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Iroquois Capital Delivers Open Letter To Pharmacyte Biotech Board Of Directors

roquois Capital Management, LLC (together with its affiliates, "Iroquois"), one of the largest stockholders of PharmaCyte Biotech, Inc. ("PMCB" or the "Company") (NASDAQ:PMCB) with

Benzinga · 06/09/2022 09:07

roquois Capital Management, LLC (together with its affiliates, "Iroquois"), one of the largest stockholders of PharmaCyte Biotech, Inc. ("PMCB" or the "Company") (NASDAQ:PMCB) with beneficial ownership of approximately 5.8% of the outstanding common stock of the Company, today announced that it has delivered a letter to the Company's Board of Directors.

The full text of the letter follows:

June 9, 2022

PharmaCyte Biotech, Inc.

3960 Howard Hughes Parkway, Suite 500

Las Vegas, Nevada 89169

Attn: Board of Directors

Dear Members of the Board of Directors:

As you know, Iroquois Capital Management, LLC ("Iroquois Capital," "us," or "we") is one of the largest stockholders of PharmaCyte Biotech, Inc. ("Pharmacyte" or the "Company"), with ownership of approximately 5.8% of the Company's outstanding shares.

It has been almost a month since we delivered a public letter to you outlining our serious concerns with the direction the Company is currently headed and our recommendations for real and urgent change, including, most importantly, with respect to the composition of the Company's Board of Directors (the "Board").  Since then, we have received an outpouring of support from the Company's stockholders who share both our concerns with and belief in the promise of the Company, but who have nonetheless had to endure the destruction of their precious capital under this Board's watch and agree that the status quo at the Company is untenable.

We expect that you have received similar feedback, judging by the Company's recent announcements that it has initiated a buyback program, will begin holding quarterly earnings calls and has purportedly aligned the incentives between Pharmacyte stockholders and the Company's leadership with new executive compensation arrangements. While we applaud any action by the Company designed to create stockholder value, we remind you that these same initiatives, among others, were each expressly recommended to the Company for over six months prior to the airing of our public grievances in our attempts to engage constructively with the Company's leadership in private. Therefore, we remain understandably skeptical that such announcements amount to anything more than a reactive and thinly-veiled attempt to placate stockholders by belatedly implementing a few of our long-standing recommendations that we believe the Board finds most convenient, but which fall well short of the level of change needed to drive value at the Company, including a Board that is materially constituted to represent the best interests of all its stockholders, the true owners of the Company, and fill gaps in the existing leadership's skills and experiences. 

We also believe that certain of these announcements leave stockholders with more questions than answers, including why it has taken so long for the Company to accommodate recommendations clearly benefitting the Company when such actions were at all times readily within the Board's control.

We Believe the Company's Recent Announcement of a $10 Million Buyback Program Was Unnecessarily Delayed and Raises Questions as to the Company's Stated Ability to Implement Purchases Thereunder "Immediately"

The Company's announcement of a $10 million buyback program, which the Company has stated in its related press release is "effective immediately", begs the question as to how, given the likelihood of material non-public information in the Company's possession surrounding, among other things, the terms of the Company's recently implemented executive compensation arrangements and the lifting of the hold by the Food and Drug Administration (the "FDA") on the Company's planned Phase 2b clinical trial for the use of its Cell-in-a-Box® platform, the Company is nonetheless in a position to transact in its own securities "immediately" in the open market. We believe this statement has led to similar confusion among the Company's other stockholders, evident in the additional 8% decline in the Company's stock price since June 1, 2022, the day before the Company's buyback program was announced.

In our view, this is just one example of the Company's communication failures stemming from a Board that has long-suffered from a dearth of capital markets experience and stockholder representation. Nonetheless, given the fact that we had suggested the Company implement a buyback program more than six months ago after it became clear that the clinical hold imposed by the FDA in October 2020 effectively solidified the Company's cash position, we struggle to understand why the Board did not begin discussing it until March 2022, and only implemented it a month after we made the suggestion and our concerns public in our prior letter.

We Are Concerned By the Company's Failure to Disclose the Material Terms of the Compensation Arrangements Recently Entered into with the Company's Executives and How Such Arrangements Will Align Incentives Between the Company's Leadership and its Stockholders

Furthermore, we question how the new compensation arrangements entered into with the Company's executives "align the compensation of [the] management team with corporate performance" when the Company has failed to timely disclose such agreements in a Current Report on Form 8-K for the benefit of the Company's stockholders, failed to identify whether any such compensation arrangements contain an equity component or are comprised entirely of cash payments and failed to identify the "specified corporate goals" the achievement of which bonuses to be paid are contingent upon. We are puzzled by the fact that the Company does not seem to appreciate that stockholders of a Nasdaq-listed company expect such information to be clearly disclosed in its entirety as soon as practicable and not buried in a lengthy filing months after such agreements have been entered into.

Contrary to the Company's Claims, We Believe the Issues Facing the Company Stem Directly from the Lack of Capital Markets Experience on a Dysfunctional Board Whose Members Have Been Hand-Picked by and Are Beholden to the Company's Chairman, Chief Executive Officer, President and General Counsel, Kenneth L. Waggoner

Finally, while we are encouraged by the Company's newly stated commitment that it will broaden the capital markets experience on the Board, given the existing directors' utter lack of public company directorship experience prior to joining the Company, other than Mr. Waggoner and the Company's Chief Financial Officer Carlos Trujillo's overlapping Board experience at VelaTel Global Communications, Inc. (f/k/a China Tel Group, Inc.) nearly a decade ago, we do not believe a process whereby the existing Board members hand-pick additional directors or simply choose their replacements approaches the level of change that we believe is required at this critical juncture in the Company's future. 

We believe Mr. Waggoner has already demonstrated his inability to form a high-functioning Board committed to driving value for stockholders.  The Company's most recent appointment of two additional medical doctors hand-picked by Mr. Waggoner, on top of the existing two medical doctors that serve as directors alongside him, the Company's CFO whose prior interlocking directorate we have already mentioned, and a business development executive, is a testament to this fact.  We believe stockholders deserve more than an insular, dysfunctional Board that has failed to ever purchase shares in the open market and is seemingly structured to rubber-stamp Mr. Waggoner's agenda rather than fostering a boardroom reflecting the imperatives of the Company's true owners. 

While we agree the existing directors possess strong scientific and clinical experience, we believe their experience is far better suited as members of a newly formed scientific advisory board, rather than in a position where they are expected to drive value for stockholders, which we believe largely explains why the Company has been so slow to implement the changes urgently raised by Iroquois more than six months ago.

We Believe the Company's Dismal Corporate Governance Practices Have Eroded the Board's Oversight and Accountability Function

While Mr. Waggoner serves as both Pharmacyte's Chairman of the Board and Chief Executive Officer in contravention to well-recognized corporate governance best practices counseling for the separation of such roles, the Board has also failed to appoint a lead independent director to adequately represent the interests of the Company's stockholders in light of the combination of the Chairman and CEO role in one person. The inclusion of Mr. Waggoner as a member on the Audit Committee, which should be comprised entirely of independent directors, is further emblematic of the haphazard way in which we believe the Company's oversight and accountability function is structured.  Furthermore, we note that it is highly unusual for a company's chief financial officer to also serve as a member of its board of directors, which unfortunately is also the case here at Pharmacyte. We believe it is simply unacceptable for a public company traded on a national exchange to continue to be run in such a manner and view such practices as a relic of persisting old habits that must be addressed immediately.

We Call on the Company to Immediately Enlist Stockholder Participation in a Process to Materially Reconstitute the Board with Highly Qualified Independent Candidates with the Requisite Skillsets, Experience, Drive and Sense of Accountability Needed to Turn the Company Around

We appreciate that much of the Company's upcoming milestones are largely determined by the lifting of the FDA's hold on the Company's Phase 2b clinical trial, whose timeline continues to drift further into the future and is largely outside of the Company's control, however we think the Company's recent announcements provide a glimpse into the positive change an independent and highly experienced Board is capable of effecting in short order to the extent its interests are aligned with the Company's stockholders.

Accordingly, we hereby reiterate our request for the Company to immediately enlist the participation of its stockholders in a process to meaningfully reconstitute the Board with highly qualified nominees possessing the requisite experience and ownership mentality required to drive the level of change we believe is necessary to create value at the Company. Barring the foregoing, we intend to provide stockholders the option to select a different path for the future of their Company and to allow their collective voice be heard at the upcoming annual meeting scheduled for August 25, 2022.

Best Regards,

/s/ Richard Abbe

Richard Abbe

Managing Member

Iroquois Capital Management, LLC

About Iroquois Capital Management, LLC

Iroquois Capital Management, LLC is a New York-based investment adviser that provides investment advisory services to Iroquois Master Fund Ltd., a privately pooled investment vehicle.