Company owns 14.3% of the equity in SG Austria
Pte. Ltd. (“SG Austria”) and is reported on the cost method of accounting. SG Austria has two subsidiaries: (i) Austrianova
Singapore Pte. Ltd. (“Austrianova”); and (ii) Austrianova Thailand Co., Ltd. The Company purchased products and services from
these companies in the approximate amounts of $63,000 and $174,000 in the three and nine months ended January 31, 2022, respectively,
and $110,000 and $184,000 in the three and nine months ended January 31, 2021, respectively.
In April 2014, the Company entered a Consulting
Agreement with Vin-de-Bona Trading Company, Pte. Ltd. (“Vin-de Bona”) pursuant to which Vin-de-Bona agreed to provide professional
consulting services to the Company. Vin-de-Bona is owned by Prof. Walter H. Günzburg (“Prof. Günzburg”) and Dr.
Brian Salmons (“Dr. Salmons”), both of whom are involved in numerous aspects of the Company’s scientific endeavors relating
to cancer and diabetes (Prof. Gunzburg is the Chairman of Austrianova, and Dr. Salmons is the Chief Executive Officer and President of
Austrianova). The term of the agreement is for 12 months, automatically renewable for successive 12-month terms. After the initial term,
either party can terminate the agreement by giving the other party 30 days’ written notice before the effective date of termination.
The agreement has been automatically renewed annually. The amounts incurred for the three and nine months ended January 31, 2022, were
approximately $29,000 and $79,000, respectively, and $21,000 and $65,000 for the three and nine months ended January 31, 2021, respectively.
In addition, during the nine months ended January 31, 2022, and 2021 the Company issued 0 and 167 shares of common stock, to Dr. Salmons.
The Company recorded a noncash consulting expense of approximately $0 and $2,300 relating to these share issuances for the nine months
ended January 31, 2022, and 2021, respectively.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
The Company acquires assets still in development
and enters R&D arrangements with third parties that often require milestone and royalty payments to the third-party contingent upon
the occurrence of certain future events linked to the success of the asset in development. Milestone payments may be required, contingent
upon the successful achievement of an important point in the development lifecycle of the pharmaceutical product (e.g., approval of the
product for marketing by a regulatory agency). If required by the license agreements, the Company may have to make royalty payments based
upon a percentage of the sales of the pharmaceutical products if regulatory approval for marketing is obtained.
Office Lease
In May 2019, the Company entered into a lease
for its office space in Laguna Hills, California for a one-year lease for the leased premises. The term of the lease expired on August
31, 2020.
On May 28, 2020, the Company entered into an additional
six-month lease of this office space, commencing on September 1, 2020. The term of the new lease expired on February 28, 2021.
On May 24, 2021, the Company entered into an additional
six-month lease of this office space, commencing on September 1, 2021, which expires on February 28, 2022.
In October 2021, the Company moved the Company’s
headquarter 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 expires 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 expires on October 31, 2022.
Rent expense for the office leases for the three
and nine months ended January 31, 2022, were $6,103 and $13,995, respectively, and for the three and nine months ended January 31, 2021,
were $5,288 and $17,824, 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 | |
|
Periods Ending | |
Amount |
April 30, 2022 | |
$ | 2,201 | |
April 30, 2023 | |
| 2,052 | |
| |
$ | 4,253 | |
Compensation Agreements
The Company entered into executive compensation
agreements with its three executive officers in March 2015, each of which was amended in December 2015 and March 2017. Each agreement
has a term of two years with annual extensions thereafter unless the Company or the officer provides written notification of termination
at least ninety days prior to the end of the term or subsequent extensions. The Company also entered a compensation agreement with a Board
member in April 2015 which continued in effect until amended in May 2017.
In May 2017, the Company amended the compensation
agreements with the Board members, and the terms of each compensation agreement continues in effect until a member is no longer on the
Board.
As of January 31, 2022, the Company had four independent
directors. Each director receives the same compensation: (i) $12,500 in cash for each calendar quarter of service on the Board; (ii) 333
fully paid, non-assessable shares of the Company’s restricted common stock (“Shares”) annually; and (iii) a five-year
option to purchase 333 Shares annually at an exercise price equal to the fair market value of the Shares on the date of grant. The Shares
and the option Shares fully vest on the date of the grants.
NOTE 10 - INCOME TAXES
The Company had income tax expense for the nine
months ended January 31, 2022, and 2021, of $1,600 and $800, respectively. During the nine months ended January 31, 2022, and 2021, the
Company had a net operating loss (“NOL”) for each period which generated deferred tax assets for NOL carryforwards. The Company
provided valuation allowances against the net deferred tax assets including the deferred tax assets for NOL carryforwards. Valuation allowances
provided for the net deferred tax asset increased by approximately $814,000 and $565,000 for the nine months ended January 31, 2022, and
2021, respectively.
There was no material difference between the effective
tax rate and the projected blended statutory tax rate for the nine months ended January 31, 2022, and 2021.
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 as of January 31, 2022.
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, 2022, and 2021, the Company had no accrued interest or penalties related to uncertain tax positions.
See Note 10 of Notes to the Consolidated Financial
Statements included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2021, for additional information regarding
income taxes.
NOTE 11 – EARNINGS (LOSS) 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 periods ended January 31, 2022, and 2021, 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.
As of January 31, 2022, Pre-Funded Warrants to
purchase 950,000 shares of common stock that were issued in connection with the Registered Direct Offering with an effective date of August
23, 2021, remain unexercised (see Note 6 – Stock Options and Warrants). The 950,000 shares were included in the basic and diluted
net loss per share calculation.
The table below sets forth the basic loss per
share calculations:
Earnings per share calculations | |
| |
|
| |
Three Months Ended January 31, |
| |
2022 | |
2021 |
Net loss | |
$ | (811,290 | ) | |
$ | (757,096 | ) |
Basic weighted average number of shares outstanding | |
| 21,667,239 | | |
| 1,558,023 | |
Diluted weighted average number of shares outstanding | |
| 21,667,239 | | |
| 1,558,023 | |
Basic and diluted loss per share | |
$ | (0.04 | ) | |
$ | (0.49 | ) |
| |
| |
|
| |
Nine Months Ended January 31, |
| |
2022 | |
2021 |
Net loss | |
$ | (2,816,454 | ) | |
$ | (2,591,232 | ) |
Basic weighted average number of shares outstanding | |
| 13,538,792 | | |
| 1,405,517 | |
Diluted weighted average number of shares outstanding | |
| 13,538,792 | | |
| 1,405,517 | |
Basic and diluted loss per share | |
$ | (0.21 | ) | |
$ | (1.84 | ) |
The table below sets forth these potentially dilutive
securities:
Schedule of potentially dilutive securities | |
Nine Months Ended January 31, |
| |
2022 | |
2021 |
Excluded options | |
| 48,667 | | |
| 41,733 | |
Excluded warrants | |
| 10,773,315 | | |
| 43,505 | |
Total excluded options and warrants | |
| 10,821,982 | | |
| 85,238 | |
NOTE 12 – PREFERRED STOCK
The Company has authorized 10,000,000 shares of
preferred stock, with a par value of $0.0001, of which one share has been designated as "Series A Preferred Stock". The one
share of Series A Preferred Stock was issued on October 30, 2019, and repurchased by the Company on December 3, 2019. As of January 31,
2022, 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 13 – SUBSEQUENT EVENTS
On February 13, 2022, Mr. Thomas C.K. Yuen,
a member of the Board of Directors of the Company, passed away. Mr. Yuen served as an independent member of the Board and as a member
of the Board’s Compensation Committee and Nominating Committee (of which he was the Chairman).
On February 15, 2022, the Company notified the
Nasdaq Stock Market (“Nasdaq”) of Mr. Yuen’s death and that, because of the loss, the Company is temporarily not in
compliance with the continued listing requirements as set forth in Nasdaq Listing Rule 5605(b)(1), regarding the composition of the Board.
This is because a majority of the Board is, as a result of Mr. Yuen’s death, not comprised of independent directors.
In accordance with Nasdaq Listing Rule 5605(b)(1)(A),
the Company has an automatic cure period in order to regain compliance. The Company expects to regain compliance with such rule by filling
Mr. Yuen’s vacancy on the Board with a new independent director who satisfies the applicable requirements of the Nasdaq Listing
Rules prior to the expiration of the cure period provided under Nasdaq Listing Rule 5605.
Nasdaq rules require that a majority of the Board
of Directors be independent directors. The Company is technically no longer in compliance with Nasdaq rules. As required, the Company
filed an 8-K with the SEC on Feb. 17 disclosing this.
On February 24, 2022, the Company received a letter
from Nasdaq confirming that we are not in compliance with Nasdaq rules. The Company expected to receive this letter. The letter also sets
forth the cure period the Company was given to regain compliance:
|
· |
the earlier of the Company’s next annual shareholders’ meeting or February 13, 2023; or |
|
· |
if the next annual shareholders’ meeting is held before August 12, 2022, then the Company must provide evidence of compliance no
later than August 12, 2022. |