Alzamend Neuro, Inc. 10-K

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on The NASDAQ Capital Market under the symbol ALZN. The following table sets forth our high and low sale prices per share of our common stock as reported by www.nasdaq.com on the NASDAQ Capital Market from June 15, 2021 through the date indicated below. Fiscal Year Ending April 30, 2022 High Low First Quarter of 2022 through July 28, 2021 $ 33.55 $ 4.30 On July 28, 2021, the last sales price per share of our common stock was $5.22. Dividend Policy We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to support operations and to finance the growth and development of our business. Any future determination to pay dividends will be made at the discretion of our Board of Directors subject to applicable laws and will depend upon, among other factors, our results of operations, financial condition, contractual restrictions and capital requirements. Our future ability to pay cash dividends on our capital stock may be limited by any future debt instruments or preferred securities. Equity Compensation Information The information required by this item regarding equity compensation plans is incorporated by reference to the information set forth in Item 13 of this Annual Report on Form 10-K. Recent Sales of Unregistered Securities Not applicable. Use of Proceeds On June 14, 2021, our Registration Statement on Form S-1 (file No. 333-255955) was declared effective by the SEC for our initial public offering of common stock, or IPO. On June 17, 2021, we sold an aggregate of 2,875,000 shares of common stock, including 375,000 shares pursuant to the underwriter’s exercise of their option to purchase additional shares, each at an offering price of $5.00 per share, for aggregate gross proceeds of approximately $14.4 million. After deducting underwriting discounts, commissions and offering costs incurred by us of approximately $1.1 million, the net proceeds from the offering were approximately $13.3 million. The sole managing underwriter for the offering was Spartan Capital Securities, LLC. No offering costs were paid or are payable, directly or indirectly, to our directors or officers, to persons owning 10% or more of any class of our equity securities, or to any of our affiliates. There has been no material change in the expected use of the net proceeds from our IPO as described in our final prospectus filed with the SEC on June 15, 2021. Upon receipt, the net proceeds from our IPO were held in cash, cash equivalents and short-term investments. As of April 30, 2021, we did not use any of the net proceeds from the IPO, as the reporting period ended prior to the date of the IPO. Pending such uses, we plan to continue investing the unused proceeds from the IPO in fixed, non-speculative income instruments and money market funds. ITEM 6. SELECTED FINANCIAL DATA. As a Smaller Reporting Company, we are electing to follow scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item. - 46 - ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of our operations together with our financial statements and the notes thereto appearing elsewhere in this Annual Report. This discussion contains forward-looking statements reflecting our current expectations, whose actual outcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements,” and elsewhere in this Annual Report. Overview We were incorporated on February 26, 2016 as Alzamend Neuro, Inc. under the laws of the State of Delaware. We were formed to acquire and commercialize patented intellectual property and know-how to prevent, treat and cure the crippling and deadly Alzheimer’s. Existing Alzheimer’s treatments only temporarily relieve symptoms but do not slow or halt the underlying worsening of the disease. We have developed a novel approach in an attempt to combat Alzheimer’s through immunotherapy. Critical Accounting Policies and Estimates Research and Development Expenses . Research and development costs are expensed as incurred. Research and development costs consist of scientific consulting fees and lab supplies, as well as fees paid to other entities that conduct certain research and development activities on behalf of our company. We have acquired and may continue to acquire the rights to develop and commercialize new product candidates from third parties. The upfront payments to acquire license, product or rights, as well as any future milestone payments, are immediately recognized as research and development expense provided that there is no alternative future use of the rights in other research and development projects. Stock-Based Compensation. We maintain a stock-based compensation plan as a long-term incentive for employees, non-employee directors and consultants. The plan allows for the issuance of incentive stock options, non-qualified stock options, restricted stock units, and other forms of equity awards. We recognize stock-based compensation expense for stock options on a straight-line basis over the requisite service period and account for forfeitures as they occur. Our stock-based compensation costs are based upon the grant date fair value of options estimated using the Black-Scholes option pricing model. To the extent any stock option grants are made subject to the achievement of a performance-based milestone, management evaluates when the achievement of any such performance-based milestone is probable based on the relative satisfaction of the performance conditions as of the reporting date. The Black-Scholes option pricing model utilizes inputs which are highly subjective assumptions and generally require significant judgment. These assumptions include: · Fair Value of Common Stock. See the subsection titled “– Common Stock Valuations” below. · Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option. · Expected Volatility. Because we do not have an extensive trading history for our common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded life sciences companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on the similar size, stage in life cycle or area of specialty. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available. · Expected Term. The expected term represents the period that the stock-based awards are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term), as we do not have sufficient historical data to use any other method to estimate expected term. · Expected Dividend Yield. We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero. Certain of such assumptions involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different. - 47 - Common Stock Valuations. Prior to our initial public offering in June 2021, there was no public market for our common stock, and, as a result, the fair value of the shares of common stock underlying our share-based awards was estimated on each grant date by our Board of Directors. To determine the fair value of our common stock underlying option grants, our Board of Directors considered, among other things, input from management, and our Board of Directors’ assessment of additional objective and subjective factors that it believed were relevant, and factors that may have changed from the date of the most recent valuation through the date of the grant. These factors included, but were not limited to: · our results of operations and financial position, including our levels of available capital resources; · our stage of development and material risks related to our business; · progress of our research and development activities; · our business conditions and projections; · the valuation of publicly traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of peer companies; · the lack of marketability of our common stock as a private company; · the prices at which we sold shares of our common stock to outside investors in arms-length transactions; · the likelihood of achieving a liquidity event for our security holders, such as an initial public offering or a sale of our company, given prevailing market conditions; · trends and developments in our industry; and · external market conditions affecting the life sciences and biotechnology industry sectors. Following the closing of our initial public offering, our Board of Directors will determine the fair market value of our common stock based on the closing price of our common stock as reported on the date of grant. Emerging Growth Company Status. The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. Plan of Operations Our plan of operations is currently focused on the development of both our therapeutic candidates which are at different stages of development. We submitted an IND application for AL001 to the FDA on June 30, 2021. On July 28, 2021, the FDA responded to our IND that we are safe to proceed and we will be able to commence Phase I clinical trials in humans. We have an additional preclinical candidate for Alzheimer’s, AL002, which has transitioned from early-stage development to an extensive program of preclinical study and evaluation, which was completed on May 31, 2021 and was followed by a comprehensive report prepared by Charles River Laboratories, Inc., an independent preclinical service provider, received on July 23, 2021. Our preclinical program included a toxicologic evaluation, histopathology study and brain beta amyloid analysis and, after we received additional financing in March 2021, was expanded to include an immunoglobulin analysis and biodistribution study. In November 2018, we adopted a Charter for our Scientific Advisory Board and have appointed two members, Dr. Thomas Wisniewski (Director of the NYU Pearl I. Barlow Center for Memory Evaluation and Treatment) and Dr. Eric McDade (Associate Director of the Dominantly Inherited Alzheimer Network Trials Unit (“DIAN-TU”)). The Scientific Advisory Board members have clinical specializations, including extensive experience with Alzheimer’s and other neurological diseases. We intend to rely on this advisory group of experts to help guide our therapies through the related scientific and manufacturing initiatives. - 48 - The continuation of our current plan of operations with respect to completing our IND application and beginning the series of human clinical trials for each of our therapeutics requires us to raise additional capital to fund our operations. Because our working capital requirements depend upon numerous factors, including the progress of our preclinical and clinical testing, timing and cost of obtaining regulatory approvals, changes in levels of resources that we devote to the development of manufacturing and marketing capabilities, competitive and technological advances, status of competitors, and our ability to establish collaborative arrangements with other organizations, we will require additional financing to fund future operations. Results of Operations Year Ended April 30, 2021 Compared to Year Ended April 30, 2020 The following table summarizes the results of our operations for the year ended April 30, 2021 and 2020. For the Year Ended April 30, 2021 2020 OPERATING EXPENSES Research and development $ 1,310,716 $ 1,069,418 General and administrative 3,641,172 3,354,743 Total operating expenses 4,951,888 4,424,161 Loss from operations (4,951,888 ) (4,424,161 ) OTHER INCOME (EXPENSE), NET Gain on extinguishment of debt 62,418 - Interest expense (142,421 ) - Interest expense - related party (16,382 ) - Interest income - related party 1,706 13,925 Total other income (expense), net (94,679 ) 13,925 NET LOSS $ (5,046,567 ) $ (4,410,236 ) Basic and diluted net loss per common share $ (0.07 ) $ (0.06 ) Basic and diluted weighted average common shares outstanding 72,650,073 71,253,580 Revenue We were formed on February 26, 2016 to acquire and commercialize patented intellectual property and know-how to prevent, treat and cure the crippling and deadly disease, Alzheimer’s. We currently have only two product candidates, AL001 and AL002. These products are in the preclinical stage of development and will require extensive clinical study, review and evaluation, regulatory review and approval, significant marketing efforts and substantial investment before either or both of them, and any respective successors, will provide us with any revenue. We did not generate any revenues during the year ended April 30, 2021 and 2020, and we do not anticipate that we will generate revenue for the foreseeable future. General and administrative expenses General and administrative expenses for the year ended April 30, 2021 and 2020 were $3.6 million and $3.4 million, respectively. As reflected in the table below, general and administrative expenses primarily consisted of the following expense categories: stock compensation expense, professional fees, as well as salaries and benefits. The remaining general and administrative expenses of $166,000 and $120,000, respectively, primarily consisted of payments for advertising and promotion, transfer agent fees, travel, and other office expenses, none of which is significant individually. - 49 - For the Year Ended April 30, 2021 2020 Stock compensation expense $ 2,323,810 $ 1,945,741 Professional fees 699,910 861,348 Salary and benefits 451,921 427,306 Other general and administrative expenses 165,531 120,348 Total general and administrative expenses $ 3,641,172 $ 3,354,743 Stock compensation expense During the year ended April 30, 2021 and 2020, we incurred general and administrative stock compensation expense of $2.3 million and $1.9 million, respectively, related to stock option grants to executives, employees and consultants as well as shares issued for services to Spartan Capital. All option grants are granted at the per share fair value on the grant date. Vesting of options differs based on the terms of each option. We valued the options at their date of grant utilizing the Black Scholes option pricing model. We valued the shares issued for services at their intrinsic value on the date of issuance. Stock-based compensation is a non-cash expense because we settle these obligations by issuing shares of our common stock from authorized shares instead of settling such obligations with cash payments. Professional fees The second largest component of our general and administrative expenses is professional fees. During the year ended April 30, 2021 and 2020, we reported professional fees of $700,000 and $861,000, respectively, which are principally comprised of the following items: Year Ended April 30, 2021 · In June 2017, we entered into a five-year consulting agreement with Spartan Capital pursuant to which Spartan Capital has agreed to provide consulting services with respect to general corporate matters, including, but not limited to, advice and input with respect to raising capital, potential merger and acquisition transactions, identifying suitable personnel for management, developing corporate structure and finance strategies, assisting us with strategic introductions, assisting management with enhancing corporate and shareholder value and introducing us to potential investors. In December 2017, since the maximum amount was raised in the prior private placement, we paid to Spartan Capital a consulting fee of $1.4 million for the services to be rendered over the 60-month term of this consulting agreement. During the year ended April 30, 2021, we recorded an expense of $280,000 as a result of this consulting agreement. · In June 2019, we entered into an uplisting agreement with Spartan Capital pursuant to which Spartan Capital has agreed to provide consulting services with respect to an IPO, merger, acquisition or sale of stock or assets, joint venture, strategic alliance or other similar transaction. We paid to Spartan Capital a consulting fee of $475,000 and issued Spartan 500,000 shares of our common stock for the services to be rendered over the 24-month term of the uplisting agreement. During the year ended April 30, 2021, we recorded an expense of $263,000 as a result of this consulting agreement. The uplisting agreement was terminated on March 3, 2021. · During the year ended April 30, 2021, we incurred $26,000 in legal fees. · During the year ended April 30, 2021, we incurred $125,000 in audit fees. Year Ended April 30, 2020 · In June 2017, we entered into a five-year consulting agreement with Spartan Capital pursuant to which Spartan Capital agreed to provide consulting services with respect to general corporate matters, including, but not limited to, advice and input with respect to raising capital, potential merger and acquisition transactions, identifying suitable personnel for management, developing corporate structure and finance strategies, assisting us with strategic introductions, assisting management with enhancing corporate and shareholder value and introducing us to potential investors. In December 2017, since the maximum amount was raised in a prior private placement, we paid to Spartan Capital a consulting fee of $1.4 million for the services to be rendered over the five-year term of this consulting agreement. During the year ended April 30, 2020, we recorded an expense of $280,000 in connection with this consulting agreement. - 50 - · In June 2019, we entered into a two-year uplisting agreement with Spartan Capital pursuant to which Spartan Capital agreed to provide consulting services with respect to a potential public offering. Compensation under this agreement consisted of a cash payment in the amount of $475,000 and the issuance of 500,000 shares of our common stock. We are amortizing the cost of these services over the two-year term of the uplisting agreement. During the year ended April 30, 2020, we recorded an expense of $104,000 in connection with the uplisting agreement. The uplisting agreement was terminated on March 3, 2021. · During the year ended April 30, 2020, we incurred $244,000 in legal fees. · During the year ended April 30, 2020, we incurred $76,000 in audit fees. Salaries and Benefits During the year ended April 30, 2021 and 2020, we incurred $452,000 and $427,000, respectively, in employee-related expenses. As of April 30, 2021, we had one full-time and three part-time employees. We appointed Stephan Jackman, who is a full-time employee, as Chief Executive Officer as of November 30, 2018, Kenneth S. Cragun as Chief Financial Officer on December 15, 2018, and Henry C.W. Nisser as Executive Vice President and General Counsel on May 1, 2019. Research and development expenses Research and development expenses for the year ended April 30, 2021 and 2020, were $1.3 million and $1.1 million, respectively. As reflected in the table below, research and development expenses primarily consisted of professional fees, licenses and fees, as well as stock compensation expense. For the Year Ended April 30, 2021 2020 Professional fees $ 1,173,464 $ 709,432 Licenses and fees 50,000 50,487 Stock compensation expense 87,252 309,499 Total research and development expenses $ 1,310,716 $ 1,069,418 Licenses and fees There are certain initial license fees and milestone payments required to be paid to the University of South Florida and the USF Research Foundation, for the licenses of the technologies, pursuant to the terms of the License Agreement with Sublicensing Terms (the “License Agreement”) with the Licensor and a direct support organization of the University. During the year ended April 30, 2021, we incurred $50,000 in license fees related to achieving the milestone of conducting pre-IND discussions with the FDA regarding AL001 under the new license agreements entered into on June 10, 2020 for the treatment of neurodegenerative diseases excluding Alzheimer’s and for the treatment of psychiatric diseases/disorders. During the year ended April 30, 2020, we incurred $50,000 in license fees related to achieving the milestone of conducting pre-IND discussions with the FDA regarding AL001. Professional fees During the year ended April 30, 2021 and 2020, we reported professional fees of $1.2 million and $709,000, respectively, which are principally comprised of professional fees attributed to various types of scientific services, including FDA consulting services. The increase relates to professional fees incurred related to AL001 chemistry, manufacturing and controls. Stock compensation expense During the year ended April 30, 2021 and 2020, we incurred $87,000 and $309,499, respectively, in research and development stock compensation expense related to stock option grants to consultants. All option grants are granted at the per share fair value on the grant date. Vesting of options differs based on the terms of each option. We valued the options at their date of grant utilizing the Black Scholes option pricing model. Stock-based compensation is a non-cash expense because we settle these obligations by issuing shares of our common stock from authorized shares instead of settling such obligations with cash payments. - 51 - Other income (expense), net Gain on extinguishment of debt In May 2020, we received loan proceeds in the amount of $62,000 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after the earlier of (i) 24 weeks after the loan disbursement date and (ii) December 31, 2020 as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. We used the proceeds for purposes consistent with the PPP. In December 2020, we met the conditions and received forgiveness of the loan and recorded the benefit as a gain on extinguishment of debt. Interest expense Interest expense was $142,000 for the year ended April 30, 2021 related to the convertible promissory note issued in August 2020 including non-cash interest expense of $124,000 recorded from the amortization of debt discount. Interest expense – related party Interest expense – related party was $16,000 for the year ended April 30, 2021 related to the convertible promissory note – related party issued in August 2020 including non-cash interest expense of $14,000 recorded from the amortization of debt discount. Interest income – related party During the year ended April 30, 2021 and 2020, we reported interest income, related party of $2,000 and $14,000, respectively, relating to a promissory note from Avalanche. Current and deferred income taxes As of April 30, 2021 and 2020, we had deferred tax assets, prior to valuation allowance, of $4,354,645 and $2,844,294, respectively. We considered the scheduled reversal of deferred tax items, historic generation of taxable losses, projected future taxable losses, available tax planning strategies, and other factors in determining whether the Company will realize its deferred tax assets. Based on available evidence, we believe it is not more likely than not that the Company’s deferred tax assets will be realized. Accordingly, we maintain a full valuation allowance and did not record an income tax benefit during the years ended April 30, 2021 and 2020. Liquidity and Capital Resources The accompanying financial statements have been prepared on the basis that our company will continue as a going concern. As of April 30, 2021, we had cash of $1.9 million and an accumulated deficit of $16.8 million. We have incurred recurring losses and reported losses for the year ended April 30, 2021 totaling $5.0 million. In the past, we have financed our operations principally through issuances of promissory notes and equity securities. In March of 2021, the Company entered into a securities purchase agreement with Digital Power Lending, a California limited liability company and wholly owned subsidiary of Ault Global, or DPL, pursuant to which the Company agreed to sell an aggregate of 6,666,667 shares of its common stock for an aggregate of $10 million, or $1.50 per share, which sales will be made in tranches. On March 9, 2021, DPL paid $4 million, less the $1.8 million in advances and the surrender for cancellation of the $50,000 convertible promissory note, each as described below, for an aggregate of 2,666,667 shares of the Company’s common stock. According to the securities purchase agreement, DPL will purchase an additional (i) 1,333,333 shares of the Company’s common stock once the FDA shall have approved the Company’s IND for the Company’s phase 1a clinical trials for a purchase price of $2 million, and (ii) 2,666,667 shares of the Company’s common stock once the Company has completed these phase 1a clinical trials for a purchase price of $4 million. The Company further agreed to issue DPL warrants to purchase a number of shares of its common stock equal to 50% of the shares of common stock purchased under the securities purchase agreement at an exercise price of $3.00 per share. Finally, the Company agreed that for a period of eighteen months following the date of the payment of the final tranche of $4 million, DPL will have the right to invest an additional $10 million on the same terms, except that no specific milestones have been determined with respect to the additional $10 million as of the date of this Annual Report. On June 17, 2021 we announced the closing of our initial public offering of 2,500,000 shares of our common stock and full exercise of the underwriter’s over-allotment option to purchase 375,000 additional shares of our common stock at a price to the public of $5.00 per share. The gross proceeds from the offering to our company, before deducting the underwriting discounts and estimated offering expenses, were approximately $14.4 million. Our common stock is listed on The Nasdaq Capital Market under the ticker symbol “ALZN”. - 52 - We expect to continue to incur losses for the foreseeable future and needs to raise additional capital until we are able to generate revenues from operations sufficient to fund our development and commercial operations. However, based on our current business plan, we believe that our cash and cash equivalents at April 30, 2021, together with the funds received from our June 2021 initial public offering, are sufficient to meet our anticipated cash requirements during the twelve-month period subsequent to the issuance of the financial statements included in this Annual Report. Impact of Coronavirus on Our Operations In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic which continues to spread throughout the United States and the world. We are monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on our operations, financial position, cash flows, supply chains, and the industry in general, in addition to the impact on our employees. Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on our operations and liquidity is uncertain as of the date of this Annual Report. The continuing presence of COVID-19 has adversely impacted our business. Our drug development and manufacturing activities for A001 were delayed by eight weeks due to a shutdown at our third-party manufacturing facility during the months of March to May 2020, which resulted in about a one month overall delay in our clinical protocol development and IND development and submission as a result of a lack of labor and equipment. COVID-19 also delayed our nonclinical studies for AL002 by 12 weeks during the months of March to May 2020 due to shutdowns at our third-party lab facilities where we were not granted access to perform research. Moreover, COVID-19 has affected our ability to raise capital due to uncertain capital markets. We continue to assess and monitor our business operations and system supports and the impact COVID-19 may continue to have on our operations and financial condition, but there can be no assurance that this analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sector in particular. Our operations are located in Orange County, CA and Tampa, FL, and certain members of our senior management work in Atlanta, GA and New York, NY. We have been following the recommendations of local health authorities to minimize exposure risk for our employees, including the temporary closures of our offices where certain of our employees work and having employees work remotely to the extent possible, has not negatively impacted their efficiency. Currently, we and our third-party facilities are working closely to pre-COVID-19 levels and expect normal operations for the balance of the calendar year. Contractual Obligations On May 1, 2016, we entered into a Standard Exclusive License Agreement for AL002 with Sublicensing Terms with the University of South Florida Research Foundation, Inc., as licensor, pursuant to which the licensor granted us a royalty bearing exclusive worldwide license limited to the field of Alzheimer’s Immunotherapy and Diagnostics, under United States Patent No. 8,188,046, entitled “Amyloid Beta Peptides and Methods of Use,” filed April 7, 2009 and granted May 29, 2012. In addition to royalty payments of 4% on net sales of products developed from the licensed technology, we were required to pay a license fee of $100,000 on June 25, 2016, and December 31, 2016. As an additional licensing fee for the license of the AL001 technologies, the licensor received 2,227,923 shares of our common stock. Additionally, we are required to pay milestone payments on the due dates to the licensor for the license of the technology, as follows: Original AL001 License: Payment Due Date Event $ 50,000 Completed Pre-IND meeting $ 65,000 Completed IND application filing $ 190,000 12 months from IND filing date Upon first dosing of patient in a clinical trial $ 500,000 12 months from first patient dosing Upon completion of first clinical trial $ 1,250,000 24 months from completion of the first clinical trial Upon first patient treated in a Phase III clinical trial $ 10,000,000 8 years from the effective date of the agreement Upon FDA Approval - 53 - AL002 License: Payment Due Date Event $ 50,000 January 1, 2022 Upon IND application filing $ 50,000 12 months from IND application filing date Upon first dosing of patient in first Phase I clinical trial $ 175,000 12 months from first patient dosed in Phase I Upon completion of first Phase I clinical trial $ 500,000 24 months from completion of first Phase I clinical trial Upon completion of first Phase II clinical trial $ 1,000,000 12 months from completion of the first Phase II clinical trial Upon first patient treated in a Phase III clinical trial $ 10,000,000 7 years from the effective date of the agreement Upon FDA BLA approval We have met the Pre-IND meeting and IND application filing milestones encompassing AL001. If we fail to meet a milestone by its specified date, the licensor may terminate the license agreement. The licensor was also granted a preemptive right to acquire such shares or other equity securities that may be issued from time to time by us while the licensor remains the owner of any equity securities of our company. There are certain license fees and milestone payments required to be paid pursuant to the terms of the Standard Exclusive license agreements with Sublicensing Terms, both effective July 2, 2018, (the “AL001 license agreements”) with the licensor and the University of South Florida. In addition, a royalty payment of 3% is required pursuant to License #18110 while License #1811 requires a royalty payment of 1.5% on net sales of products developed from the licensed technology. For the two AL001 licenses, in the aggregate, we were required to pay initial license fees of $50,000 no later than July 31, 2018, and $150,000 no later than October 31, 2018. As an additional licensing fee, the licensor is entitled to receive that number of shares of our common stock equal to 3% of the sum of the total number of issued and outstanding shares. Additionally, we are required to pay milestone payments on the due dates to the licensor for the license of the technology, as follows: Additional AL001 Licenses: Payment Due Date Event $ 30,000 Upon first pre-IND meeting Pre-IND meeting $ 50,000 December 31, 2022 IND application filing $ 150,000 12 months from IND filing date Upon first dosing of patient in a clinical trial $ 400,000 12 months from first patient dosing Upon completion of first clinical trial $ 1,000,000 36 months from completion of the first Phase II clinical trial Upon first patient treated in a Phase III clinical trial $ 8,000,000 August 1, 2029 First commercial sale Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Recent Accounting Standards For information about recent accounting pronouncements that may impact our financial statements, please refer to Note 3 of Notes to Financial Statements under the heading “Recent Accounting Standards.” - 54 - ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Because we are a smaller reporting company, this section is not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements required by this Item 8 are included in this Annual Report following Item 16 hereof. As a smaller reporting company, we are not required to provide supplementary financial information. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.