Business context and reporting period
The supplied filing is Nuvilex, Inc.’s unaudited Form 10-Q for the three months ended July 31, 2013, not a filing under the name Pharmacyte Biotech, Inc. It is the company’s fiscal first quarter, rather than calendar-year Q1. Nuvilex described a shift toward biotechnology, including cell-encapsulation cancer treatments, alongside legacy consumer products.
During the period, Nuvilex completed its acquisition of Bio Blue Bird AG (BBB), obtaining 100% of its equity and a 14.5% interest in SG Austria. BBB held exclusive worldwide oncology encapsulation licenses. BBB’s financial statements were not yet consolidated while the company worked to complete audits and other integration steps.
Financial results and position
| Metric | Three months ended July 31, 2013 | Comparable 2012 period or balance-sheet date |
|---|---|---|
| Revenue | $0 | $6,626 |
| Operating expenses | $1,400,691 | $545,412 |
| Operating loss | $1,400,691 | $538,786 |
| Net loss | $4,666,367 | $510,517 |
| Basic loss per share | $0.01 | $0.00 |
| Operating cash flow | $(159,674) | $(85,388) |
- At July 31, 2013, cash was $206,038, current assets were $1,804,361, and current liabilities were $994,155; reported working capital was $810,206. Total assets were $3,394,191.
- Cash used in investing activities was $1,568,850, primarily payments toward the acquisition. Financing provided $1,735,259, including $1,660,000 from common-stock sales; ending cash was $206,038.
- Total liabilities were $994,155, including $420,000 in loans payable. The filing also describes a past-due $20,000 note bearing 8% interest and $400,000 in disputed licensing-fee obligations under settlement negotiations. Series E preferred stock of $500,000 was presented outside stockholders’ equity.
- There was no revenue in the quarter, so the filing provides no meaningful gross margin. No cash interest or income/franchise taxes were reported as paid.
Material changes and unusual items
- Revenue fell to zero after Nuvilex discontinued Cinnergen sales, citing marketing and maintenance costs that exceeded revenue.
- Net loss increased by $4,155,850 year over year. Compensation expense rose to $1,202,127, largely reflecting stock-based compensation and higher share prices; the company also reported $480,000 in stock issued to directors.
- A $3,973,795 loss on debt settlement followed issuance of 26 million common shares to settle debt and accrued interest. A $640,000 loss was recorded on conversion of preferred stock. These items substantially increased the reported net loss.
- The company reported $1,358,470 in gain on forgiveness of debt, including a $1,312,328 gain related to the Cornerstone settlement. The Cornerstone agreement was satisfied, collateral shares were returned, and the company reported no remaining liability to the bank.
- Common shares outstanding were 536,941,348 at July 31; the cover page reports 637,241,348 as of September 13, 2013. The filing also reports 59,433,600 outstanding warrants, with a weighted-average exercise price of $0.125.
Outlook, risks, and contingencies
Management planned preparations for pancreatic-cancer clinical trials and sought to develop revenue through licensing, partnerships, research, and product sales. The filing gives no quantified revenue, earnings, or cash-flow guidance.
The company stated that it had no regular revenue source sufficient to cover operating costs, had an accumulated deficit of $46,112,474, and expected continued losses. Management said substantial additional capital would be needed; failure to raise funds could delay or prevent clinical trials, require changes to business plans, or force the company to cease operations. The filing expressly raises substantial doubt about the company’s ability to continue as a going concern.
The company said there were no material pending legal proceedings and no material changes to previously disclosed risk factors. Management characterized disclosure controls as effective and reported no material quarter-specific change in internal control over financial reporting. Forward-looking plans remain subject to regulatory, clinical, financing, and execution risks.
Important facts for investors to verify
- Confirm the issuer and reporting period: the supplied filing names Nuvilex, Inc., while the request names Pharmacyte Biotech, Inc.
- Reconcile the reported 536.9 million shares outstanding at July 31 with 637.2 million reported at September 13, including intervening issuances and dilution.
- Review the terms, valuation, and accounting for the large share-based debt settlement and compensation charges.
- Verify the status and funding requirements of BBB integration, clinical-trial preparations, and the outstanding $400,000 licensing obligation and $20,000 note.
- Assess near-term cash needs and the company’s ability to obtain additional financing given zero quarterly revenue, operating cash use, and the going-concern warning.