NOTE 13 – INVESTMENT IN TNF PHARMACEUTICALS, INC.

On May 20, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with a public company operating in the medical industry, MyMD Pharmaceuticals, Inc. which subsequently changed its name to TNF Pharmaceuticals, Inc., (“TNF”). Pursuant to the SPA, the Company purchased (i) 7,000 shares of TNF’s Series G Convertible Preferred Stock (the “Preferred Shares” or “Series G Preferred Stock”), representing approximately 33% of TNF’s issued and outstanding share capital on an as-converted basis (and approximately 78% of all shares of Series G Preferred Stock outstanding), at a price of $1.816 per Preferred Share, which are convertible into 3,854,626 shares of Common Stock (as defined below); (ii) warrants to purchase up to 3,854,626 shares of TNF’s Common Stock with a five-year term (“Long-Term Warrant”); and (iii) warrants to purchase up to 3,854,626 shares of TNF’s Common Stock with a 18-month term (“Short-Term Warrant”) (collectively, the “TNF warrants”), for an aggregate purchase price of $7,000,000.

Pursuant to the SPA, the Company has the right to participate in future sales of TNF’s equity and equity-linked securities until the second anniversary of the Closing or the date on which no TNF Preferred Shares remain outstanding, whichever is earlier. Additionally, the Company has the right to nominate one individual to serve on TNF’s board of directors until PharmaCyte no longer beneficially owns at least 20% of TNF’s common stock on an as-converted basis. The Company’s Interim Chief Executive Officer serves on the board of directors of TNF.

The Company has determined that TNF is a VIE, since TNF does not have sufficient equity at risk to finance its own operations without additional subordinated financial support. However, the Company has determined that it is not the primary beneficiary of TNF. Furthermore, TNF’s Series G Preferred Stock is not considered in substance common stock, and as such, equity method accounting does not apply. The Company recorded its investment in TNF Series G Preferred Stock at its fair value of approximately $17,410,000 on May 23, 2024 as the Company did not elect the measurement alternative to account for the investment at cost less impairment. Subsequent changes in fair value of the TNF Series G Preferred Stock are recognized in earnings at each reporting period. The initial fair value of the TNF Series G Preferred Stock was estimated utilizing a Monte Carlo simulation with the following assumptions: TNF stock price of $2.00, price floor of $0.40, expected time to settlement of 5.00 years, dividend rate of 10%, discounted market interest rate of 9.8%, risk free rate of 4.52%, equity volatility of 115.0% and probability of default of 18.3%.

The Warrants were determined to meet the definition of a derivative and were required to be recorded at fair value in accordance with ASC 815. Subsequent changes in the fair value of the Warrants are recognized in earnings, at each reporting date. The approximately $10,986,000 issuance date fair value of the Warrants was determined utilizing the Black Scholes Merton Method with the following assumptions: TNF stock price of $2.00, exercise price of $1.82, risk free rate of 4.52%-5.05%, equity volatility of 115.0%-125.0% and remaining term of 1.5-5.0 years. As the fair value of the TNF Series G Preferred Stock and Warrants exceeded the Company’s total investment in TNF, the Company recognized an approximately $21,396,000 gain on investment on the condensed consolidated statements of operations for the excess of the fair value of the Warrants over the investment amount. As both the Series G Preferred Stock and Warrants are required to be initially measured and subsequently remeasured at fair value, they are presented as a single line item on the condensed consolidated balance sheets as Investment – TNF.

During the three and six months ending October 31, 2024, the Company recognized a loss for the change in fair value of the Investment – TNF of approximately $4,265,000 and $3,541,000, respectively. The approximately $18,799,000 fair value of the TNF Series G Preferred Stock was estimated utilizing a Monte Carlo simulation with the following assumptions on October 31, 2024: TNF stock price of $1.42, price floor of $0.36, expected time to settlement of 5.00 years, dividend rate of 10%, discount market interest rate of 7.0%, risk free rate of 4.15%, equity volatility of 120.0% and probability of default of 18.0%. The approximately $6,056,000 fair value of the Warrants was determined utilizing the Black Scholes Merton Method with the following assumptions on October 31, 2024: TNF stock price of $1.42, exercise price of $1.82, risk free rate of 4.14%-4.26%, equity volatility of 105.0%-110.0% and remaining term of 1.06-4.56 years.

Below is a summary of activity for the Preferred Stock as of October 31, 2024:

Below is a summary of activity for the Preferred Stock Warrants as of October 31, 2024: