Alzamend Neuro, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following management’s discussion and analysis of financial condition and results of operations in conjunction with our unaudited condensed financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on July 29, 2021. NOTE ABOUT FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. This section should be read in conjunction with our unaudited condensed financial statements and related notes included in Part I, Item 1 of this report. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. In this Quarterly Report, unless the context requires otherwise, references to the “Company,” “Alzamend,” “we,” “our company” and “us” refer to Alzamend Neuro, Inc., a Delaware corporation. 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 potentially 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. 21 · 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. Common Stock Valuations. Prior to our IPO 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. To determine the fair value of our Common Stock underlying option grants, our Board considered, among other things, input from management, and our Board’s 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 IPO 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 IPO, our Board determined the fair market value of our Common Stock based on the closing price of our Common Stock as reported on the date of grant. 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 Investigational New Drug (“IND”) application for AL001 to the FDA on June 30, 2021. On July 28, 2021, we announced receipt of FDA “Study May Proceed” letter for a Phase I study under our IND application for AL001, a lithium-based ionic cocrystal oral therapy for patients with dementia related to mild, moderate, and severe cognitive impairment associated with Alzheimer’s. 22 On August 17, 2021, we announced that we have contracted Altasciences to conduct a six-month Phase I relative bioavailability study for AL001 for dementia related to Alzheimer’s beginning in September 2021. The Phase I first-in-human study is for the purpose of determining potential clinically safe and appropriate dosing for AL001 in future studies. The Phase I study will investigate the pharmacokinetics (the movement of drug through the body) of lithium following a single dose of AL001 (the “study drug”) compared to a typical single dose of a marketed 300 mg immediate-release lithium carbonate capsule (the “comparator” – currently indicated to treat mood disorders) in healthy male and female subjects. The lithium and salicylate components of AL001 will be given within the amounts already approved for use in patients. The purpose of the research study is to test the safety, tolerability, and bioavailability (how much and when drug gets in the body) of the study drug, AL001, compared to the currently marketed formulation of the comparator, lithium carbonate. This is expected to ascertain what AL001 doses should be given, and how often, in subsequent Phase 2 safety and efficacy trials involving Alzheimer’s patients. At least 24 healthy male and female human subjects will complete the Phase I trial. On September 13, 2021, we announced that the first group of healthy participants have been dosed in a six-month Phase I relative bioavailability study for AL001 for dementia related to Alzheimer’s. We recently announced that we anticipate receiving topline data from this study in mid to late December 2021. At this time, we will receive a summary of demographic data, the data for the primary endpoint and a summary of safety data. A full report of the Phase I first-in-human study will be completed in March 2022. The Phase 1 study is for the purpose of determining potential clinically safe and appropriate dosing for AL001 in a planned Phase 2 multiple ascending dose study. AL001 is a lithium-delivering ionic cocrystal under development as an oral treatment for patients with dementia related to mild, moderate, and severe cognitive impairment associated with Alzheimer’s. 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. On September 30, 2021, we announced that we have received a written response to our meeting request relating to our Type B Pre- IND application from the FDA providing a path for our planned clinical development of AL002. AL002 is a patented method using a mutant-peptide sensitized cell as a cell-based therapeutic vaccine that seeks to restore the ability of a patient’s immunological system to combat Alzheimer’s. Preclinical work supports AL002 being associated with a positive anti-inflammatory response and a decrease in brain amyloid contents. Based on AL002’s positive toxicology results, the biologic nature of this product and the urgent need to deliver treatments for Alzheimer’s to patients, we proposed, and the FDA agreed, to conduct a combined Phase 1/2 study. We recently announced that the FDA’s agreement to us conducting a combined Phase 1/2 study, together with our process to identify the right manufacturing partner to provide our study drug materials for the Phase 1/2 study, has extended the timeline for when we anticipate filing the IND, which is now expected to be done in the second quarter of 2022, and we plan to initiate the clinical trial of AL002 as soon as possible after the approval of the IND by the FDA. 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. 23 Results of Operations Results of Operations for the Three Months Ended October 31, 2021 and 2020 The following table summarizes the results of our operations for the three months ended October 31, 2021 and 2020. For the Three Months Ended October 31, 2021 2020 $ Change % Change OPERATING EXPENSES Research and development $ 1,750,050 $ 474,913 $ 1,275,137 268% General and administrative 1,833,884 823,033 1,010,851 123% Total operating expenses 3,583,934 1,297,946 2,285,988 * Loss from operations (3,583,934 ) (1,297,946 ) (2,285,988 ) * OTHER EXPENSE, NET Interest expense (15,995 ) (50,664 ) 34,669 -68% Interest expense - related party - (5,487 ) 5,487 * Total other expense, net (15,995 ) (56,151 ) 40,156 * NET LOSS $ (3,599,929 ) $ (1,354,097 ) $ (2,245,832 ) 166% Basic and diluted net loss per common share $ (0.04 ) $ (0.02 ) $ (0.02 ) * Basic and diluted weighted average common shares outstanding 93,458,556 72,262,858 * *Not meaningful 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 three months ended October 31, 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 three months ended October 31, 2021 and 2020 were $1.8 million and $823,000, respectively. As reflected in the table below, general and administrative expenses primarily consisted of the following expense categories: stock compensation expense, professional fees, insurance, as well as salaries and benefits. For the three months ended October 31, 2021 and 2020, the remaining general and administrative expenses of $64,000 and ($1,000), respectively, primarily consisted of payments for advertising and promotion, transfer agent fees, license fees, travel, and other office expenses, none of which is significant individually. For the Three Months Ended October 31, 2021 2020 $ Change % Change Stock compensation expense $ 1,169,117 $ 547,124 $ 621,993 114% Professional fees 232,375 165,850 66,525 40% Insurance 214,299 - 214,299 100% Salary and benefits 154,481 111,139 43,342 39% Other general and administrative expenses 63,612 (1,080 ) 64,692 * Total general and administrative expenses $ 1,833,884 $ 823,033 $ 1,010,851 123% *Not meaningful 24 Stock Compensation Expense During the three months ended October 31, 2021 and 2020, we incurred general and administrative stock compensation expense of $1.2 million and $547,000, 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 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 three months ended October 31, 2021 and 2020, we reported professional fees of $232,000 and $166,000, respectively, which were principally comprised of the following items: Three Months Ended October 31, 2021 · 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. In December 2017, 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 three months ended October 31, 2021, we recorded an expense of $70,000 as a result of this consulting agreement. · During the three months ended October 31, 2021, we incurred $45,000 in audit fees, $39,000 in legal fees, $24,000 in Board fees, and $19,000 in related party consulting. Three Months Ended October 31, 2020 · During the three months ended October 31, 2020, we recorded an expense of $70,000 in connection with the five-year consulting agreement with Spartan Capital. · In June 2019, we entered into a two-year uplisting agreement (the “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 Common Stock. We are amortizing the cost of these services over the two-year term of the uplisting agreement. During the three months ended October 31, 2020, we recorded an expense of $59,000 in connection with the uplisting agreement. The Uplisting Agreement was terminated on March 3, 2021. · During the three months ended October 31, 2020, we incurred $27,000 in audit fees and $11,000 in legal fees. Salaries and Benefits During the three months ended October 31, 2021 and 2020, we incurred $154,000 and $111,000, respectively, in employee-related expenses. As of October 31, 2021, we had three full-time and four part-time employees. We appointed Stephan Jackman, who is a full-time employee, as Chief Executive Officer as of November 30, 2018, and Lien Escalona as Chief Financial Officer in June 2021. Henry C.W. Nisser, our Executive Vice President and General Counsel, Kenneth S. Cragun, our Senior Vice President of Finance, and David Katzoff, our Chief Operating Officer, work for us on a part-time basis. Messrs. Nisser and Katzoff spend no less than an average of 8 hours per week on our company’s business and Mr. Cragun spends no less than an average of 10 hours per week on our company’s business. 25 Research and Development Expenses Research and development expenses for the three months ended October 31, 2021 and 2020, were $1.7 million and $475,000, 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 Three Months Ended October 31, 2021 2020 $ Change % Change Professional fees $ 1,406,932 $ 453,100 $ 953,832 211% Licenses and fees 192,471 - 192,471 100% Stock compensation expense 111,267 21,813 89,454 410% Other research and development expenses 39,380 - 39,380 * Total research and development expenses $ 1,750,050 $ 474,913 $ 1,275,137 268% *Not meaningful Professional Fees During the three months ended October 31, 2021 and 2020, we reported professional fees of $1.4 million and $453,000, respectively, which were 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 Phase I relative bioavailability study for AL001 for dementia related to Alzheimer’s. Licenses and Fees There are certain initial license fees and milestone payments required to be paid to the University of South Florida and the Licensor, for the licenses of the technologies, pursuant to the terms of the License Agreement with Sublicensing Terms . During the three months ended October 31, 2021, we accrued $190,000 in license fees as a result of our first dosage of patients during the quarter ended October 31, 2021 for the Phase I relative bioavailability study for AL001 for dementia related to Alzheimer’s. Stock Compensation Expense During the three months ended October 31, 2021 and 2020, we incurred $111,000 and $22,000, 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 Common Stock from authorized shares instead of settling such obligations with cash payments. Other Expense, net Interest Expense Interest expense was $16,000 for the three months ended October 31, 2021, primarily related to the convertible promissory note issued in February 2021 including non-cash interest expense of $5,000 recorded from the amortization of debt discount. 26 Results of Operations for the Six Months Ended October 31, 2021 and 2020 The following table summarizes the results of our operations for the six months ended October 31, 2021 and 2020. For the Six Months Ended October 31, 2021 2020 $ Change % Change OPERATING EXPENSES Research and development $ 2,666,458 $ 783,759 $ 1,882,699 240% General and administrative 3,223,715 1,832,494 1,391,221 76% Total operating expenses 5,890,173 2,616,253 3,273,920 * Loss from operations (5,890,173 ) (2,616,253 ) (3,273,920 ) * OTHER EXPENSE, NET Interest expense (29,623 ) (50,815 ) 21,192 -42% Interest expense - related party - (5,487 ) 5,487 * Interest income - related party - 1,706 (1,706 ) -100% Total other expense, net (29,623 ) (54,596 ) 24,973 * NET LOSS $ (5,919,796 ) $ (2,670,849 ) $ (3,248,947 ) 122% Basic and diluted net loss per common share $ (0.07 ) $ (0.04 ) $ (0.03 ) 82% Basic and diluted weighted average common shares outstanding 88,148,524 72,262,858 * *Not meaningful 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 six months ended October 31, 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 six months ended October 31, 2021 and 2020 were $3.2 million and $1.8 million, respectively. As reflected in the table below, general and administrative expenses primarily consisted of the following expense categories: stock compensation expense, professional fees, insurance, as well as salaries and benefits. For the six months ended October 31, 2021 and 2020, the remaining general and administrative expenses of $295,000 and $147,000, respectively, primarily consisted of payments for advertising and promotion, transfer agent fees, license fees, travel, and other office expenses, none of which is significant individually. For the Six Months Ended October 31, 2021 2020 $ Change % Change Stock compensation expense $ 1,766,822 $ 1,116,744 $ 650,078 58 % Professional fees 532,497 343,643 188,854 55 % Insurance 285,732 - 285,732 100 % Salary and benefits 343,290 224,978 118,312 53 % Other general and administrative expenses 295,374 147,129 148,245 * Total general and administrative expenses $ 3,223,715 $ 1,832,494 $ 1,391,221 76 % *Not meaningful 27 Stock Compensation Expense During the six months ended October 31, 2021 and 2020, we incurred general and administrative stock compensation expense of $1.8 million and $1.1 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 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 six months ended October 31, 2021 and 2020, we reported professional fees of $532,000 and $344,000, respectively, which were principally comprised of the following items: Six Months Ended October 31, 2021 · During the six months ended October 31, 2021, we recorded an expense of $140,000 as a result of the five-year consulting agreement with Spartan Capital. · During the six months ended October 31, 2021, we incurred $129,000 in investor relations, $124,000 in audit fees, $68,000 in legal fees, $24,000 in Board fees and $19,000 in related party consulting. Six Months Ended October 31, 2020 · During the six months ended October 31, 2020, we recorded an expense of $140,000 in connection with the five-year consulting agreement with Spartan Capital. · During the six months ended October 31, 2020, we recorded an expense of $118,000 in connection with the Uplisting Agreement. The Uplisting Agreement was terminated on March 3, 2021. · During the six months ended October 31, 2020, we incurred $61,000 in audit fees and $25,000 in legal fees. Salaries and Benefits During the six months ended October 31, 2021 and 2020, we incurred $343,000 and $225,000, respectively, in employee-related expenses. As of October 31, 2021, we had three full-time and four part-time employees. We appointed Stephan Jackman, who is a full-time employee, as Chief Executive Officer as of November 30, 2018, and Lien Escalona as Chief Financial Officer in June 2021. Henry C.W. Nisser, our Executive Vice President and General Counsel, Kenneth S. Cragun, our Senior Vice President of Finance, and David Katzoff, our Chief Operating Officer, work for us on a part-time basis. Messrs. Nisser and Katzoff spend no less than an average of 8 hours per week on our company’s business and Mr. Cragun spends no less than an average of 10 hours per week on our company’s business. Research and Development Expenses Research and development expenses for the six months ended October 31, 2021 and 2020, were $2.7 million and $784,000, 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 Six Months Ended October 31, 2021 2020 $ Change % Change Professional fees $ 2,111,624 $ 710,133 $ 1,401,491 197 % Licenses and fees 257,801 30,000 227,801 759 % Stock compensation expense 253,184 43,626 209,558 480 % Other research and development expenses 43,849 - 43,849 * Total research and development expenses $ 2,666,458 $ 783,759 $ 1,882,699 240 % *Not meaningful 28 Professional Fees During the six months ended October 31, 2021 and 2020, we reported professional fees of $2.1 million and $710,000, respectively, which were 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 Phase I relative bioavailability study for AL001 for dementia related to Alzheimer’s. Licenses and Fees There are certain initial license fees and milestone payments required to be paid to the University of South Florida and the Licensor, for the licenses of the technologies, pursuant to the terms of the License Agreement with Sublicensing Terms. During the six months ended October 31, 2021, we accrued $65,000 in license fees as we have submitted our IND application on June 30, 2021. We also accrued $190,000 in license fees as a result of our first dosage of patients for the Phase I relative bioavailability study for AL001 for dementia related to Alzheimer’s. Stock Compensation Expense During the six months ended October 31, 2021 and 2020, we incurred $253,000 and $44,000, 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 Common Stock from authorized shares instead of settling such obligations with cash payments. Other Expense, net Interest Expense Interest expense was $30,000 for the six months ended October 31, 2021, primarily related to the convertible promissory note issued in February 2021 including non-cash interest expense of $10,000 recorded from the amortization of debt discount. 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 October 31, 2021, we had cash of $13.6 million and an accumulated deficit of $22.8 million. We have incurred recurring losses and reported losses for the three and six months ended October 31, 2021 totaling $3.6 million and $5.9 million, respectively. In the past, we have financed our operations principally through issuances of promissory notes and equity securities. In March of 2021, we entered into a securities purchase agreement with DPL, pursuant to which we agreed to sell an aggregate of 6,666,667 shares of 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 prior advances and the surrender for cancellation of the $50,000 convertible promissory note, previously issued to Ault Global, for an aggregate of 2,666,667 shares of Common Stock. Under the terms of the securities purchase agreement, DPL (i) purchased, in July 2021, an additional 1,333,333 shares of Common Stock upon FDA approval of our IND for our Phase Ia clinical trials for AL001 for a purchase price of $2 million, and (ii) will purchase 2,666,667 shares of Common Stock once we have completed these Phase Ia clinical trials for AL001 for a purchase price of $4 million. We further agreed to issue DPL warrants to purchase a number of shares of 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, we 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 Quarterly Report. On June 17, 2021 we announced the closing of our IPO of 2,875,000 shares of Common Stock at a price to the public of $5.00 per share. The proceeds from the offering to us, net of underwriting discounts and estimated offering expenses, were approximately $12.9 million. Our Common Stock is listed on The Nasdaq Capital Market under the ticker symbol “ALZN”. We contracted Altasciences to conduct a six-month Phase I relative bioavailability study for AL001 for dementia related to Alzheimer’s that started on September 10, 2021. The Phase I first-in-human study is for the purpose of determining potential clinically safe and appropriate dosing for AL001 in future studies. AL001 is a lithium-delivering ionic cocrystal under development as an oral treatment for patients with dementia related to mild, moderate and severe cognitive impairment associated with Alzheimer’s. We expect to continue to incur losses for the foreseeable future and need 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 October 31, 2021, are sufficient to meet our anticipated cash requirements during the twelve-month period subsequent to the issuance of the financial statements included in this Quarterly Report. 29 Cash Flows The following table summarizes our cash flows for the six months ended October 31, 2021: For the Six Months Ended October 31, 2021 2020 Net cash provided by (used in): Operating activities $ (3,268,834 ) $ (648,023 ) Investing activities - 100,915 Financing activities 14,912,256 462,683 Net increase (decrease) in cash and cash equivalents $ 11,643,422 $ (84,425 ) Operating Activities During the six months ended October 31, 2021, net cash used in operating activities was $3.3 million. This consisted primarily of a net loss of $5.9 million, partially offset by non-cash charges of $2.0 million and an increase in our net operating assets and liabilities of $601,000. The non-cash charges primarily consisted of stock-based compensation expense. The increase in our net operating assets and liabilities were due to an increase in accounts payable and accrued expenses and a decrease in prepaid expenses and other current assets. During the six months ended October 31, 2020, net cash used in operating activities was $648,000. This consisted primarily of a net loss of $2.7 million, partially offset by non-cash charges of $1.2 million and an increase in our net operating assets and liabilities of $812,000. The non-cash charges primarily consisted of stock-based compensation expense. The increase in our net operating assets and liabilities were due to an increase in accounts payable and accrued expenses and an increase in prepaid expenses and other current assets. Investing Activities There were no investing activities for the six months ended October 31, 2021. During the six months ended October 31, 2020, net cash provided by investing activities was $101,000. This consisted of proceeds from repayment of notes receivable from a related party, Avalanche International Corp. Financing Activities During the six months ended October 31, 2021, net cash provided by financing activities was $14.9 million. This consisted primarily of proceeds from our initial public offering of $12.9 million, net of costs. On July 28, 2021, we received from the FDA a “Study May Proceed” letter for a Phase Ia study under our IND application for AL001. Based on the achievement of this milestone, we sold an additional 1,333,333 shares of Common Stock to DPL for $2 million, or $1.50 per share, and issued to DPL warrants to acquire 666,667 shares of our Common Stock with an exercise price of $3.00 per share. During the six months ended October 31, 2020, net cash provided by financing activities was $463,000. This consisted primarily of proceeds from our convertible note payable and convertible note payable-related party. 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 Quarterly 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. 30 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 maintain pre-COVID-19 levels. Although we currently expect normal operations for the balance of the fiscal year, recent events, such as the identification of the Omnicron variant and the various responses that federal, state and local governments have taken as a result, may have an adverse impact on our operations that is not currently anticipated. 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.(“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 are required to pay milestone payments on the due dates to Licensor for the license of the technology, as follows: Original AL001 License: Payment Due Date Event $ 65,000 6 months from the June 30, 2021 IND filing date IND application filing $ 190,000 12 months from the June 30, 2021 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 12 months from completion of the first Phase II 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 AL002 License: Payment Due Date Event $ 50,000 Upon IND application filing 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 If we fail to meet a milestone by its specified date, 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 “AL001 license agreements” with 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. Additionally, we are required to pay milestone payments on the due dates to the licensor for the license of the technology, as follows: 31 Additional AL001 Licenses: Payment Due Date Event $ 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 8 years from the effective date of the agreement 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 the Notes to Unaudited Condensed Financial Statements under the heading “Recent Accounting Standards.” 32 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Because we are a smaller reporting company, this section is not applicable.