What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-09-13 compared with 2022-03-15 · 270 added, 478 removed, 373 unchanged (67% of the section changed)

2 unchanged sentences

Condensed Balance Sheets

January 31, 2022

July 31, 2022

April 30, 2022

2 unchanged sentences

TOTAL CURRENT ASSETS

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

2 unchanged sentences

Related party payable

Convertible notes, net

TOTAL CURRENT LIABILITIES

TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

10,000,000 shares authorized;

Series A Convertible Preferred Stock, $ 0.0001 stated value per share,

1,360,000 shares designated;

nil and 750,000 shares issued and outstanding

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

Series A Convertible Preferred Stock, $ 0.0001 stated value per share, 1,360,000 shares designated;

nil issued and outstanding as of July 31, 2022 and April 30, 2022

Common stock, $ 0.0001 par value:

300,000,000 shares authorized;

90,102,623 and

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

shares issued and outstanding as of July 31, 2022 and April 30, 2022

Additional paid-in capital

11 unchanged sentences

Condensed Statements of Operations

For the Three Months Ended

For the Nine Months Ended

For the Three Months Ended July 31,

OPERATING EXPENSES

5 unchanged sentences

( 2,306,239 )

( 8,446,739 )

( 3,731,912 )

OTHER INCOME (EXPENSE), NET

OTHER EXPENSE, NET

Interest expense

Interest expense - related party

Interest income - related party

Gain on extinguishment of debt

Total other income (expense), net

$ ( 2,572,865 )

$ ( 1,118,884 )

Total other expense, net

$ ( 3,037,074 )

1 unchanged sentence

Basic and diluted net loss per common share

Basic and diluted weighted average common

shares outstanding

The accompanying notes are an integral part of

these unaudited condensed financial statements.

Alzamend Neuro, Inc.

Condensed Statements of Stockholders’

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 )

Stock-based compensation to

employees and consultants

Proceeds from stock option exercise

Issuance of shares of common stock

for conversion of note

( 2,572,865 )

BALANCES, January 31, 2022

$ ( 14,883,295 )

$ ( 25,325,098 )

The accompanying notes are an integral part of

these unaudited condensed financial statements.

Alzamend Neuro, Inc.

Condensed Statements of Stockholders’

Equity (Deficit)

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 )

$ ( 666,768 )

Stock-based compensation to

employees and consultants

( 1,118,884 )

BALANCES, January 31, 2021

$ ( 14,883,295 )

$ ( 15,575,603 )

$ ( 1,295,947 )

Basic and diluted weighted average common shares outstanding

The accompanying notes are an integral part of

2 unchanged sentences

Condensed Statements of Stockholders’

For the Nine Months Ended January 31, 2022

For the Three Months Ended July 31, 2022

Series A Convertible

Note Receivable for

Note Receivable

Preferred Stock

4 unchanged sentences

$ ( 29,194,495 )

Issuance of common stock for

restricted stock awards

Stock-based compensation to

employees and consultants

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

Stock-based compensation to employees and consultants

( 3,037,074 )

BALANCES, January 31, 2022

BALANCES, July 31, 2022

$ ( 14,883,295 )

4 unchanged sentences

Condensed Statements of Stockholders’

Equity (Deficit)

For the Nine Months Ended January 31, 2021

For the Three Months Ended July 31, 2021

Series A Convertible

Note Receivable for

Note Receivable

Preferred Stock

4 unchanged sentences

$ ( 16,832,437 )

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

( 3,789,734 )

Stock-based compensation to employees and consultants

Proceeds from sale of common stocks and warrants-related party

Proceeds from stock option exercise

Proceeds from initial public offering, net of underwriters' discounts and commissions and issuance costs of $ 1.5 million

Conversion of Series A convertible stock

( 2,319,867 )

BALANCES, January 31, 2021

( 2,319,867 )

BALANCES, July 31, 2021

$ ( 14,883,295 )

4 unchanged sentences

Condensed Statements of Cash Flows

For the Nine Months Ended January 31,

For the Three Months Ended July 31,

Cash flows from operating activities:

2 unchanged sentences

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation expense

Interest expense - debt discount

Interest expense - debt discount, related party

Gain on extinguishment of debt

Stock-based compensation to employees and consultants

1 unchanged sentence

Prepaid expenses and other current assets

Accounts payable and accrued expenses

Accounts payable and accrued liabilities

Net cash used in operating activities

1 unchanged sentence

( 1,222,664 )

Cash flows from investing activities:

Proceeds from repayments of notes receivable - related party

Net cash provided by investing activities

Cash flows from financing activities:

1 unchanged sentence

Proceeds from stock option exercise

Advances from related party payable

Proceeds from short-term advances, related party

Proceeds from note payable

Proceeds from note receivable for common stock – related party

Proceeds from convertible note payable

Proceeds from convertible note payable, related party

Proceeds from initial public offering, net of underwriters' discounts

and commissions and issuance costs

Proceeds from initial public offering, net of underwriters’ discounts and commissions and issuance costs

Net cash provided by financing activities

Net increase (decrease) in cash

Net (decrease) increase in cash

( 2,536,690 )

Cash at beginning of period

3 unchanged sentences

Fair value of warrants issued in connection with initial public offering

Fair value of warrants issued in connection with convertible notes payable,

related party

Fair value of warrants issued in connection with convertible notes payable

Issuance of common stock on conversion of note

Fair value of warrants issued in connection with March 2021 securities purchase agreement, related party

The accompanying notes are an integral part of

7 unchanged sentences

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 .

With two current and future product candidates, Alzamend aims to bring treatments or cures to market at a reasonable cost as quickly as

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, through

two royalty-bearing exclusive worldwide licenses from the University of South Florida Research Foundation, Inc., as licensor (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 from the same Licensor.

The Company is devoting substantially

all its efforts towards research and development of its Technology.

The Company has not generated any product revenue to date.

has financed its operations to date primarily through debt financings and through the sale of its common stock, par value $ 0.0001 per

share (the “Common Stock”).

all its efforts towards research and development of its Technology and raising capital.

The Company has not generated any product revenue

The Company has financed its operations to date primarily through debt financings and through the sale of its common stock, par

value $ 0.0001 per share (“Common Stock”).

The Company expects to continue to incur net losses in the foreseeable future.

Initial Public Offering

On June 14, 2021, the Company’s

registration statement on Form S-1 (File No.

333-255955) for its initial public offering of Common Stock (“IPO”) was declared

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 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

of the IPO, all of the Company’s outstanding shares of Series A convertible preferred stock (the “Series A Preferred Shares”)

were converted into 15,000,000 shares of Common Stock.

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 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

to continue to incur losses for the foreseeable future and needs to raise additional capital until it is able to generate revenues from

operations sufficient to fund its development and commercial operations.

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

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

The accompanying condensed

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

As of July 31, 2022, the Company

had cash of $ 11.5 million and an accumulated deficit of $ 32.2 million.

The Company incurred losses for the three months ended July 31,

2022 totaling $ 3.0 million.

Historically, the Company has financed its operations principally through issuances of equity and debt instruments.

The Company expects to continue to incur losses for the foreseeable

future and needs to raise additional capital until it is able to generate revenues from operations sufficient to fund its development

and commercial operations.

However, based on the Company’s current business plan, management believes that the Company’s cash

at July 31, 2022 is 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 Report.

SIGNIFICANT ACCOUNTING POLICIES

3 unchanged sentences

of America (“U.S.

GAAP”) and the rules of the Securities and Exchange Commission applicable to interim reports of companies

filing as a smaller reporting company.

These financial statements should be read in conjunction with the audited financial statements

and notes thereto contained in the Company’s Report on Form 10-K for the year ended April 30, 2021, filed with the SEC on July 29,

In the opinion of management, the accompanying condensed interim financial statements include all adjustments necessary in order

to make the financial statements not misleading.

The results of operations for interim periods are not necessarily indicative of the results

to be expected for the full year or any other future period.

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 Annual Report

on Form 10-K have been omitted.

The accompanying condensed balance sheet at April 30, 2021 has been derived from the audited balance sheet

at April 30, 2021 contained in such Form 10-K.

GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) applicable to interim

reports of companies filing as a smaller reporting company.

These financial statements should be read in conjunction with the audited

financial statements and notes thereto contained in the Company’s Report on Form 10-K for the year ended April 30, 2022, filed with

the SEC on July 19, 2022.

In the opinion of management, the accompanying condensed interim financial statements include all adjustments

necessary in order to make the financial statements not misleading.

The results of operations for interim periods are not necessarily

indicative of the results to be expected for the full year or any other future period.

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 on Form 10-K have been omitted.

The accompanying condensed balance sheet at April 30, 2022 has been derived

from the audited balance sheet at April 30, 2022 contained in such Form 10-K.

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 stock-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 January 31, 2022

As of July 31, 2022

and April 30, 2022, the Company had no cash equivalents.

21 unchanged sentences

The fair values of warrants

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.

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.

Property and Equipment,

Property and equipment are

stated at cost, net of accumulated depreciation.

Depreciation is computed using the straight-line method over the estimated useful life

of five years.

Significant additions and improvements are capitalized, while repairs and maintenance are charged to expense as incurred.

Research and Development

2 unchanged sentences

Research and development costs consist of scientific consulting fees and lab supplies, as well as fees paid

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.

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, 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.

Stock-Based Compensation

4 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 satisfaction of the performance

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 Company recognizes stock-based

compensation expense for restricted stocks on a straight-line basis over the requisite service period and account for forfeitures as they

The Company’s stock-based compensation for restricted stocks is based upon the estimated fair value of the Common Stock.

The Black-Scholes option pricing

8 unchanged sentences

on the specific terms of the warrant agreement.

Debt Issued with Warrants

The Company considers guidance

within ASC 470-20, Debt (“Subtopic 470-20”), ASC 480, and ASC 815 when accounting for the issuance of convertible

debt with detachable warrants.

As described above under the caption “Warrants,” the Company classifies warrants to purchase

Common Stock as either equity instruments, derivative liabilities, or liabilities depending on the specific terms of the warrant agreement.

In circumstances in which

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 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.

The debt discount is amortized as interest expense using the effective interest

Embedded Derivatives.

Company considers whether there are any embedded features in debt instruments that require bifurcation and separate accounting as derivative

financial instruments pursuant to ASC 815.

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 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

The Company utilizes FASB

ASC Topic No.

260, Earnings per Share .

Basic loss per share is computed by dividing loss available to common stockholders

by the weighted-average number of common shares outstanding.

Diluted loss per share is computed similar to basic loss per share except

that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential

common shares had been issued and if the additional common shares were dilutive.

Diluted loss per common share reflects the potential

dilution that could occur if convertible preferred stock, options and warrants were to be exercised or converted or otherwise resulted

in the issuance of Common Stock that then shared in the earnings of the entity.

ASC 260, Earnings per Share .

Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average

number of common shares outstanding.

Diluted loss per share is computed similar to basic loss per share except that the denominator is

increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued

and if the additional common shares were dilutive.

Diluted loss per common share reflects the potential dilution that could occur if convertible

preferred stock, options and warrants were to be exercised or converted or otherwise resulted in the issuance of Common Stock that then

shared in the earnings of the entity.

Since the effects of outstanding

options, warrants and convertible preferred stock are anti-dilutive in the periods presented, shares of Common Stock underlying these

instruments have been excluded from the computation of loss per common share.

options, warrants, convertible preferred stock and convertible notes are anti-dilutive in the periods presented, shares of Common Stock

underlying these instruments have been excluded from the computation of loss per common share.

The following sets forth the

1 unchanged sentence

been excluded from the computation of loss per common share:

For the Nine Months Ended January 31,

For the Three Months Ended July 31,

Series A convertible preferred stock

1 unchanged sentence

Convertible notes

(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 our determination of basic loss per share as they represent shares

The Company has excluded

stock options, with

an exercise price of $ 0.0004 ,

from 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.

5 unchanged sentences

or results of operations upon adoption.

In August 2018, the FASB issued

ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, (“ASU

The amendments modify the disclosure requirements in Topic 820 to add disclosures regarding changes in unrealized gains

and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the

narrative description of measurement uncertainty.

Certain disclosure requirements in Topic 820 are also removed or modified.

The amendments

are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

Certain of the amendments

are to be applied prospectively while others are to be applied retrospectively.

The Company adopted ASU 2018-13 as of May 1, 2020.

of this standard had no material impact on its financial statements and related disclosures.

In December 2019, the FASB

issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”),

which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general

principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This guidance is effective

for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

Company adopted ASU 2018-13 as of May 1, 2021.

Adoption of this standard had no material impact on the Company’s financial statements

and related disclosures.

In August 2020, the FASB issued

ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts

in Entity’s Own Equity (Subtopic 815-40) .

This ASU reduces the number of accounting models for convertible debt instruments

and convertible preferred stock.

As well as amend the guidance for the derivatives scope exception for contracts in an entity’s

own equity to reduce form-over-substance-based accounting conclusions.

In addition, this ASU improves and amends the related EPS guidance.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods therein.

is either a modified retrospective method or a fully retrospective method of transition.

The adoption of this standard on May 1, 2021

did not have a material impact on the Company’s financial position or results of operations.

The Company has considered

2 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 (“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 January 31, 2022 and April 30, 2021, the outstanding balance of the note receivable was

$ 14,883,295 .

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 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

As the note receivable from ALSF is related to the issuance of Common Stock, it is recorded as an offset to additional paid-in

At July 31, 2022 and April 30, 2022, the outstanding balance of the note receivable was $ 14,883,295 .

ALSF is wholly owned by

Ault Life Sciences, Inc.

ALSI is majority owned by Ault & Company, Inc.

(“Ault & Co.”).

Horne and Nisser, directors of the Company, are also directors of Ault & Co.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

1 unchanged sentence

current assets are as follows:

January 31, 2022

July 31, 2022

April 30, 2022

4 unchanged sentences

Total prepaid expenses and other current assets

On June 14, 2021, the Company

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.

On June 16, 2022, the

Company purchased D&O insurance for 12 months in the amount of $ 492,000.

Prepaid insurance at July 31, 2022 represented the unamortized

portion of annual premium paid for this policy of $ 452,000 .

At July 31, 2022, prepaid consulting fees of $ 117,000 consisted of payments

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

STOCK-BASED COMPENSATION

41 unchanged sentences

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:

A summary of stock option

activity for the three months ended July 31, 2022 is presented below:

Outstanding Options

Available for

Aggregate Intrinsic

Balance at April 30, 2022

Options granted

( 1,750,000 )

Options exercised

( 3,000,000 )

Options cancelled/forfeited

Balance at January 31, 2022

Options vested and expected to vest at January 31, 2022

Options expired

( 1,100,000 )

Options exercisable at January 31, 2022

Balance at July 31, 2022

Options vested and expected to vest at July 31, 2022

Options exercisable at July 31, 2022

The aggregate intrinsic value

3 unchanged sentences

Stock Options Granted to Employees and Consultants

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,

The estimated fair value of

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

option-pricing model using the following assumptions:

For the Three Months Ended July 31,

Expected term (in years)

85.53 % - 87.10 %

Risk-free interest rate

5 unchanged sentences

Expected Volatility:

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

stock price becomes available.

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 did not have sufficient trading history for its Common

Stock at July 31, 2022.

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

the volatility of its own stock price becomes available.

Risk-Free Interest Rate:

5 unchanged sentences

Therefore, the expected dividend yield was zero.

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.

Stock-based compensation to

employees and consultants from stock option grants for the three months ended July 31, 2022 and 2021 were $ 867,000 and $ 740,000 , respectively.

Performance Contingent

1 unchanged sentence

In November 2018, the Board

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

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

These options have an exercise price of

13 unchanged sentences

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.

Due to the significant risks and uncertainties associated with FDA approvals, as of July 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

4 unchanged sentences

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.

days later than 180 days after the Company’s initial public offering (“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.

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.

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%.

significant risks and uncertainties associated with achieving the market-contingent awards, as of July 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 Consultants - TAMM Net

Stock Options Granted to TAMM Net

On March 23, 2021, the Company

1 unchanged sentence

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.

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.

The performance goal of completing

Phase I of AL001 was achieved on March 22, 2022, and the Company recognized stock compensation related to the completion of Phase I of

AL001 over the implied service period to complete this milestone.

Due to the significant risks and uncertainties associated with achieving

the completion of Phase I for AL002, as of July 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 -Other Consultants

Stock Options Granted to Consultants

On October 14, 2021, the Company

2 unchanged sentences

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

been recognized for these awards related to Phase II of AL001 and AL002.

As of July 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 Phase II of AL001 and AL002.

Stock-Based Compensation

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

The Company’s results

of operations include expenses relating to stock-based compensation for three months ended July 31, 2022 and 2021, that were comprised

For the Three Months Ended July 31,

Research and development

General and administrative

As of January 31, 2022, total

As of July 31, 2022, total

unamortized stock-based compensation expense related to unvested employee and non-employee awards that are expected to vest was $ 3.7 million .

The weighted-average period over which such stock-based compensation expense will be recognized is approximately 2.2 years.

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, 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 January 31, 2022:

information about Common Stock warrants outstanding and exercisable at July 31, 2022:

$ 1.00 - $ 6.25

The estimated fair value of warrants granted 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,

the three months ended July 31, 2021 were calculated using the Black-Scholes option-pricing model using the following assumptions:

For the Three Months Ended July 31,

Expected term (in years)

1 unchanged sentence

0.27 % - 0.28 %

Dividend yield

3 unchanged sentences

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 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

stock price becomes available.

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

Stock at July 31, 2021.

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

the volatility of its own stock price becomes available.

Risk-Free Interest Rate:

5 unchanged sentences

OTHER RELATED PARTY TRANSACTIONS

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.

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 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

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

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 .

In March 2021, the Company

entered into a securities purchase agreement with Digital Power Lending, LLC (“DPL”) pursuant to which the Company sold an

aggregate of 6,666,667 shares of Common Stock for an aggregate of $ 10 million, or $1.50 per share, which sales were 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”), the parent company of DPL, 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 IA clinical trials for AL001 for a purchase price of $2 million, and (ii) purchased 2,666,667 shares

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

The Company issued to DPL

warrants to purchase 3,333,333 shares of Common Stock 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

the date of this Quarterly Report.

COMMITMENTS AND CONTINGENCIES

6 unchanged sentences

May 29, 2012.

In addition to royalty payments

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:

Paid in November 2021

are certain initial license fees and milestone payments required to be paid by the Company to the Licensor pursuant to the terms of license

The license agreements for AL002 require the Company to pay royalty payments of 4 % on net sales of products developed

from the licensed technology for AL002 while the license agreements for AL001 require that the Company pay combined royalty payments of 4.5 %

on net sales of products developed from the licensed technology for AL001.

The Company has already paid an initial license fee of

$200,000 for AL002 and an initial license fee of $200,000 for AL001.

As an additional licensing fee for the license of AL002, the Licensor

received 3,601,809 shares of common stock.

As an additional licensing fee for the license of the AL001 technologies, the Licensor received

2,227,923 shares of common stock.

Minimum royalties for AL001 are $25,000 in 2023, $45,000 in 2024 and $70,000 in 2025 and every year

thereafter, for the life of the agreement.

Minimum royalties for AL002 are $20,000 in 2022, $40,000 in 2023 and $50,000 in 2024 and every

year thereafter, for the life of the respective agreement.

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

due dates to the Licensor for the license of the AL001 technologies and for the AL002 technology, as follows:

AL001 License:

Completed September 2019

Pre-IND meeting

Completed June 2021

IND application filing

Paid in November 2021

Completed December 2021

Upon first dosing of patient in a clinical trial

12 months from first patient dosing

Completed March 2022

Upon Completion of first clinical trial

3 unchanged sentences

Upon FDA approval

AL002 License:

Upon IND application filing

Milestone met and completed

Completed January 2022

Upon IND application filing

9 unchanged sentences

Upon FDA BLA approval

If the Company fails to meet

a milestone by its specified date, the Licensor may terminate the license agreement.

Licensor was also granted

a preemptive right to acquire such shares or other equity securities that may be issued from time to time by the Company while Licensor

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.

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:

December 31, 2022

Company has met the pre-IND meeting, IND application filing, and successfully completed the Phase I clinical trial milestones encompassing

If the Company fails to meet a milestone by its specified date, the Licensor may terminate the license agreement.

was also granted a preemptive right to acquire such shares or other equity securities that may be issued from time to time by the Company

while Licensor remains the owner of any equity securities of the Company.

June 10, 2020, the Company obtained two (2) additional royalty-bearing exclusive worldwide licenses from the Licensor to a therapy

One of the additional licenses is for the treatment of neurodegenerative diseases excluding Alzheimer’s and the other

license is for the treatment of psychiatric diseases and disorders.

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 dated June 10, 2020 and

effective as of November 1, 2019, with the Licensor and the University of South Florida (the “June AL001 License Agreements”).

Under each of the June AL001 License Agreements, a royalty payment of 3 % is required on net sales of products developed from the

licensed technology.

For the two (2) additional AL001 licenses, in the aggregate, the Company has paid initial license fees of $ 20,000 .

Additionally, under each of the June AL001 License Agreements, the Company is required to pay milestone payments on the due dates to the

Licensor for the license of the technology, as follows:

AL001 Licenses:

Upon IND application filing

IND application filing

7 unchanged sentences

First commercial sale

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

was recorded as a discount to the convertible promissory note with a corresponding increase to additional paid-in capital.

computed the estimated fair value of the warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded

debt discount in the amount of $ 13,000 based on the estimated fair value of the warrants.

The risk-free rate of 0.27 % was derived from

Treasury yield curve, matching the term of the warrant, in effect at the measurement date.

The volatility factor of 103.7 % was

determined based on the historical volatility data of similar companies, considering the industry, products and market capitalization

of such other entities.

In aggregate, the Company recorded debt discount in the amount of $ 137,000 based on the fair values of the warrants

and original issue discount of $ 46,000 .

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

EQUITY TRANSACTIONS

7 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 January 31, 2022, there

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

As of July 31, 2022, there

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

On April 30, 2019, the Company

7 unchanged sentences

future financing the Company may consummate and to have all the shares of Common Stock to which it is entitled under the SPA registered

under the Securities Act within 180 days of the final closing of an initial public offering.

In May 2021, the term of the note receivable

was extended to December 31, 2023.

under the Securities Act within 180 days of the final closing of the IPO.

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.

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.

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 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

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

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

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) purchased 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 3,333,333 shares of Common

Stock 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, on April 28, 2022, 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.

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 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