What changed in this filing

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Item 1. Financial Statements

2022-03-15 compared with 2021-12-13 · 336 added, 360 removed, 515 unchanged (57% of the section changed)

2 unchanged sentences

Condensed Balance Sheets

October 31, 2021

January 31, 2022

April 30, 2021

14 unchanged sentences

1,360,000 shares designated;

nil and 750,000 shares issued and outstanding as

of October 31, 2021 and April 30, 2021, respectively

nil and 750,000 shares issued and outstanding

as of January 31, 2022 and April 30, 2021, respectively

Common stock, $ 0.0001 par value:

300,000,000 shares authorized;

and 67,429,525 shares issued and outstanding as of October 31, 2021 and

April 30, 2021, respectively

90,102,623 and

shares issued and outstanding as of January 31, 2022 and April 30, 2021

Additional paid-in capital

11 unchanged sentences

Condensed Statements of Operations

For the Three Months Ended October 31,

For the Six Months Ended October 31,

For the Three Months Ended

For the Nine Months Ended

OPERATING EXPENSES

7 unchanged sentences

( 3,731,912 )

OTHER EXPENSE, NET

OTHER INCOME (EXPENSE), NET

Interest expense

1 unchanged sentence

Interest income - related party

Total other expense, net

Gain on extinguishment of debt

Total other income (expense), net

$ ( 2,572,865 )

9 unchanged sentences

Condensed Statements of Stockholders’

Equity (Deficit)

For the Three Months Ended October 31, 2021

A Convertible

Receivable for

BALANCES, July 31, 2021

For the Three Months Ended January 31, 2022

Series A Convertible

Note Receivable for

Preferred Stock

Common Stock -

Related Party

BALANCES, October 31, 2021

$ ( 14,883,295 )

$ ( 22,752,233 )

Issuance of common

restricted stock awards

Stock-based compensation

Stock-based compensation to

employees and consultants

Proceeds from

Proceeds from stock option exercise

Issuance of shares of common stock

for conversion of note

( 2,572,865 )

October 31, 2021

BALANCES, January 31, 2022

$ ( 14,883,295 )

5 unchanged sentences

Equity (Deficit)

For the Three Months Ended October 31, 2020

A Convertible

Receivable for

BALANCES, July 31, 2020

For the Three Months Ended January 31, 2021

Series A Convertible

Note Receivable for

Preferred Stock

Common Stock -

Related Party

BALANCES, October 31, 2020

$ ( 14,883,295 )

$ ( 14,456,719 )

Stock-based compensation

$ ( 666,768 )

Stock-based compensation to

employees and consultants

Proceeds from

note receivable –

related party for common stock

Fair value of

warrants issued in

connection with convertible notes

Fair value of

warrants issued in

connection with convertible notes

-related party

( 1,118,884 )

BALANCES, October 31, 2020

BALANCES, January 31, 2021

$ ( 14,883,295 )

5 unchanged sentences

Condensed Statements of Stockholders’

Equity (Deficit)

For the Six Months Ended October 31, 2021

A Convertible

Receivable for

For the Nine Months Ended January 31, 2022

Series A Convertible

Note Receivable for

Preferred Stock

Common Stock -

Related Party

BALANCES, April 30, 2021

1 unchanged sentence

$ ( 16,832,437 )

Issuance of common

for restricted stock awards

Stock-based compensation

Issuance of common stock for

restricted stock awards

Stock-based compensation to

employees and consultants

Proceeds from

sale of common

stocks & warrants-related

Proceeds from

initial public

offering, net of underwriters’

discounts and commissions and

issuance costs of $ 1.5

Conversion of

convertible preferred stock

Proceeds from sale of common stock

and warrants-related party, net

Proceeds from stock option exercise

Proceeds from initial public offering,

net of underwriters' discounts and

commissions and issuance costs of

$ 1.5 million

Issuance of shares of common stock

for conversion of note

Conversion of Series A convertible

( 8,492,661 )

October 31, 2021

BALANCES, January 31, 2022

$ ( 14,883,295 )

5 unchanged sentences

Equity (Deficit)

For the Six Months Ended October 31, 2020

A Convertible

Receivable for

April 30, 2020

For the Nine Months Ended January 31, 2021

Series A Convertible

Note Receivable for

Preferred Stock

Common Stock -

Related Party

BALANCES, April 30, 2020

$ ( 14,983,200 )

$ ( 11,785,869 )

compensation to

Stock-based compensation to

employees and consultants

Proceeds from

note receivable –

Proceeds from note receivable –

related party for common stock

Fair value of

warrants issued in

Fair value of warrants issued in

connection with convertible notes

Fair value of

warrants issued in

Fair value of warrants issued in

connection with convertible notes-

2 unchanged sentences

( 3,789,734 )

October 31, 2020

BALANCES, January 31, 2021

$ ( 14,883,295 )

5 unchanged sentences

Condensed Statements of Cash Flows

For the Six Months Ended October 31,

For the Nine Months Ended January 31,

Cash flows from operating activities:

4 unchanged sentences

Interest expense - debt discount, related party

Gain on extinguishment of debt

Stock-based compensation to employees and consultants

4 unchanged sentences

( 5,051,637 )

( 1,454,154 )

Cash flows from investing activities:

5 unchanged sentences

Advances from related party payable

Proceeds from short-term advances, related party

Proceeds from note payable

2 unchanged sentences

Proceeds from convertible note payable, related party

from initial public offering, net of underwriters' discounts

Proceeds from initial public offering, net of underwriters' discounts

and commissions and issuance costs

9 unchanged sentences

Fair value of warrants issued in connection with convertible notes payable

Issuance of common stock on conversion of note

The accompanying notes are an integral part of

4 unchanged sentences

Alzamend Neuro, Inc.

(the “Company” or “Alzamend”), is an early clinical-stage biopharmaceutical company focused on developing

novel products for the treatment of neurodegenerative diseases and psychiatric disorders.

Company’s primary focus is Alzheimer’s disease (“Alzheimer’s”).

With two current and future product

candidates, Alzamend aims to bring treatments and/or potential cures to market as quickly as possible.

The Company’s current

pipeline consists of two novel therapeutic drug candidates (collectively, the “Technology”):

(i) a patented ionic

cocrystal technology delivering a therapeutic combination of lithium, proline and salicylate, known as AL001 or LiProSal, through

two royalty-bearing exclusive worldwide licenses from the University of South Florida Research Foundation, Inc.

(the “Licensor”), and

(ii) 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, known as AL002 or CA022W, through a royalty-bearing exclusive

worldwide license with Licensor .

“Company” or “Alzamend”), is an early clinical-stage biopharmaceutical company focused on developing novel products

for the treatment of neurodegenerative diseases and psychiatric disorders.

The Company’s primary focus is Alzheimer’s disease

(“Alzheimer’s”).

With two current and future product candidates, Alzamend aims to bring treatments and/or potential

cures to market as quickly as possible.

The Company’s current pipeline consists of two novel therapeutic drug candidates (collectively,

the “Technology”):

(i) a patented ionic cocrystal technology delivering a therapeutic combination of lithium, proline and

salicylate, known as AL001 or LiProSal, through two royalty-bearing exclusive worldwide licenses from the University of South Florida

Research Foundation, Inc.

(the “Licensor”), and (ii) 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, known as

AL002 or CA022W, through a royalty-bearing exclusive worldwide license with Licensor .

The Company is devoting substantially

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effective by the Securities and Exchange Commission (“SEC”).

On June 15, 2021, the Company issued and sold 2,875,000

shares of Common Stock in the IPO at a public offering price of $ 5.00

per share, resulting in net proceeds of $12.9 million

after deducting underwriting discounts and commissions and offering expenses paid by the Company.

Digital Power Lending, LLC (“DPL”),

a California limited liability company and a related party, purchased 2,000,000

of the Company’s IPO shares on June 15, 2021.

The Company’s Common Stock is listed on The Nasdaq Capital Market under

the ticker symbol “ALZN”.

On June 15, 2021, the Company issued and sold 2,875,000 shares

of Common Stock in the IPO at a public offering price of $ 5.00 per share, resulting in net proceeds of $12.9 million after deducting

underwriting discounts and commissions and offering expenses of $1.5 million paid by the Company.

Digital Power Lending, LLC (“DPL”), a California

limited liability company and a related party, purchased 2,000,000 of the Company’s IPO shares on June 15, 2021.

The Company’s

Common Stock is listed on The Nasdaq Capital Market under the ticker symbol “ALZN”.

In connection with the closing

2 unchanged sentences

LIQUIDITY AND GOING CONCERN

The accompanying financial

statements have been prepared on the basis that the Company will continue as a going concern.

As of October 31, 2021, the Company had

cash of $ 13.6 million and an accumulated deficit of $22.8 million.

The Company incurred losses for the three and six months ended October

31, 2021 totaling $ 3.6 million and $ 5.9 million , respectively.

Historically, the Company has financed its operations principally through

issuances of promissory notes and equity securities.

The accompanying financial statements have

been prepared on the basis that the Company will continue as a going concern.

As of January 31, 2022, the Company had cash of $ 11.8 million

and an accumulated deficit of $25.3 million.

The Company incurred losses for the three and nine months ended January 31, 2022 totaling

$ 2.6 million and $ 8.5 million , respectively.

The Company expects

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However, based on the Company’s current business plan,

management believes that the Company’s cash and cash equivalents at October 31, 2021, are sufficient to meet the Company’s

management believes that the Company’s cash and cash equivalents at January 31, 2022, are sufficient to meet the Company’s

anticipated cash requirements during the twelve-month period subsequent to the issuance of the financial statements included in this Quarterly

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Certain notes to the financial statements that would substantially duplicate

the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Company’s Report

the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Company’s Annual Report

on Form 10-K have been omitted.

2 unchanged sentences

Accounting Estimates

The preparation of financial

statements, in conformity with U.S.

GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets

and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of

expenses during the reporting period.

The Company’s critical accounting policies that involve significant judgment and estimates

include share-based compensation, warrant valuation, and valuation of deferred income taxes.

The preparation of financial statements,

in conformity with U.S.

GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during

the reporting period.

The Company’s critical accounting policies that involve significant judgment and estimates include stock-based

compensation, warrant valuation, and valuation of deferred income taxes.

Actual results could differ from those estimates

2 unchanged sentences

highly liquid investments with a remaining maturity of three months or less when purchased to be cash equivalents.

As of October 31, 2021

As of January 31, 2022

and April 30, 2021, the Company had no cash equivalents.

Fair Value of Financial

The Company’s financial

instruments are accounts payable, related party payable and convertible notes.

The recorded values of accounts payable approximate their

fair values based on their short-term nature.

The recorded values of related party payable and convertible notes party are recorded at

their carrying value, net of any unamortized debt discount, which approximates their fair value based on their short-term nature and as

interest rates approximate market rates.

Financial Accounting Standards

19 unchanged sentences

The fair values of warrants

are determined using the Black-Scholes valuation model, a “Level 3” fair value measurement, based on the estimated fair value

of Common Stock, volatility based on the historical volatility data of similar companies, considering the industry, products and market

capitalization of such other entities, the expected life based on the remaining contractual term of the conversion option and warrants

and the risk free interest rate based on the implied yield available on U.S.

Treasury Securities with a maturity equivalent to the warrants’

contractual life.

issued in connection with equity or debt issuance are determined using the Black-Scholes valuation model, a “Level 3” fair

value measurement, based on the estimated fair value of the underlying Common Stock, volatility based on the historical volatility data

of similar companies, considering the industry, products and market capitalization of such other entities, the expected life based on

the remaining contractual term of the conversion option and warrants and the risk free interest rate based on the implied yield available

Treasury Securities with a maturity equivalent to the warrants’ contractual life.

Research and Development

2 unchanged sentences

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 the Company.

The Company has 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

to clinical research organizations that conduct certain research and development activities on behalf of the Company.

The Company has acquired and may continue

to acquire the rights to develop and commercialize new product candidates from third parties.

The upfront payments to acquire licenses,

products 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.

5 unchanged sentences

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

evaluates when the achievement of any such performance-based milestone is probable based on the satisfaction of the performance

conditions as of the reporting date.

17 unchanged sentences

debt is issued with equity-classified warrants, the proceeds from the issuance of convertible debt are allocated to the warrants and convertible

debt based on their relative estimated fair value.

The fair value of equity warrants is recorded as a discount to the convertible debt

debt based on their relative estimated fair values.

The allocated fair value of equity warrants is recorded as a discount to the convertible debt

with a corresponding increase to additional paid-in capital.

4 unchanged sentences

Beneficial Conversion Feature.

the amount allocated to the convertible debt results in an effective per share conversion price less than the fair value of the Common

Stock on the commitment date, the intrinsic value of this beneficial conversion feature is recorded as a discount to the convertible debt

with a corresponding increase to additional paid-in capital.

The beneficial conversion feature discount is equal to the difference between

the effective conversion price and the fair value of the Common Stock at the commitment date, unless limited by the remaining proceeds

allocated to the debt.

At issuance, the effective conversion price of the Company’s convertible notes payable were not deemed to

be below the estimated fair value of the Common Stock, and, as a result, no beneficial conversion feature was recorded.

The Company accounts for debt

as liabilities measured at amortized cost and amortizes the resulting debt discount to interest expense using the effective interest method

over the expected term of the convertible notes pursuant to ASC 835, Interest .

the amount allocated to the convertible debt results in an effective per share conversion price less than the fair value of the underlying

Common Stock on the commitment date, the intrinsic value of this beneficial conversion feature is recorded as a discount to the convertible

debt with a corresponding increase to additional paid-in capital.

The beneficial conversion feature discount is equal to the difference

between the effective conversion price and the fair value of the underlying Common Stock at the commitment date, unless limited by the

remaining proceeds allocated to the debt.

Loss per Common Share

16 unchanged sentences

been excluded from the computation of loss per common share :

For the Six Months Ended October 31,

Series A preferred shares

For the Nine Months Ended January 31,

Series A convertible preferred stock

Stock options (1)

1 unchanged sentence

(1) The Company has excluded 4,500,000 stock options, with an exercise price of $0.0004, from

its anti-dilutive securities as these shares have been included in the determination of basic loss per share as they represent shares

its anti-dilutive securities as these shares have been included in our determination of basic loss per share as they represent shares

issuable for little or no cash consideration upon the satisfaction of certain conditions pursuant to ASC 260-10-45-14.

Recent Accounting

Recent Accounting Standards

From time to time, new accounting

44 unchanged sentences

NOTE RECEIVABLE FOR COMMON STOCK, RELATED PARTY

On April 30, 2019, the Company

and Ault Life Sciences Fund, LLC (“ALSF”) entered into a securities purchase agreement for the purchase of 10,000,000 shares

of the Company’s Common Stock for a total purchase price of $ 15,000,000 , or $1.50 per share with 5,000,000 warrants with a 5 -year

life and an exercise price of $ 3.00 per share and vesting upon issuance.

The total purchase price of $15,000,000 was in the form of a

non-interest bearing note receivable with a 12-month term from ALSF, a related party.

In November 2019, the term of the note receivable

was extended to December 31, 2021, and in May 2021, the term of the note receivable was extended to December 31, 2023.

The note is secured

by a pledge of the purchased shares.

On April 30, 2019, the

Company and Ault Life Sciences Fund, LLC (“ALSF”) entered into a Securities Purchase Agreement (“SPA”) for

the purchase of 10,000,000

shares of the Company’s Common Stock for a total purchase price of $ 15,000,000 ,

or $1.50 per share with 5,000,000

warrants with a 5 -year

life and an exercise price of $ 3.00

per share and vesting upon issuance.

The total purchase price of $15,000,000 was in the form of a non-interest bearing note

receivable with a 12-month term from ALSF, a related party.

In November 2019, the term of the note receivable was extended to

December 31, 2021, and in May 2021, the term of the note receivable was extended to December 31, 2023.

The note is secured by a

pledge of the purchased shares.

As the note receivable from ALSF is related to the issuance of Common Stock, it is recorded as an

offset to additional paid-in capital.

At October 31, 2021 and April 30, 2021, the outstanding balance of the note receivable was $ 14,883,295 .

At January 31, 2022 and April 30, 2021, the outstanding balance of the note receivable was

$ 14,883,295 .

PREPAID EXPENSES AND OTHER CURRENT ASSETS

1 unchanged sentence

current assets are as follows :

October 31, 2021

January 31, 2022

April 30, 2021

5 unchanged sentences

On June 14, 2021, the Company

purchased D&O insurance for 12 months in the amount of $ 855,000 .

Prepaid insurance at October 31, 2021 represents the unamortized

portion of annual premium paid for this policy of $ 584,000 .

At October 31, 2021, prepaid consulting fees of $ 327,000 consisted of payments

to Spartan Capital Securities, LLC (“Spartan Capital”).

purchased directors and officers insurance for 12 months at an annual premium amount of $ 855,000 .

Prepaid insurance at January 31, 2022 represents the unamortized portion of annual premium paid for this policy.

At January 31,

2022, prepaid consulting fees represented the balance of fees paid for consulting services to Spartan Capital Securities, LLC

(“Spartan Capital”) that are expected to be recognized over the remaining term of the agreement that runs through December 31, 2022.

STOCK-BASED COMPENSATION

3 unchanged sentences

The Plan provides for the issuance of a

maximum of 12,500,000 shares of Common Stock to be offered to the Company’s directors, officers, employees,

and consultants.

On March 1, 2019 the Company’s stockholders approved an additional 7,500,000 shares to be available for issuance

under the Plan.

Options granted under the Plan have an exercise price equal to or greater than the fair value of the underlying Common

Stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant.

The options expire between

five and 10 years from the date of grant.

Restricted stock awards granted under the Plan are subject to a vesting period determined at

maximum of 12,500,000 shares of Common Stock to be offered to the Company’s directors, officers, employees, and consultants.

March 1, 2019, the Company’s stockholders approved an additional 7,500,000 shares to be available for issuance under the Plan.

granted under the Plan have an exercise price equal to or greater than the fair value of the underlying Common Stock at the date of grant

and become exercisable based on a vesting schedule determined at the date of grant.

The options expire between five and 10 years from

the date of grant.

Restricted stock awards granted under the Plan are subject to a vesting period determined at the date of grant.

2021 Stock Incentive

6 unchanged sentences

Stock Subject to the 2021

The maximum number of shares of Common Stock that may be issued under the 2021 Plan is 10,000,000 shares,

which number will be increased to the extent that compensation granted under the 2021 Plan is forfeited, expires or is settled for cash

(except as otherwise provided in the 2021 Plan).

Substitute awards (awards made or shares issued by the Company in assumption of, or in

substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company that

the Company acquires or any subsidiary of the Company or with which the Company or any subsidiary combines) will not reduce the shares

authorized for grant under the 2021 Plan, nor will shares subject to a substitute award be added to the shares available for issuance

or transfer under the 2021 Plan.

The maximum number of shares of Common Stock that may be issued under the 2021 Plan is 10,000,000 shares, which number

will be increased to the extent that compensation granted under the 2021 Plan is forfeited, expires or is settled for cash (except as

otherwise provided in the 2021 Plan).

Substitute awards (awards made or shares issued by the Company in assumption of, or in substitution

or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company that the Company

acquires or any subsidiary of the Company or with which the Company or any subsidiary combines) will not reduce the shares authorized

for grant under the 2021 Plan, nor will shares subject to a substitute award be added to the shares available for issuance or transfer

under the 2021 Plan.

All options that the Company

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Stock-based compensation is a non-cash expense because the Company settles

these obligations by issuing shares of Common Stock from its authorized shares instead of settling such obligations

with cash payments.

A summary of stock option

activity for the six months ended October 31, 2021, is presented below:

these obligations by issuing shares of Common Stock from its authorized shares instead of settling such obligations with cash payments.

A summary of stock option activity for the

nine months ended January 31, 2022, is presented below:

Outstanding Options

6 unchanged sentences

Options cancelled/forfeited

Balance at October 31, 2021

Options vested and expected to vest at April 30, 2021

Options exercisable at April 30, 2021

Balance at January 31, 2022

Options vested and expected to vest at January 31, 2022

$ 1 0,529,200

Options exercisable at January 31, 2022

The aggregate intrinsic value

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Stock Options Granted to Employees and Consultants

The estimated fair value of

stock options granted to employees and consultants during the six months ended October 31, 2021 and 2020, were calculated using the Black-Scholes

option-pricing model using the following assumptions:

For the Six Months Ended October 31,

The estimated fair value of stock options

granted to employees and consultants during the nine months ended January 31, 2022 and 2021, were calculated using the Black-Scholes option-pricing

model using the following assumptions:

For the Nine Months Ended January 31,

Expected term (in years)

85.53 % - 87.10 %

Risk-free interest rate

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Expected Volatility:

Company uses an average historical stock price volatility of comparable public companies within the biotechnology and pharmaceutical industry

that were deemed to be representative of future stock price trends as the Company does not have trading history for its Common Stock.

uses an average historical stock price volatility of comparable public companies within the biotechnology and pharmaceutical industry

that were deemed to be representative of future stock price trends as the Company only has a limited trading history for its Common Stock.

The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own

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Therefore, the expected dividend yield was zero.

Stock-based compensation to

employees and consultants from stock option grants for the six months ended October 31, 2021 and 2020 were $ 2,020,000 and $ 1,160,000 ,

respectively.

Stock-based compensation to employees and

consultants from stock option grants for the nine months ended January 31, 2022 and 2021 were $ 3.2 million and $ 1.7 million , respectively.

Performance Contingent

1 unchanged sentence

In November 2018, the Board

granted 2,000,000 performance-contingent options under the Plan to the Chief Executive Officer.

granted 2,000,000 performance-based options under the Plan to the Chief Executive Officer.

These options have an exercise price of

$ 1.00 per share.

These options have two

separate performance triggers for vesting based upon the therapies achieving certain Food and Drug Administration

(“FDA”) approval milestones within a specified timeframe.

By definition, the performance condition in these options can

only be achieved after the performance condition of FDA approval has been achieved.

As such, the requisite service period is based

on the estimated period over which the market condition can be achieved.

When a performance goal is deemed to be probable of

achievement, time-based vesting and recognition of stock-based compensation expense commences.

In the event any of the milestones

are not achieved by the specified timelines, such vesting award will terminate and no longer be exercisable with respect to that

portion of the shares.

The maximum potential expense associated with the performance-contingent awards is $ 1.2

million of general and administrative expense if all of the performance conditions are achieved as stated in the option

Due to the significant risks and uncertainties associated with FDA approvals, as of October 31, 2021, the Company

believes that the achievement of the requisite performance conditions is not probable and, as a result, no compensation cost has

been recognized for these awards.

On November 26, 2019,

the Board granted 4,250,000

performance- and market-contingent awards to certain key employees and a director.

These grants were made outside of the Plan.

awards have an exercise price of $1.50 per share.

These awards have multiple separate market triggers for vesting based upon either

(i) the successful achievement of stepped target closing prices on a national securities exchange for 90 consecutive trading days

later than 180 days after the Company’s IPO for its Common Stock, or (ii) stepped target prices for a change in control

These options have two separate

performance triggers for vesting based upon the therapies achieving certain Food and Drug Administration (“FDA”) approval

milestones within a specified timeframe.

By definition, the performance condition in these options can only be achieved after the performance

condition of FDA approval has been achieved.

As such, the requisite service period is based on the estimated period over which the market

condition can be achieved.

When a performance goal is deemed to be probable of achievement, time-based vesting and recognition of stock-based

compensation expense commences.

In the event any of the milestones are not achieved by the specified timelines, such vesting award will

terminate and no longer be exercisable with respect to that portion of the shares.

The maximum potential expense associated with the performance-contingent

awards is $ 1.2 million of general and administrative expense if all of the performance conditions are achieved as stated in the option

Due to the significant risks and uncertainties associated with FDA approvals, as of January 31, 2022, the Company believes

that the achievement of the requisite performance conditions is not probable and, as a result, no compensation cost has been recognized

for these awards.

On November 26, 2019, the

Board granted 4,250,000 performance- and market-contingent awards to certain key employees and a director.

These grants were made outside

These awards have an exercise price of $1.50 per share.

These awards have multiple separate market triggers for vesting based

upon either (i) the successful achievement of stepped target closing prices on a national securities exchange for 90 consecutive trading

days later than 180 days after the Company’s IPO for its Common Stock, or (ii) stepped target prices for a change in control transaction.

The target prices range from $15 per share to $40 per share.

the event any of the stock price milestones are not achieved within three years, the unvested portion of the performance options

will be reduced by 25%.

Due to the significant risks and uncertainties associated with achieving the market-contingent awards, as of

October 31, 2021 , the Company believes that the achievement of the requisite performance conditions is not probable and, as a

result, no compensation cost has been recognized for these awards.

In the event any of the stock price milestones are not achieved within three

years, the unvested portion of the performance options will be reduced by 25%.

Due to the significant risks and uncertainties associated

with achieving the market-contingent awards, as of January 31, 2022, the Company believes that the achievement of the requisite performance

conditions is not probable and, as a result, no compensation cost has been recognized for these awards.

Performance Contingent

Stock Options Granted to TAMM Net

On March 23, 2021, the

Company issued performance-based stock options to the certain team members at TAMM Net, Inc.

to purchase an aggregate of 450,000

shares of Common Stock at a per share exercise price of $1.50 per share, of which 50% vest upon the completion of Phase I of

AL001 by March 31, 2022 and the remaining 50% vest upon completion of Phase I of AL002 by December 31, 2022.

As of October 31, 2021, the

Company believes the performance goal of completing Phase I of AL001 will be achieved on or before March 31, 2022.

The Company is recognizing

stock compensation related to the completion of Phase I of AL001 by March 31, 2022 over the implied service period expected to complete

this milestone.

Due to the significant risks and uncertainties associated with achieving the completion of Phase I for AL002, as of October

31, 2021, the Company believes that the achievement of the requisite performance conditions is not probable and, as a result, no compensation

cost has been recognized for these awards related to AL002.

Stock Options Granted to Consultants - TAMM Net

On March 23, 2021, the Company

issued performance-based stock options to the certain team members at TAMM Net, Inc.

to purchase an aggregate of 450,000 shares of Common

Stock at a per share exercise price of $1.50 per share, of which 50% vest upon the completion of Phase I clinical trial for AL001 by March 31, 2022 and

the remaining 50% vest upon completion of Phase I clinical trial for AL002 by December 31, 2022.

The Company retained TAMM Net, Inc., a consulting firm based in Georgia for project management experienced with

good manufacturing practices to lead, develop and manage the Company’s preclinical and clinical efforts, extending from the current

status of each product candidate through the exit or commercialization of the technologies that the Company has licensed.

As of January 31, 2022, the

Company believes the performance goal of completing Phase I clinical trial of AL001 will be achieved.

The Company is recognizing stock

compensation related to the completion of Phase I clinical trial of AL001 by March 31, 2022 over the implied service period expected to

complete this milestone.

Due to the significant risks and uncertainties associated with achieving the completion of Phase I for AL002,

as of January 31, 2022, the Company believes that the achievement of the requisite performance conditions is not probable and, as a result,

no compensation cost has been recognized for these awards related to AL002.

Performance Contingent

Stock Options Granted to Consultants

Stock Options Granted to Consultants -Other Consultants

On October 14, 2021, the Company

issued performance-based stock options to two consultants to purchase an aggregate of 200,000 shares of Common Stock

with an exercise price of $2.42 per share, of which 50,000 vest upon completion of each of the Phase II clinical trials of AL001 for a

Bipolar indication, AL001 for a PTSD indication, AL001 for a depression indication and AL002 for an Alzheimer’s indication.

As of October 31, 2021, the

issued performance-based stock options to two consultants to purchase an aggregate of 200,000 shares of Common Stock with an exercise

price of $2.42 per share, of which 50,000 vest upon completion of each of the Phase II clinical trials of AL001 for a Bipolar indication,

AL001 for a PTSD indication, AL001 for a depression indication and AL002 for an Alzheimer’s indication.

As of January 31, 2022, the

Company believes that the achievement of the requisite performance conditions is not probable and, as a result, no compensation cost has

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Stock-Based Compensation

The Company’s results

of operations include expenses relating to stock-based compensation for three and six months ended October 31, 2021 and 2020, was comprised

For the Three Months Ended October 31,

For the Six Months Ended October 31,

Company’s results of operations include expenses relating to stock-based compensation for the three and nine months ended

January 31, 2022 and 2021, was comprised as follows:

For the Three Months Ended

For the Nine Months Ended

Research and development

General and administrative

As of October 31, 2021, total

As of January 31, 2022, total

unamortized stock-based compensation expense related to unvested employee and non-employee awards that are expected to vest was $ 5.2 million.

The weighted-average period over which such stock-based compensation expense will be recognized is approximately 1.9 years.

During the six months ended

October 31, 2021, the Company issued warrants to purchase an aggregate of 727,917 shares of Common Stock at exercise prices ranging from

During the nine months ended

January 31, 2022, the Company issued warrants to purchase an aggregate of 727,917 shares of Common Stock at exercise prices ranging from

$ 3.00 to $ 6.25 per share.

On June 17 2021, the Company issued a warrant to purchase an aggregate of 61,250

shares of Common Stock at an exercise price equal to $ 6.25

per share of Common Stock in connection with the IPO.

Based on the terms of the Company’s warrant agreement, the Company

accounted for the warrant as an equity instrument as the warrant is indexed to the Common Stock, require settlement in shares and

would be classified as equity under ASC 815.

On July 28, 2021 the Company received from the U.S.

Food and Drug Administration a

“Study May Proceed” letter for a Phase Ia study under the Company’s Investigational New Drug application for

Based on the achievement of this milestone, the Company 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 Common Stock with an exercise price of $ 3.00

per share (see Note 8).

Based on the terms of the Company’s warrant agreement, the Company accounted for the warrant as an

equity instrument as the warrant is indexed to the Common Stock, require settlement in shares and would be classified as equity

under ASC 815.

On June 17 2021, the Company issued a warrant to purchase an aggregate of 61,250 shares of Common Stock at an exercise price equal to $ 6.25 per share of Common Stock in connection with the IPO.

Based on the terms of the Company’s warrant agreement, the Company accounted for the warrant as an equity instrument as the warrant is indexed to the Common Stock, requires settlement in shares and would be classified as equity under ASC 815.

(ii) On July 28, 2021, the Company received from the U.S.

Food and Drug Administration a “Study May Proceed”

letter for a Phase I study under the Company’s Investigational New Drug application for AL001.

Based on the achievement of this

milestone, the Company 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 Common Stock with an exercise price of $ 3.00 per share (see Note 8).

Based on the terms of the Company’s

warrant agreement, the Company accounted for the warrant as an equity instrument as the warrant is indexed to the Common Stock, requires

settlement in shares and would be classified as equity under ASC 815.

The following table summarizes

information about Common Stock warrants outstanding at October 31, 2021:

information about Common Stock warrants outstanding at January 31, 2022:

$ 1.00 - $ 6.25

The estimated fair value of warrants granted during

the six months ended October 31, 2021 and 2020, were calculated using the Black-Scholes option-pricing model using the following assumptions:

For the Six Months Ended October 31,

the nine months ended January 31, 2022 and 2021, were calculated using the Black-Scholes option-pricing model using the following assumptions:

For the Nine Months Ended January 31,

Expected term (in years)

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Company uses an average historical stock price volatility of comparable public companies within the biotechnology and pharmaceutical industry

that were deemed to be representative of future stock price trends as the Company does not have trading history for its Common Stock.

that were deemed to be representative of future stock price trends as the Company only has a limited trading history for its Common Stock.

The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own

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OTHER RELATED PARTY TRANSACTIONS

In March 2021, the

Company entered into a securities purchase agreement with DPL pursuant to which the Company 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 a $50,000 convertible promissory

note held by Ault Global Holdings, Inc (“Ault Global“), for an aggregate of 2,666,667 shares of Common Stock.

terms of the securities purchase agreement, DPL (i) purchased an additional 1,333,333 shares of Common Stock upon approval of the

IND for Phase Ia clinical trials for AL001 for a purchase price of $2 million, and (ii) will purchase 2,666,667 shares of Common Stock upon the completion of these Phase Ia clinical trials for AL001 for a purchase price of $4

Company further agreed to issue to 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, the Company agreed that

for a period of 18 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 October 31, 2021 .

In May 2021, the Board

Ault, the Company’s current Founder and Chairman Emeritus, agreed to certain arrangements with regard to

Board composition and other matters.

Contemporaneously with the

effectiveness of the IPO, and in consideration for (i) the conversion of 750,000 shares of the Company’s Series A Preferred

Shares beneficially owned by Mr.

In March 2021, the Company entered into

the SPA with DPL pursuant to which the Company 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 a $50,000 convertible promissory note held by BitNile Holdings,

Inc (“BitNile“), for an aggregate of 2,666,667 shares of Common Stock.

Under the terms of the securities purchase agreement,

DPL (i) purchased an additional 1,333,333 shares of Common Stock upon approval of the IND for Phase I clinical trials for AL001 for a

purchase price of $2 million, and (ii) will purchase 2,666,667 shares of Common Stock upon the completion of the Phase I clinical trials

for AL001 for a purchase price of $4 million .

The Company further agreed to issue to 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, the Company agreed that for a period of 18 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 January 31, 2022 .

In May 2021, the Board and Mr.

Ault, the Company’s Founder and Chairman Emeritus, agreed to certain arrangements with regard to Board composition and other matters.

Contemporaneously with the effectiveness of the IPO, and in consideration for (i) the conversion of 750,000 shares of the Company’s

Series A Preferred Shares beneficially owned by Mr.

Ault through Ault Life Sciences, Inc.

into 15,000,000 shares of Common Stock, (ii) the extension of

the maturity date of the note in the original principal amount of $15,000,000 issued to the Company by Ault Life Sciences Fund, LLC,

an entity controlled by Mr.

into 15,000,000 shares of Common Stock, (ii)

the extension of the maturity date of the note in the original principal amount of $15,000,000 issued to the Company by Ault Life Sciences

Fund, LLC, an entity controlled by Mr.

Ault, to December 31, 2023, and (iii) the resignation by Mr.

Ault as a director and executive officer of

the Company , the Board agreed that William B.

Horne will become Chairman of the Board and remain in that position for so long

Ault as a director and executive officer

of the Company , the Board agreed that William B.

Horne will become Chairman of the Board and remain in that position for so long as Mr.

Ault beneficially owns no less than 5 % of the outstanding shares of Common Stock (for which Mr.

Horne will be paid $ 50,000 per year), and Henry Nisser will remain a member of the Company’s Board for so long as Mr.

Ault beneficially owns no less than

of the outstanding shares of Common Stock (for which Mr.

Horne will be paid $ 50,000

per year for his services), and Henry Nisser will remain a member of the Company’s Board for so long as Mr.

Ault beneficially

owns no less than 5% of the outstanding shares of Common Stock (for no additional remuneration).

5% of the outstanding shares of Common Stock (for no additional remuneration).

Additionally, Mr.

Ault will hold

the position of Founder and Chairman Emeritus and, as such, have the right to nominate an observer to the Board for a period of five

years after the closing date of the IPO.

Following the closing of the IPO, the Company entered into a five-year consulting agreement

Ault under which he will provide strategic advisory and consulting services to the Company in consideration for annual fees

of $ 50,000 .

Ault will hold the position of Founder

and Chairman Emeritus and, as such, have the right to nominate an observer to the Board for a period of five years after the closing date

Following the closing of the IPO, the Company entered into a five-year consulting agreement with Mr.

Ault under which he will

provide strategic advisory and consulting services to the Company in consideration for annual fees of $ 50,000 .

COMMITMENTS AND CONTINGENCIES

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In addition to royalty payments

on net sales of products developed from the licensed technology, the Company is required to pay milestone payments on the due dates to

the licensor for the license of the technology, as follows:

of 4 % on net sales of products developed from the licensed technology, the Company is required to pay milestone payments on the due dates

to the licensor for the license of the technology, as follows:

Original AL001 License:

6 months from the June 30, 2021 IND filing date

Paid in November 2021

IND application filing

12 months from the June 30, 2021 IND filing date

Paid in November 2021

Upon first dosing of patient in a clinical trial

23 unchanged sentences

remains the owner of any equity securities of the 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 Licensor and the University of South Florida.

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, the Company is required to pay milestone payments on the due

dates to Licensor for the license of the technology, as follows:

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 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, the Company is required to pay milestone payments on the due dates to Licensor for the license

of the technology, as follows:

Additional AL001 Licenses:

9 unchanged sentences

First commercial sale

In February 2021, the Company

entered into a securities purchase agreement with an institutional investor to sell a convertible promissory note in the aggregate principal

amount of $ 348,000 for a purchase price of $ 335,000 .

The purchase price of the February 2021 convertible promissory note satisfies the

principal and accrued interest of the August 2020 and December 2020 convertible promissory notes with the same institutional investor.

Since the terms of the February 2021 convertible promissory note were not substantially different from the August 2020 and December 2020

convertible promissory notes, no gain or loss was recognized as a result of this debt issuance.

The convertible promissory note bears

interest at 10 % per annum, which principal and all accrued and unpaid interest are due on December 31, 2021.

The principal and interest

earned on the convertible promissory note may be converted into shares of Common Stock at $ 1.50 per share.

CONVERTIBLE NOTES

In February 2021, the

Company entered into the SPA with an institutional investor to sell a convertible promissory note in the

aggregate principal amount of $ 348,000

for a purchase price of $ 335,000 .

The purchase price of the February 2021 convertible promissory note satisfies the principal and accrued interest of the August 2020

and December 2020 convertible promissory notes with the same institutional investor.

Since the terms of the February 2021

convertible promissory note were not substantially different from the August 2020 and December 2020 convertible promissory notes, no

gain or loss was recognized as a result of this debt issuance.

The convertible promissory note bears interest at 10 %

per annum, which principal and all accrued and unpaid interest were due on December 31, 2021.

At January 31, 2022, the

principal and interest earned on the convertible promissory note have been converted into shares of Common Stock at $ 1.50

per share, for a total of 252,265 shares.

The fair value of equity warrants

9 unchanged sentences

and original issue discount of $ 46,000 .

As of October 31, 2021, the convertible promissory note is presented net of unamortized debt discount

TRANSACTION S

As of January 31, 2022, the debt discount has been fully amortized.

EQUITY TRANSACTIONS

Company is authorized to issue 10,000,000 shares of Preferred Stock $ 0.0001 par value.

6 unchanged sentences

Series A Preferred Shares

In connection with the closing

of the IPO, all of the outstanding Series A Preferred Shares were converted into 15,000,000 shares of Common Stock.

As of October 31,

2021, there were no Series A Preferred Shares and no other shares of Preferred Stock issued or outstanding.

In connection with the closing of the IPO,

all of the outstanding Series A Preferred Shares were converted into 15,000,000 shares of Common Stock.

As of January 31, 2022, there

were no Series A Preferred Shares or other shares of Preferred Stock issued or outstanding.

On April 30, 2019, the Company

11 unchanged sentences

The note is secured by a pledge of the purchased shares.

In March 2021, the

Company entered into a securities purchase agreement with DPL pursuant to which the Company 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 a $ 50,000

convertible promissory note held by Ault Global, for an aggregate of 2,666,667

shares of Common Stock.

Under the terms of the securities purchase agreement, DPL

(i) purchased an additional 1,333,333 shares of Common Stock upon approval by the FDA of the Company’s IND for its Phase Ia

clinical trials for AL001 for a purchase price of $2 million, and (ii) will purchase 2,666,667 shares of Common

Stock upon the completion of these Phase Ia clinical trials for AL001 for a purchase price of $4 million.

The Company further agreed

to issue to 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 .

In March 2021, the Company entered into the SPA with DPL pursuant to which the Company 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 a $ 50,000 convertible promissory note held by BitNile, for an

aggregate of 2,666,667 shares of Common Stock.

Under the terms of the securities purchase agreement, DPL (i) purchased an additional 1,333,333

shares of Common Stock upon approval by the FDA of the Company’s IND for its Phase Ia clinical trials for AL001 for a purchase price

of $2 million, and (ii) will purchase 2,666,667 shares of Common Stock upon the completion of these Phase Ia clinical trials for AL001

for a purchase price of $4 million.

The Company further agreed to issue to 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, the Company agreed

3 unchanged sentences

SUBSEQUENT EVENTS

The Company has evaluated

subsequent events through the date the financial statements were issued.

The Company has determined that there are no such events that

warrant disclosure or recognition in the condensed consolidated financial statements presented herein

The Company has evaluated subsequent events

through the date the financial statements were issued.

The Company has determined that there are no such events that warrant disclosure

or recognition in the condensed financial statements presented herein.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements