PHARMACYTE BIOTECH, INC. Form 10-Q

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2024

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 001-40699

PHARMACYTE BIOTECH, INC.

(Exact name of registrant as specified in its charter)

Nevada	62-1772151
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3960 Howard Hughes Parkway, Suite 500, Las Vegas, NV 89169

(Address of principal executive offices)

(917) 595-2850

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.0001 Per Share	PMCB	The Nasdaq Stock Market LLC (Nasdaq Capital Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ☐	Accelerated filer ☐
	Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of December 9, 2024, the registrant had 6,968,134 outstanding shares of common stock, with a par value of $0.0001 per share.

PHARMACYTE BIOTECH, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2024

		Page

PART I.	FINANCIAL INFORMATION	3

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets as of October 31, 2024, and April 30, 2024 (Unaudited)	3

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended October 31, 2024, and 2023 (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended October 31, 2024, and 2023 (Unaudited)	5

	Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity for the Three and Six Months Ended October 31, 2024, and 2023 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended October 31, 2024, and 2023 (Unaudited)	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36

PART II.	OTHER INFORMATION	37

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

	Signatures	40

PART I – FINANCIAL INFORMATION

Item 1. Financial Information.

PHARMACYTE BIOTECH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	October 31, 2024			April 30, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	20,840,056		$	50,179,968
Prepaid expenses and other current assets		493,213			259,800
Total current assets		21,333,269			50,439,768

Other assets:
Intangible asset		1,549,427			1,549,427
Investment in preferred stock – TNF		24,855,000			–
Convertible note receivable – Femasys		3,435,000			2,755,000
Warrant asset – Femasys		3,918,000			5,152,000
Other asset		7,688			7,688
Total other assets		33,765,115			9,464,115

Total Assets	$	55,098,384		$	59,903,883

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	348,595		$	389,369
Accrued expenses		707,185			735,199
Accrued Series B convertible preferred stock redemption and dividends		3,720,458			6,296,696
Total current liabilities		4,776,238			7,421,264

Other liabilities:
Warrant liability		6,871,000			10,784,000
Derivative liability		–			2,184,000
Total other liabilities		6,871,000			12,968,000

Total Liabilities		11,647,238			20,389,264

Commitments and Contingencies (Notes 6 and 8)		–

Convertible Preferred Stock:
Series B convertible preferred stock: authorized 35,000 shares, $0.0001 par value and $1,000 face value, 0 and 14,646 shares issued and outstanding excluding 2,979 and 5,833 shares subject to redemption as of October 31, 2024 and April 30, 2024, respectively. Liquidation preference of $0 and $15,060,421, as of October 31, 2024 and April 30, 2024, respectively		–			11,867,016
Stockholders' equity:
Preferred stock, authorized 10,000,000		–			–
Series A preferred stock: authorized 1 share, $0.0001 par value and 0 shares issued and outstanding as of October 31, 2024 and April 30, 2024		–			–
Common stock: authorized 200,000,000 shares, $0.0001 par value; shares issued 21,672,095, shares outstanding 7,034,259 as of October 31, 2024, and shares issued 21,672,078, shares outstanding 8,037,624 as of April 30, 2024		2,167			2,167
Additional paid-in capital		181,352,842			185,334,173
Accumulated deficit		(93,673,215	)		(115,625,010	)
Treasury stock, at cost, 14,637,836 and 13,634,454 shares as of October 31, 2024, and April 30, 2024, respectively		(44,207,381	)		(42,040,216	)
Accumulated other comprehensive loss		(23,267	)		(23,511	)
Total stockholders' equity		43,451,146			27,647,603

Total Liabilities, Convertible Preferred Stock and Stockholders' Equity	$	55,098,384		$	59,903,883

See accompanying Notes to Condensed Consolidated Financial Statements.

PHARMACYTE BIOTECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended October 31,						Six Months Ended October 31,
	2024			2023			2024			2023

Revenue	$	–		$	–		$	–		$	–

Operating expenses:
Research and development costs		97,470			82,033			193,486			186,516
Compensation expense		283,333			229,159			672,817			469,157
Director fees		138,000			306,738			276,000			356,953
Legal and professional		469,685			519,073			980,241			844,301
General and administrative		117,572			272,517			252,403			1,627,919
Total operating expenses		1,106,060			1,409,520			2,374,947			3,484,846

Loss from operations		(1,106,060	)		(1,409,520	)		(2,374,947	)		(3,484,846	)

Other income (expenses):
Interest income		382,562			894,181			929,994			1,770,059
Change in fair value of warrant liability		1,829,000			4,075,000			3,913,000			2,623,000
Change in fair value of derivative liability		980,000			(769,000	)		2,184,000			(1,299,000	)
Change in fair value of convertible note receivable		435,000			–			680,000			–
Change in fair value of warrant asset - Femasys		276,000			–			(1,234,000	)		–
Change in fair value of investment - TNF		(4,265,000	)		–			(3,540,734	)		–
Gain on related party investment - TNF		–			–			21,395,734			–
Other expense		(1,062	)		(765	)		(1,252	)		(2,614	)
Total other income, net		(363,500			4,199,416			24,326,742			3,091,445

Net income (loss)		(1,469,560	)		2,789,896			21,951,795			(393,401	)

Preferred stock dividends		(443,958	)		(586,886	)		(1,129,759	)		(906,735	)
Preferred stock accretion		(1,045,357	)		(4,461,097	)		(3,193,404	)		(7,733,130	)

Net income (loss) attributable to common stockholders	$	(2,958,875	)	$	(2,258,087	)	$	17,628,632		$	(9,033,266	)

Basic and diluted income (loss) per share attributable to common stockholders	$	(0.39	)	$	(0.26	)	$	1.83		$	(0.85	)

Weighted average shares outstanding basic and diluted		7,637,034			8,765,134			7,751,708			10,683,514

See accompanying Notes to Condensed Consolidated Financial Statements.

PHARMACYTE BIOTECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


	Three Months Ended October 31,						Six Months Ended October 31,
	2024			2023			2024		2023

Net income (loss)	$	(1,469,560	)	$	2,789,896		$	21,951,795	$	(393,401	)

Other comprehensive income (loss):
Foreign currency translation		61			(1,591	)		244		(1,140	)
Other comprehensive income (loss)		61			(1,591	)		244		(1,140	)
Comprehensive income (loss)	$	(1,469,499	)	$	2,788,305		$	21,952,039	$	(394,541	)

See accompanying Notes to Condensed Consolidated Financial Statements.

PHARMACYTE BIOTECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

THREE AND SIX MONTHS ENDED OCTOBER 31, 2024 AND 2023

(UNAUDITED)


	Preferred Stock					Common Stock			Additional Paid-in			Treasury Stock					Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount			Shares	Amount		Capital			Shares		Amount			Deficit			Loss			Equity

Balance, April 30, 2023	–		$	–		21,602,078	$	2,160	$	202,230,583		(4,808,098	)	$	(13,560,623		$	(115,958,773	)	$	(23,003	)	$	72,690,344
Stock issued for warrant exercise	–			–		70,000		7		63		–			–			–			–			70
Accrued preferred stock dividends	–			–		–		–		(319,849	)	–			–						–			(319,849	)
Preferred stock accretion	–			3,272,033		–		–		(3,272,033	)	–			–			–			–			(3,272,033	)
Foreign currency translation adjustment	–			–		–		–		–		–			–			–			451			451
Net loss	–			–		–		–		–		–			–			(3,183,297	)		–			(3,183,297	)
Repurchase of common stock	–			–		–		–		–		(8,085,879	)		(26,721,897	)		–			–			(26,721,897	)
Issuance of Series B Preferred Stock, net of discounts and issuance costs of $18,246,925	35,000			16,753,075		–		–		–		–			–			–			–			–

Balance, July 31, 2023	35,000			20,025,108		21,672,078		2,167		198,638,764		(12,893,977	)		(40,282,520	)		(119,142,070	)		(22,552	)		39,193,789

Series B preferred stock subject to redemption	(3,520	)		(3,188,536	)	–		–		–		–			–			–			–			–
Series B preferred stock dividends	–			–		–		–		(586,886	)	–			–			–			–			(586,886	)
Preferred stock accretion	–			4,461,097		–		–		(4,461,097	)	–			–			–			–			(4,461,097	)
Repurchase of common stock	–			–		–		–		–		(78,109	)		(166,603	)		–			–			(166,603	)
Foreign currency translation adjustment	–			–		–		–		–		–			–			–			(1,591	)		(1,591	)
Net income	–			–		–		–		–		–			–			2,789,896			–			2,789,896
Balance, October 31, 2023	31,480		$	21,297,669		21,672,078	$	2,167	$	193,590,781		(12,972,086	)	$	(40,449,123	)	$	(116,352,174	)	$	(24,143	)	$	36,767,508

(continued)

	Preferred Stock					Common Stock			Additional Paid-in			Treasury Stock					Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount			Shares	Amount		Capital			Shares		Amount			Deficit			Loss			Equity

Balance, April 30, 2024	14,646		$	11,867,016		21,672,078	$	2,167	$	185,334,173		(13,634,454	)	$	(42,040,216	)	$	(115,625,010	)	$	(23,511	)	$	27,647,603
Stock-based compensation options	–			–		–		–		222,677		–			–			–			–			222,677
Preferred stock accretion	–			2,148,047		–		–		(2,148,047	)	–			–			–			–			(2,148,047	)
Series B preferred stock redemption	(2,917	)		(2,893,144	)	–		–		–		–			–			–			–			–
Series B preferred stock subject to redemption	(5,833	)		(5,788,805	)	–		–		–		–			–			–			–			–
Preferred stock dividends				–		–		–		(685,801	)													(685,801	)
Foreign currency translation adjustment	–			–		–		–		–		–			–			–			183			183
Net income	–			–		–		–		–		–			–			23,421,355			–			23,421,355
Repurchase of common stock	–			–		–		–		–		(320,346	)		(749,600	)		–			–			(749,600	)
Balance, July 31, 2024	5,896			5,333,114		21,672,078		2,167		182,723,002		(13,954,800	)		(42,789,816	)		(92,203,655	)		(23,328	)		47,708,370

Fractional shares adjustment						17		–		–		–						–			–			–
Stock-based compensation options	–			–		–		–		119,155		–			–			–			–			119,155
Preferred stock accretion	–			1,045,357		–		–		(1,045,357	)	–			–			–			–			(1,045,357	)
Series B preferred stock redemption	(2,917	)		(2,868,607	)	–		–		–		–			–			–			–			–
Series B preferred stock subject to redemption	(2,979	)		(3,509,864	)	–		–		–		–			–			–			–			–
Preferred stock dividends				–		–		–		(443,958	)													(443,958	)
Foreign currency translation adjustment	–			–		–		–		–		–			–			–			61			61
Net loss	–			–		–		–		–		–			–			(1,469,560	)		–			(1,469,560	)
Repurchase of common stock	–			–		–		–		–		(683,036	)		(1,417,565	)		–			–			(1,417,565	)

Balance, October 31, 2024	–		$	–		21,672,095	$	2,167	$	181,352,842		(14,637,836	)	$	(44,207,381	)	$	(93,673,215	)	$	(23,267	)	$	43,451,146

See accompanying Notes to Condensed Consolidated Financial Statements.

PHARMACYTE BIOTECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended October 31,
	2024			2023
Cash flows from operating activities:
Net income (loss)	$	21,951,795		$	(393,401	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on related party investment – TNF		(21,395,734	)		–
Stock-based compensation		341,832			–
Change in fair value of warrant liability		(3,913,000	)		(2,623,000	)
Change in fair value of derivative liability		(2,184,000	)		1,299,000
Change in fair value of convertible note receivable		(680,000	)		–
Change in fair value of warrant asset – Femasys		1,234,000			–
Change in fair value of investment – TNF		3,540,734			–
Change in assets and liabilities:
Decrease in prepaid expenses and other current assets		(233,413	)		(215,508	)
Increase (decrease) in accounts payable		(40,775	)		(2,118	)
Increase (decrease) in accrued expenses		(49,471	)		293,632
Net cash provided by (used in) operating activities		(1,428,032	)		(1,641,395	)

Cash flows from investing activities:
Investment in preferred stock and warrants		(7,000,000	)		–
Net cash used in investing activities		(7,000,000	)		–

Cash flows from financing activities:
Repurchase of common stock		(2,145,708	)		(26,622,277	)
Proceeds from issuance of preferred stock		–			33,650,075
Redemption of preferred stock		(18,766,416	)		–
Proceeds from warrant exercise		–			70
Net cash provided by (used in) financing activities		(20,912,124	)		7,027,868

Effect of currency rate exchange on cash and cash equivalents		244			(1,140	)

Net increase (decrease) in cash and cash equivalents		(29,339,912	)		5,385,333

Cash and cash equivalents at beginning of the period		50,179,968			68,039,936
Cash and cash equivalents at end of the period	$	20,840,056		$	73,425,269

Supplemental disclosure of cash flows information:
Cash paid during the periods for income taxes	$	–		$	1,600

Supplemental disclosure of cash flows information:
Non-cash derivative liability at initial fair value	$	–		$	2,770,000
Non-cash warrant liability at initial fair value	$	–		$	14,127,000
Reclassification of Series B Convertible Preferred Stock and dividends to current liability	$	16,190,179		$	4,095,271
Accretion of discounts to redemption value of Series B Preferred Stock	$	3,193,404		$	7,733,130
Excise tax accrued on repurchase of common stock	$	21,457		$	266,223

See accompanying Notes to Condensed Consolidated Financial Statements.

PHARMACYTE BIOTECH, INC.

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 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”) 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. 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 U.S. 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. 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.

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:

	·	Provide additional sequencing data and genetic stability studies;

	·	Conduct a stability study on ‌the Company’s final formulated product candidate as well as the cells from the Company’s Master Cell Bank;

	·	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;

	·	Provide additional detailed description of the manufacturing process of ‌the Company’s product candidate for pancreatic cancer;

	·	Provide additional product release specifications for the Company’s encapsulated cells;

	·	Demonstrate comparability between the 1^st and 2^nd generation of ‌the Company’s product candidate for pancreatic cancer and ensure adequate and consistent product performance and safety between the two generations;

	·	Conduct a biocompatibility assessment using the Company’s capsules material;

	·	Address specified insufficiencies in the Chemistry, Manufacturing and Controls information in the cross-referenced Drug Master File;

	·	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

	·	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:

	·	Provide a Certificate of Analysis for pc3/2B1 plasmid that includes tests for assessing purity, safety, and potency;

	·	Perform qualification studies for the drug filling step to ensure that the Company’s product candidate for pancreatic cancer remains sterile and stable during the filling process;

	·	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;

	·	Provide additional details for the methodology for the Resorufin (CYP2B1) potency and the PrestoBlue cell metabolic assays;

	·	Provide a few examples of common microcatheters that fit the specifications in ‌the Company’s Angiography Procedure Manual;

	·	Clarify the language in ‌our Pharmacy Manual regarding proper use of the syringe fill with the Company’s product candidate for pancreatic cancer; and

	·	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.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of October 31, 2024 and for the three and six months then ended. The results of operations for the three and six months ended October 31, 2024 are not necessarily indicative of the operating results for the year or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and related disclosures as of April 30, 2024 and for the year then ended which are included in the Company’s Annual Report on Form 10- K, filed with the SEC on August 13, 2024.

Liquidity Uncertainties

As of October 31, 2024, the Company had approximately $20.8 million in cash and cash equivalents as compared to approximately $50.2 million at April 30, 2024. The Company expects that its current cash and cash equivalents of approximately $16 million as of the filing of this Quarterly Report on Form 10-Q, will be sufficient to support its projected operating requirements and financial commitments for at least the next twelve months from the date of this Quarterly Report.

The Company may need to raise additional capital in order to initiate and pursue potential additional projects, including the continuing development beyond the ongoing pancreatic cancer research. Any additional equity financing, if available, may not be on favorable terms and would likely be significantly dilutive to the Company’s current stockholders, and debt financing, if available, may have restrictive covenants. If the Company is able to find funds through collaborative or licensing arrangements, it may be required to relinquish rights to some of its product candidates that the Company would otherwise seek to develop on its own, on terms that may not be favorable to the Company. The Company’s ability to access capital when needed is not assured and, if not achieved on a timely basis, will likely have a materially adverse effect on the business, financial condition and results of operations.

Basic and Diluted Income (Loss) Per Share

Basic earnings per share excludes dilution for common stock equivalents and is computed by dividing net income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted EPS is calculated based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period. Potentially dilutive securities consist of common stock options, warrants, and convertible preferred securities. The dilutive effect of stock options and warrants is reflected in diluted EPS by application of the treasury stock method. The dilutive effect of convertible preferred securities is reflected in the diluted EPS by application of the “if-converted” method. The “if-converted” method is only assumed in periods where such application would be dilutive. Basic and diluted net income (loss) per share is determined by dividing income (loss) by the weighted average ordinary shares outstanding during the period. For periods presented with a net loss, the shares underlying the ordinary share options, warrants and preferred stock have been excluded from the calculation because their effect would be anti-dilutive. Therefore, the weighted-average shares outstanding used to calculate both basic and diluted loss per share is the same for periods with a net loss.

Investment in TNF Pharmaceuticals, Inc.

In accordance with ASC 810, Consolidation, the Company assessed whether it has a variable interest in legal entities in which it has a financial relationship and, if so, whether or not those entities are variable interest entities (“VIEs”). For those entities that qualify as VIEs, ASC 810 requires the Company to determine if it is the primary beneficiary of the VIE, and if so, to consolidate the VIE. The investment in TNF did not meet the primary beneficiary requirements for consolidation, therefore no consolidation of this VIE was required.

If an entity is determined to be a VIE, the Company evaluates whether it is the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and economics. PharmaCyte consolidates a VIE if it has both power and benefits that is, PharmaCyte (i) has the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and (ii) has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE (benefits). PharmaCyte consolidates VIEs whenever it is determined that PharmaCyte is the primary beneficiary. Any intercompany transactions are eliminated in consolidation.

The Company applies ASC 321 Investments—Equity Securities to investments in equity securities for which the Company has no significant influence or equity investments that are not in substance common stock. Under this guidance, equity securities with and without readily determinable fair values are accounted for at fair value based on quoted market prices or utilizing an appropriate valuation methodology to estimate the fair value. All gains and losses on investments in equity securities are recognized in the Condensed Consolidated Statements of Operations.

New Accounting Pronouncements Effective in Future Periods

In November 2023, FASB issued ASU 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities with a single reportable segment to provide all the disclosures required by this standard and all existing segment disclosures in Topic 280 on an interim and annual basis, including new requirements to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within the reported measure(s) of a segment's profit or loss, the amount and composition of any other segment items, the title and position of the CODM, and how the CODM uses the reported measure(s) of a segment's profit or loss to assess performance and decide how to allocate resources. The guidance is effective for our annual period beginning May 1, 2025, and interim periods, thereafter, applied retrospectively with early adoption permitted. The Company is evaluating the impact of adoption of this standard on its financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities to provide greater disaggregation within their annual rate reconciliation, including new requirements to present reconciling items on a gross basis in specified categories, disclose both percentages and dollar amounts, and disaggregate individual reconciling items by jurisdiction and nature when the effect of the items meet a quantitative threshold. The guidance also requires disaggregating the annual disclosure of income taxes paid, net of refunds received, by federal (national), state, and foreign taxes, with separate presentation of individual jurisdictions that meet a quantitative threshold. The guidance is effective for the Company's annual periods beginning May 1, 2025 on a prospective basis, with a retrospective option, and early adoption is permitted. The Company is evaluating the impact of adoption of this standard on its financial statements and disclosures.

NOTE 3 – INVESTMENT IN FEMASYS SECURITIES

On November 14, 2023, the Company entered into a Securities Purchase Agreement (the “Femasys Purchase Agreement”) with Femasys Inc. (“Femasys”), pursuant to which it agreed to purchase from Femasys for a sum of $5,000,000, (i) senior unsecured convertible notes (the “Femasys Notes”) in an aggregate principal amount of $5,000,000, convertible into shares of Femasys common stock, par value $0.001 per share (the “Femasys Shares”) at a conversion price of $1.18 per share, (ii) Series A Warrants (the “Series A Warrants”) to purchase up to an aggregate of 4,237,288 Femasys Shares at an exercise price of $1.18 per share, and (iii) Series B Warrants (the “Series B Warrants”, together with the Series A Warrants, the “Femasys Warrants,” and, together with the Notes, the “Femasys Securities”) to purchase up to an aggregate of 4,237,288 Femasys Shares at an exercise price of $1.475 per share (collectively, the “Investment”). The Femasys Notes accrue interest at 6.0% per annum, payable annually, and mature two years after the date of issuance. The Femasys Warrants expire five years from the date of issuance.

Pursuant to the terms of the Femasys Purchase Agreement, the Company’s Interim Chief Executive Officer was appointed to the Femasys board of directors.

The convertible note receivable is not traded in active markets and the fair value was determined using a Monte Carlo simulation. The convertible note receivable is accounted for as available-for-sale debt securities based on “Level 3” inputs, which consist of unobservable inputs and reflect management’s estimates of assumptions that market participants would use in pricing the asset. The Company elected the fair value option for the Femasys Notes, therefore, holding gains and losses are included within change in fair value of the notes in the condensed consolidated statement of operations. The Femasys Warrants are accounted for as an equity security and are valued using a Monte Carlo simulation based on “Level 3” inputs, which consist of unobservable inputs and reflect management’s estimates of assumptions that market participants would use in pricing the asset, recorded at fair value with subsequent changes included within change in fair value of the warrants in the condensed consolidated statement of operations.

The Company recognized the Femasys Note and Femasys Warrants based on their respective fair values on the issuance date of $1,666,000 and $3,334,000, respectively. Subsequent changes in the fair value of the Femasys Note and Femasys Warrants will be recognized in earnings, at each reporting date. During the three and six months ended October 31, 2024, the Company recognized a gain for change in fair value of the convertible note receivable of $435,000 and $680,000, respectively, and a gain for change in fair value of the warrant asset of $276,000 and a loss of $1,234,000, respectively, for the three and six months ended October 31, 2024. See Note 12 – Fair value Measurements for further information.

Below is a summary of activity for the Note and Warrants as of October 31, 2024:


Balance of Notes as of May 1, 2024	$	2,755,000
Purchased		–
Change in fair value		680,000
Balance of Notes as of October 31, 2024	$	3,435,000

Balance of Warrants as of May 1, 2024	$	5,152,000
Purchased		–
Change in fair value		(1,234,000	)
Balance of Warrants as of October 31, 2024	$	3,918,000

NOTE 4 – ACCRUED EXPENSES

Accrued expenses at October 31, 2024 and April 30, 2024, are summarized below:

Schedule of accrued expenses
	October 31, 2024		April 30, 2024
Payroll related costs	$	185,846	$	167,817
Director fees		67,500		135,000
R&D costs		92,310		92,310
Excise tax on stock repurchases		361,529		340,072
Total	$	707,185	$	735,199

NOTE 5 – STOCK OPTIONS AND WARRANTS

2022 Equity Incentive Plan

Effective December 28, 2022, the Company implemented the 2022 Equity Incentive Plan (“2022 Equity Plan”) as approved by the Company’s stockholders. The 2022 Equity Plan is administered by the Compensation Committee of the Board and has 2,750,000 shares available under this plan. The 2022 Equity Plan can issue various types of awards, as follows: stock options, stock appreciation rights, restricted stock, restricted stock units, and cash or other stock-based awards. The 2022 Equity Plan is available to be issued to employees, directors, consultants, and other individuals who provide services to the Company. An incentive stock options (“ISOs”) can only be granted to employees and shall not exceed 10-years (5-years in the case of ISOs granted to any 10% shareholder).

Stock Options

As of October 31, 2024, the Company had 923,698 outstanding stock options to its directors and officers (collectively, “Employee Options”) and consultants (“Non-Employee Options”).

During the six months ended October 31, 2024, and 2023, the Company granted no Employee Options.

During the six months ended October 31, 2024 and 2023, the Company granted no Non-Employee Options.

A summary of the Company’s stock option activity and related information for the six months ended October 31, 2024, are shown below:


Options	Number of Options			Weighted Average Exercise Price per Share
Outstanding, April 30, 2024		925,164		$	2.97
Issued		–			–
Expired		(1,466	)		55.30
Outstanding, October 31, 2024		923,698		$	2.89
Exercisable, October 31, 2024		644,161		$	3.21
Vested and expected to vest		923,698		$	2.89

A summary of the activity for unvested stock options during the six months ended October 31, 2024 is as follows:


	Options		Weighted Average Grant Date Fair Value Per Share
Unvested, April 30, 2024		279,536		1.70
Granted		–		–
Vested		–		–
Forfeited		–		–
Unvested, October 31, 2024		279,536	$	1.70

The Company recorded $119,155 and $341,833 of stock-based compensation related to the issuance of Employee Options to certain officers and directors in exchange for services during the three and six months ended October 31, 2024, respectively, and $0 and $0 for the three and six months ended October 31, 2023, respectively. At October 31, 2024, there remained $132,859 of unrecognized compensation expense related to unvested Employee Options granted to officers and directors.

The aggregate intrinsic value of outstanding options as of October 31, 2024 was $0. This represents options with exercise prices less than the $1.81 per share closing price of the Company’s common stock on October 31, 2024.

Warrants

Pursuant to the Private Placement (as defined below), the Company issued investors Warrants (as defined below) to purchase 8,750,000 shares of Common Stock, with an exercise price of $4.00 per share (subject to adjustment), for a period of five years from the date of issuance. For more information on the Private Placement, see “Note 12 – Preferred Stock”.

The Warrants were determined to be within the scope of ASC 480-10 as they are puttable to the Company at Holders’ election upon the occurrence of a Fundamental Transaction (as defined in the agreements). As such, the Company recorded the Warrants as a liability at fair value with subsequent changes in fair value recognized in earnings. The Company utilized the Black-Scholes-Merton Model to calculate the value of the Warrants issued on May 10, 2023. The fair value of the Warrants of approximately $14,127,000 was estimated at the date of issuance using the fair value of our common stock of $2.74 on the issuance date and was based on the following weighted average assumptions: dividend yield 0%; expected term of 5.0 years; equity volatility of 80.0%; and a risk-free interest rate of 3.37%.

Transaction costs incurred attributable to the issuance of the Warrants of approximately $913,640 were immediately expensed in accordance with ASC 480 and is included in general and administrative expense in the accompanying Condensed Consolidated Statements of Operations.

During the three and six months ended October 31, 2024, the Company recorded a gain of approximately $1,829,000 and $3,913,000, respectively, related to the change in fair value of the warrant liability which is recorded in other income (expense) on the Condensed Consolidated Statements of Operations. The fair value of the Warrants of $6,871,000 was estimated at October 31, 2024, utilizing the Black-Scholes-Merton Model using the fair value of our common stock of $1.81 and the following weighted average assumptions: dividend yield 0%; remaining term of 3.53 years; equity volatility of 85.0%; and a risk-free interest rate of 4.05%.

A summary of the Company’s warrant activity and related information for the six months ended October 31, 2024, are shown below:


	Warrants		Weighted Average Exercise Price Per Share
Outstanding, April 30, 2024		18,570,847	$	4.54
Issued		–		–
Exercised		–		–
Expired		–		–
Outstanding, October 31, 2024		18,570,847		4.54
Exercisable, October 31, 2024		18,570,847	$	4.54

NOTE 6 – LEGAL PROCEEDINGS

From time to time, the Company is subject to legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of pending claims cannot be predicted with certainty, the Company does not believe that the outcome of any pending claims will have a material adverse effect on our financial condition or operating results.

On December 4, 2023, H.C. Wainwright & Co., LLC (“Wainwright”) filed a complaint against the Company in the Supreme Court of the State of New York, County of New York, asserting a single cause of action for breach of contract and alleging that the Company breached an April 2021 engagement agreement with Wainwright by failing to pay a purported “tail fee” allegedly due in connection with a private placement transaction that closed in 2023. Wainwright seeks damages of not less than $1,950,000, warrants to purchase an aggregate of 656,250 shares of our common stock at an exercise price of $5.00 per share, and attorney’s fees. On February 28, 2024, the Company responded to the complaint with an answer and affirmative defenses. The parties have commenced documentary discovery. The Company intends to vigorously defend against Wainwright’s complaint and does not believe that any potential loss is reasonably probable at this time.

To our knowledge there are no other legal proceedings pending 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 six months ended October 31, 2024 and 2023, respectively.

The Company owns 13.9% of the equity in SG Austria which is presented using the alternative allowed under ASC 321 - Investments Equity Securities with no readily determinable values. 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 in the three and six months ended October 31, 2024, and 2023, respectively. The investment in SG Austria was fully impaired as of April 30, 2024.

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 (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 six months ended October 31, 2024, were approximately $2,670 and $5,280 and $2,590, respectively, and $2,700 for the three and six months ended October 31, 2023, respectively.

The Company’s Interim Chief Executive Officer was appointed to the Femasys board of directors, see Note 3.

The Company’s Interim Chief Executive Officer serves on the board of directors of TNF, see Note 13.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

The Company acquires assets still in development and enters research and development (“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 January 2023, the Company entered into a month-to-month agreement of the Las Vegas office space, commencing on May 1, 2023. Additionally, the Company rents storage space pursuant to a month-to-month agreement in Laguna Hills, California.

Rent expenses for these offices for the three and six months ended October 31, 2024 were $7,071 and $14,281, respectively and for the three and six months ended October 31, 2023 were $6,631 and $15,598, respectively.

With the month-to-month office rental agreements there are no aggregate future minimum lease payments required to be made.

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 $212,000, of which the related party (SG Austria and its subsidiaries) portion will be approximately $157,000. These amounts take into account some of the costs associated with the work and preclinical studies required to lift the clinical hold.

NOTE 9 – EARNINGS PER SHARE

The Company computes earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. The Series B Preferred Shares are considered participating securities as preferred shareholders are entitled to participate with common stockholders on an as-converted basis in any distributions of assets by the Company under the terms of the Certificate of Designations. Under the two-class method, there is no change in the weighted average shares outstanding used between the basic and diluted earnings per share calculations as the Series B Preferred Shares represent the only dilutive share equivalents during the three and six months ended October 31, 2024 and 2023. During the three months ended October 31, 2024 and 2023, and the six months ended October 31, 2023, the Company incurred losses attributable to common shareholders. Accordingly, the effects of any common stock equivalent would be anti-dilutive during the period and thus are not included in the calculation of diluted weighted average number of shares outstanding.

The following table illustrates the computation of basic and diluted earnings (loss) per share:


	Three Months Ended October 31,
	2024			2023

Earnings per share
Net income (loss)	$	(1,469,560	)	$	2,789,896
Less: Accretion of discounts to redemption of Series B convertible preferred stock		(443,958	)		(586,886	)
Less: Series B convertible preferred stock dividends		(1,045,357	)		(4,461,097	)
Less: Allocation of undistributed income to Series B convertible preferred stock		–			–
Net loss attributable to common stockholders	$	(2,958,875	)	$	(2,258,087	)

Weighted average shares outstanding used in basic and diluted earnings per share		7,637,034			8,765,134
Net loss per share basic and diluted	$	(0.39	)	$	(0.26	)


	Six Months Ended October 31,
	2024			2023

Earnings per share
Net income (loss)	$	21,951,795		$	(393,401	)
Less: Accretion of discounts to redemption of Series B convertible preferred stock		(3,193,404	)		(7,733,130	)
Less: Series B convertible preferred stock dividends		(1,129,759	)		(906,735	)
Less: Allocation of undistributed income to Series B convertible preferred stock		(3,409,913	)		–
Undistributed income (loss) available to common stockholders	$	14,218,719		$	(9,033,266	)

Weighted average shares outstanding used in basic earnings per share		7,751,708			10,683,514
Net income (loss) per share basic and diluted	$	1.83		$	(0.85	)

The table below sets forth the potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive:


	Three and Six Months Ended October 31,
	2024		2023
Excluded options		923,696		279,802
Excluded warrants		18,570,847		18,570,847
Total excluded options and warrants		19,494,543		18,850,649

NOTE 10 – PREFERRED STOCK

The Company has authorized 10,000,000 shares of preferred stock, with a par value of $0.0001, of which 35,000 shares have been designated as “Series B Convertible Preferred Stock.” As of October 31, 2024 and April 30, 2024, there were 0 and 14,646 shares of Series B Preferred Stock issued and outstanding, respectively. As of October 31, 2024 and April 30, 2024, there were $0 and $11,867,016 amounts subject to redemption, respectively.

On May 10, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which it agreed to sell to the Investors (i) an aggregate of 35,000 shares of the Company’s newly-designated Series B convertible preferred stock with a stated value of $1,000 per share, initially convertible into up to 8,750,000 shares of the Company’s common stock, par value $0.0001 per share at a conversion price of $4.00 per share (the “Preferred Shares”), and (ii) warrants to acquire up to an aggregate of 8,750,000 shares of common stock (the “Warrants”) (collectively, the “Private Placement”).

The terms of the Preferred Shares are as set forth in a Certificate of Designations (the “Certificate of Designations”), which was filed with the Secretary of the State of Nevada on May 10, 2023. The Preferred Shares are convertible into common stock (the “Conversion Shares”) at the election of the holder at any time at an initial conversion price of $4.00 (the “Conversion Price”). The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of common stock, or securities convertible, exercisable or exchangeable for common stock, at a price below the then-applicable Conversion Price (subject to certain exceptions). The Company is required to settle the Preferred Shares in equal monthly installments, commencing on November 9, 2023. The amortization payments due upon such redemption are payable, at the Company’s election, in cash, or subject to certain limitations, in shares of common stock valued at the lower of (i) the Conversion Price then in effect and (ii) the greater of (A) a 20% discount to the average of the three lowest closing prices of the Company’s common stock during the thirty trading day period immediately prior to the date the amortization payment is due or (B) the lower of $0.556 and 20% of the Minimum Price (as defined in Rule 5635 of the Rule of the Nasdaq Stock Market) on the date of receipt of Nasdaq Stockholder Approval (as defined below); provided that if the amount set forth in clause B is the lowest effective price, the Company will be required to pay the amortization payment in cash. The Company may require holders to convert their Preferred Shares into Conversion Shares if the closing price of the common stock exceeds $6.00 per share for 20 consecutive trading days and the daily trading volume of the common stock exceeds 1,000,000 shares per day during the same period and certain equity conditions described in the Certificate of Designations are satisfied.

The holders of the Preferred Shares are entitled to dividends of 4% per annum, compounded monthly, which are payable in cash or shares of common stock at the Company’s option, in accordance with the terms of the Certificate of Designations. Upon the occurrence and during the continuance of a Triggering Event (as defined in the Certificate of Designations), the Preferred Shares will accrue dividends at the rate of 15% per annum. The holders of Preferred Shares have no voting rights on account of the Preferred Shares, other than with respect to certain matters affecting the rights of the Preferred Shares.

Notwithstanding the foregoing, the Company’s ability to settle conversions and make amortization payments using shares of common stock is subject to certain limitations set forth in the Certificate of Designations, including a limit on the number of shares that may be issued until the time, if any, that the Company’s stockholders have approved the issuance of more than 19.9% of the Company’s outstanding shares of common stock in accordance with Nasdaq listing standards (the “Nasdaq Stockholder Approval”). The Company received Nasdaq Stockholder Approval at its special meeting of stockholders held on August 31, 2023. Further, the Certificate of Designations contains a certain beneficial ownership limitation after giving effect to the issuance of shares of common stock issuable upon conversion of, or as part of any amortization payment under, the Certificate of Designations or Warrants.

The Certificate of Designations includes certain Triggering Events (as defined in the Certificate of Designations), including, among other things, the failure to file and maintain an effective registration statement covering the sale of the holder’s securities registrable pursuant to a registration rights agreement entered into by the Company and the Investors simultaneously with the Purchase Agreement and the Company’s failure to pay any amounts due to the holders of the Preferred Shares when due. In connection with a Triggering Event, each holder of Preferred Shares will be able to require the Company to redeem in cash any or all of the holder’s Preferred Shares at a premium set forth in the Certificate of Designations.

The Preferred Shares were determined to be more akin to a debt-like host than an equity-like host. The Company identified the following embedded features that are not clearly and closely related to the debt host instrument: 1) an installment redemption upon an Equity Conditions Failure (as defined in the Certificate of Designation), and 2) variable share-settled installment conversion. These features were bundled together, assigned probabilities of being affected and measured at fair value. Subsequent changes in the fair value of these features are recognized in the Condensed Consolidated Statements of Operations. The Company estimated the $2,770,000 fair value of the bifurcated embedded derivative at issuance using a Monte Carlo simulation model, with the following inputs: the fair value of the Company’s common stock of $2.74 on the issuance date, estimated equity volatility of 55.0%, estimated traded volume volatility of 355.0%, the time to maturity of 1.50 years, a discounted market interest rate of 15.9%, a risk free rate of 4.3%, dividend rate of 4.0%, a penalty dividend rate of 15.0%, and probability of default of 27.0%. The fair value of the bifurcated derivative liability was estimated utilizing the with and without method which uses the probability weighted difference between the scenarios with the derivative and the plain vanilla maturity scenario without a derivative.

During the three and six months ended October 31, 2024, the Company recorded a gain of approximately $980,000 and $2,184,000, respectively, related to the change in fair value of the derivative liability, which is recorded in other income, net on the Condensed Consolidated Statements of Operations. The Company estimated $0 fair value of the bifurcated embedded derivative at October 31, 2024 as there were no outstanding Preferred Shares at October 31, 2024.

During the three and six months ended October 31, 2024, the Company made all installment payments in cash pursuant to installment redemptions. The installment redemptions were paid in cash in the amounts of $9,336,833 and $18,766,416, respectively, which includes $8,750,000 and $17,500,000 of the Preferred Shares, respectively, $58,333 and $204,166 of accrued dividends, respectively, and $528,500 and $1,062,250 of additional 6% cash premium, respectively, pursuant to the terms of the Series B Preferred stock. During the three and six months ended October 31, 2024, the Company made all installment payments in cash pursuant to installment redemptions and accreted $1,045,357 and $3,193,404, respectively, of discount related to the Preferred Shares. During the three and six months ended October 31, 2024, the Company recognized a deemed dividend of $528,500 and $1,062,250, respectively, related to the amounts owed in addition to dividends if installments are paid in cash which is included in Preferred stock dividends on the condensed consolidated statement of operations.

As of October 31, 2024, the Company has reclassified a portion of the Preferred Shares to an accrued liability for the final (thirteenth) installment redemptions owed to investors in cash of $3,720,458 which includes $2,979,167 of the stated value of the Preferred Shares, $530,698 of dividends payable, and $210,593 of additional 6% cash premium pursuant to the terms of the Series B Preferred stock.

The Company has one share of preferred stock designated as “Series A Preferred Stock” as of October 31, 2024 and April 30, 2024, there were no shares of Series A 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 11 – 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. 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. The shares are treated as Treasury Stock using the cost method. During the three and six months ended October 31, 2024, the Company repurchased 683,036 and 1,003,382 additional shares, respectively, under the repurchase program at a total cost, including commissions and excise taxes of $1,417,565 and $2,167,165, respectively. As of October 31, 2024, the total number of shares repurchased pursuant to the repurchase programs was 6,551,957 shares at a total cost, including commissions and excise taxes of $17,485,484. Repurchased shares are included in Treasury Stock in the accompanying Condensed Consolidated Balance Sheets. At October 31, 2024, $2,514,516 remains available to repurchase the Company’s common stock pursuant to the share repurchase programs.

Tender Offer

On May 11, 2023, the Company commenced a tender offer, in accordance with Rule 13e-4 promulgated under the Securities Exchange Act of 1934, as amended, to purchase up to 7,750,000 shares of its common stock, par value $0.0001 per share, at a price of $3.25 per share. The tender offer expired one minute after 11:59 p.m. on June 9, 2023, and following such expiration the Company accepted for purchase a total of 8,085,879 shares at $3.25 per share, including 335,879 shares that the Company elected to purchase pursuant to its right to purchase up to an additional 2% of its outstanding shares. The resultant aggregate purchase price was $26,721,897, including excise tax, fees and expenses relating to the tender offer. These shares are treated as Treasury Stock using the cost method and are included as Treasury Stock in the accompanying Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity.

As of October 31, 2024, the total number of shares held in Treasury Stock is 14,637,836 shares at a total cost of $44,207,381.

NOTE 12 – FAIR VALUE MEASUREMENTS

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the six months ended October 31, 2024. The carrying amounts of cash equivalents, other current assets, accounts payable and accrued expenses approximate their face values at October 31, 2024 due to their short-term nature. The fair value of the bifurcated embedded derivative related to the convertible preferred stock was estimated using a Monte Carlo simulation model, which uses as inputs the fair value of the Company’s common stock and estimates for the equity volatility and traded volume volatility of the Company’s common stock, the time maturity of the convertible preferred stock, the risk-free interest rate for a period of time that approximates the time to maturity, dividend rate, a penalty dividend rate and the probability of default. The fair value of the warrant liability was estimated using the Black Scholes Merton Model which uses as inputs the following weighted average assumptions, as noted above: dividend yield, expected terms in years, equity volatility and risk-free rate.

Fair Value on a Recurring Basis

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported and reported at fair at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The estimated fair value of the warrant liability and bifurcated embedded derivative represent Level 3 measurements. The bifurcated embedded derivative was extinguished as a result of the redemption of the Series B convertible notes. The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at October 31, 2024, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

SEC Form 10-Q filed by PharmaCyte Biotech Inc.