What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-09-13 compared with 2022-03-15 · 294 added, 424 removed, 222 unchanged (76% of the section changed)

8 unchanged sentences

statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as

This section should be read in conjunction with our unaudited condensed financial statements and related notes included in Part

I, Item 1 of this report.

The statements contained in this report that are not purely historical are forward-looking statements within

the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

amended (the “Exchange Act”).

This section should be read in conjunction with our unaudited condensed financial statements

and related notes included in Part I, Item 1 of this report.

The statements contained in this report that are not purely historical are

forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange

These statements relate to future events or our

25 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 our

fees and lab supplies, as well as fees paid to other entities that conduct certain research and development activities on behalf of our

We have acquired and may continue

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

The upfront payments to acquire 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.

The upfront payments to acquire license,

product or rights, as well as any future milestone payments, are immediately recognized as research and development expense provided that

there is no alternative future use of the rights in other research and development projects.

Stock-Based Compensation.

17 unchanged sentences

· Expected Volatility.

Because we do not have an extensive trading history for our Common

Stock, the expected volatility was estimated based on the average volatility for comparable publicly traded life sciences companies over

a period equal to the expected term of the stock option grants.

The comparable companies were chosen based on the similar size, stage

in life cycle or area of specialty.

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

the volatility of our own stock price becomes available.

Because we do not have a sufficient trading history for our common

stock (“Common Stock”), the expected volatility was estimated based on the average volatility for comparable publicly traded

life sciences companies over a period equal to the expected term of the stock option grants.

The comparable companies were chosen based

on the similar size, stage in life cycle or area of specialty.

We will continue to apply this process until a sufficient amount of historical

information regarding the volatility of our own stock price becomes available.

· Expected Term.

11 unchanged sentences

Common Stock Valuations.

to our IPO in June 2021, there was no public market for our Common Stock, and, as a result, the fair value of the shares of Common Stock

underlying our stock-based awards was estimated on each grant date by our Board.

To determine the fair value of our Common Stock underlying

option grants, our Board considered, among other things, input from management, and our Board’s assessment of additional objective

and subjective factors that it believed were relevant, and factors that may have changed from the date of the most recent valuation through

the date of the grant.

to our initial public offering (“IPO”) in June 2021, there was no public market for our Common Stock, and, as a result, the

fair value of the shares of Common Stock underlying our stock-based awards was estimated on each grant date by our Board.

the fair value of our Common Stock underlying option grants, our Board considered, among other things, input from management, and our

Board’s assessment of additional objective and subjective factors that it believed were relevant, and factors that may have changed

from the date of the most recent valuation through the date of the grant.

These factors included, but were not limited to:

21 unchanged sentences

On August 17, 2021, we

announced that we have contracted Altasciences to conduct a six-month Phase I relative bioavailability study for AL001 for dementia related

to Alzheimer’s beginning in September 2021.

The Phase I first-in-human study is for the purpose of determining potential clinically

safe and appropriate dosing for AL001 in future studies.

The Phase I study will investigate the pharmacokinetics (the movement of drug

through the body) of lithium following a single dose of AL001 (the “study drug”) compared to a typical single dose of a marketed

300 mg immediate-release lithium carbonate capsule (the “comparator” – currently indicated to treat mood disorders)

in healthy male and female subjects.

The lithium and salicylate components of AL001 will be given within the amounts already approved

for use in patients.

The purpose of the research study is to test the safety, tolerability, and bioavailability (how much and when drug

gets in the body) of the study drug, AL001, compared to the currently marketed formulation of the comparator, lithium carbonate.

is expected to ascertain what AL001 doses should be given, and how often, in subsequent Phase 2 safety and efficacy trials involving Alzheimer’s

announced that we have contracted Altasciences Clinical Kansas (“Altasciences”) to conduct a six-month Phase I relative bioavailability

study for AL001 for dementia related to Alzheimer’s beginning in September 2021.

The Phase I first-in-human study is for the purpose

of determining potential clinically safe and appropriate dosing for AL001 in future studies.

The Phase I study will investigate the pharmacokinetics

(the movement of drug through the body) of lithium following a single dose of AL001 (the “study drug”) compared to a typical

single dose of a marketed 300 mg immediate-release lithium carbonate capsule (the “comparator” – currently indicated

to treat mood disorders) in healthy male and female subjects.

The lithium and salicylate components of AL001 will be given within the

amounts already approved for use in patients.

The purpose of the research study is to test the safety, tolerability, and bioavailability

(how much and when drug gets in the body) of the study drug, AL001, compared to the currently marketed formulation of the comparator,

lithium carbonate.

This is expected to ascertain what AL001 doses should be given, and how often, in subsequent Phase 2 safety and efficacy

trials involving Alzheimer’s patients.

At least 24 healthy male and female human subjects will complete the Phase I trial.

On September 13, 2021,

we announced that the first group of healthy participants have been dosed in a six-month Phase I relative bioavailability study for AL001

for dementia related to Alzheimer’s.

A full report of the Phase I first-in-human study will be completed in March 2022.

1 study is for the purpose of determining potential clinically safe and appropriate dosing for AL001 in a planned Phase 2 multiple ascending

AL001 is a lithium-delivering ionic cocrystal under development as an oral treatment for patients with dementia related to

mild, moderate, and severe cognitive impairment associated with Alzheimer’s.

September 13, 2021, we announced that the first group of healthy participants have been dosed in a six-month Phase I relative bioavailability

study for AL001 for dementia related to Alzheimer’s.

A full report of the Phase I first-in-human study was completed in March 2022.

The Phase I study is for the purpose of determining potential clinically safe and appropriate dosing for AL001 in a planned Phase 2 multiple

ascending dose study.

AL001 is a lithium-delivering ionic cocrystal under development as an oral treatment for patients with dementia

related to mild, moderate, and severe cognitive impairment associated with Alzheimer’s.

We have an additional preclinical

3 unchanged sentences

Our preclinical program included a toxicologic evaluation,

histopathology study and brain beta amyloid analysis and, after we received additional financing in March 2021, was expanded to include

an immunoglobulin analysis and biodistribution study.

histopathology study and brain beta amyloid analysis and was expanded to include an immunoglobulin analysis and biodistribution study.

On July 30, 2021, we announced

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Based on AL002’s positive toxicology results, the biologic nature of this product and the urgent need to deliver

treatments for Alzheimer’s to patients, we proposed, and the FDA agreed, to conduct a combined Phase 1/2 study.

treatments for Alzheimer’s to patients, we proposed, and the FDA agreed, to conduct a combined Phase I/II study.

We recently announced

that the FDA’s agreement to us conducting a combined Phase 1/2 study, together with our process to identify the right manufacturing

partner to provide our study drug materials for the Phase 1/2 study, has extended the timeline for when we anticipate filing the IND,

which is now expected to be done in the second quarter of 2022, and we plan to initiate the clinical trial of AL002 as soon as possible

after the approval of the IND by the FDA.

On December 17, 2021, we announced

that we received positive topline data from our Phase I clinical trial for AL001.

At this time, we will receive a summary of demographic

data, the data for the primary endpoint and a summary of safety data.

The purpose of the Phase I first-in-human study was to determine

the pharmacokinetics, safety and tolerability of AL001 so as to target doses for a planned Phase II multiple ascending dose study in Alzheimer’s

AL001 is a lithium-delivery system;

it is a lithium-salicylate-L-proline engineered ionic co-crystal under development as an

oral treatment for patients with dementia related to mild, moderate and severe cognitive impairment associated with Alzheimer’s

During Phase I

first-in-human trial, participants received a single dose of AL001 containing lithium in an amount equivalent to 150mg lithium

this is the dose proposed by the inventors as likely appropriate for Alzheimer’s treatment when given three times

Currently, marketed immediate-release lithium carbonate 300mg are given three times daily;

for example, lithium carbonate

300mg three times daily is a dose commonly used for bipolar affective disorders.

It can be difficult to set the appropriate dose of

lithium carbonate and other lithium products due to the small margin between effective and toxic blood levels and to avoid side

effects or inadequate treatment outcomes.

We see the possibility of providing the benefits from lithium at up to 50% of the

currently approved lithium carbonate dosage, with the potential for better outcomes and with elimination of the need for lithium

therapeutic drug monitoring.

Moreover, the data confirms AL001’s potential as a replacement of the current lithium-based

treatments and may provide a treatment for over 40 million Americans suffering from Alzheimer’s and other neurodegenerative

diseases and psychiatric disorders.

that the FDA’s agreement to us conducting a combined Phase I/II study, together with our process to identify the right manufacturing

partner to provide our study drug materials for the Phase I/II study, has extended the timeline for when we anticipate filing the IND,

which is now expected to be done in the third calendar quarter of 2022, and we plan to initiate the clinical trial of AL002 as soon as

possible after the approval of the IND by the FDA.

During Phase I first-in-human

trial, participants received a single dose of AL001 containing lithium in an amount equivalent to 150 mg lithium carbonate;

dose proposed by the inventors as likely appropriate for Alzheimer’s treatment when given three times daily (“TID”).

Currently, marketed immediate-release lithium carbonate 300 mg are given TID;

for example, lithium carbonate 300 mg TID is a dose commonly

used for bipolar affective disorders.

It can be difficult to set the appropriate dose of lithium carbonate and other lithium products

due to the small margin between effective and toxic blood levels and to avoid side effects or inadequate treatment outcomes.

possibility of providing the benefits from lithium at up to 50% of the currently approved lithium carbonate dosage, with the potential

for better outcomes and with elimination of the need for lithium therapeutic drug monitoring.

Moreover, the data confirms AL001’s

potential as a replacement of the current lithium-based treatments and may provide a treatment for over 40 million Americans suffering

from Alzheimer’s and other neurodegenerative diseases and psychiatric disorders.

Such findings may allow us

to reduce or eliminate the need for Phase II or Phase III studies of efficacy and/or safety of AL001 in such indications as bipolar/affective

disorders in which lithium efficacy has been established.

Bioequivalence may have utility for AL001 when seeking approval for the indications

of currently marketed lithium products, and for new indications as a benchmark for safety.

Given the systemic pharmacokinetic similarity

to marketed immediate-release lithium carbonate products, AL001 may be dosed three times daily in the planned Phase II study, a multiple

ascending dose safety study in Alzheimer’s patients.

In addition, we will pursue investigational new drug applications with the

FDA for bipolar disorder, depression, and post-traumatic stress disorder indication.

to design a development program that will potentially reduce the amount of new data generated to support approval.

Bioequivalence may

have utility for AL001 when seeking approval for the indications of currently marketed lithium products, and for new indications as a

benchmark for safety.

Given the systemic pharmacokinetic similarity to marketed immediate-release lithium carbonate products, AL001 may

be dosed TID in the planned Phase II study, a multiple ascending dose safety study in Alzheimer’s patients.

In addition, we are

pursuing investigational new drug applications with the FDA for bipolar disorder, MDD, and PTSD.

On April 4, 2022, we announced

the appointment of Dr.

Terri Hunter, Ph.D., a Technology Transfer Specialist, to our Scientific Advisory Board.

During her tenure at the

University of South Florida, Dr.

Hunter was responsible for managing the patent portfolio associated with Alzamend’s two product

candidates, AL001 and AL002.

On April 11, 2022, we announced

that we have contracted with Altasciences and iResearch Atlanta, LLC (“iResearch”) to manage and conduct, respectively, our

Phase IIA multiple ascending dose (“MAD”) study in patients with mild to moderate Alzheimer’s.

The Phase IIA study,

which commenced enrollment in May 2022, is for the purposes of evaluating the safety and tolerability of AL001 under multiple dose, steady-state

conditions, and to determine the maximum tolerated dose in patients with mild to moderate Alzheimer’s.

On April 28, 2022, we announced

that Digital Power Lending, LLC (“DPL”) has made an additional investment in our company.

On March 28, 2022, we announced

receipt of the full data set from Phase I clinical trial for AL001.

Based on the achievement of this milestone, under the March 12, 2021,

securities purchase agreement, we sold an additional 2,666,667 shares of Common Stock to DPL for $4 million, or $1.50 per share, and issued

to DPL warrants to acquire 1,333,333 shares of Common Stock with an exercise price of $3.00 per share.

On May 5, 2022, we announced

that the first patient with mild to moderate Alzheimer’s has been dosed in a 12-month Phase IIA MAD study for dementia related to

The Phase IIA study will evaluate the safety and tolerability of AL001 under multiple-dose, steady-state conditions

and determine the maximum tolerated dose in patients diagnosed with mild to moderate Alzheimer’s.

Lithium has been well characterized

for safety and is approved/marketed in multiple formulations for bipolar affective disorders.

Lithium dosing for the MAD cohorts is based

on a fraction of the usual dose for treatment of bipolar affective disorder (i.e., AL001 lithium content at a lithium carbonate equivalent

of 300 mg TID, daily total of 900 mg), with the target dose for Alzheimer’s treatment at half of that lithium carbonate equivalent

value (150 mg TID, daily total of 450 mg).

In each cohort, consisting of six active and two placebo patients (as per randomization), multiple

ascending doses will be administered TID for 14 days under fasted conditions (at least 1 hour before or 4 hours after meals) up to tolerability/safety

The lithium and salicylate components of AL001 will be given within the amounts already approved for use in patients.

subjects will complete the Phase IIA trial.

The maximum tolerated dose will then be used for further studies.

On May 17, 2022, we announced

that we have submitted a Pre-IND meeting request for AL001 and supporting briefing documents to the FDA for the treatment of bipolar disorder,

MDD and PTSD.

The continuation of our current

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Results of Operations

Results of Operations for the Three Months Ended January 31,

Results of Operations for the Three Months Ended July 31,

2022 and 2021

The following table summarizes

the results of our operations for the three months ended January 31, 2022 and 2021.

For the Three Months Ended January 31,

the results of our operations for the three months ended July 31, 2022 and 2021.

For the Three Months Ended July 31,

OPERATING EXPENSES

5 unchanged sentences

Interest expense

Interest expense - related party

Gain on extinguishment of debt

Total other expense, net

1 unchanged sentence

$ (2,319,867 )

$ (1,453,981 )

Basic and diluted net loss per common share

Basic and diluted weighted average common shares

Basic and diluted weighted average common shares outstanding

* Not meaningful

We were formed on February

26, 2016 to acquire and commercialize patented intellectual property and know-how to prevent, treat and cure the crippling and deadly

disease, Alzheimer’s.

We currently have only two product candidates, AL001 and AL002.

These products are in the preclinical stage

of development and will require extensive clinical study, review and evaluation, regulatory review and approval, significant marketing

efforts and substantial investment before either or both of them, and any respective successors, will provide us with any revenue.

did not generate any revenues during the three months ended January 31, 2022 and 2021, and we do not anticipate that we will generate

revenue for the foreseeable future.

We were formed on February 26, 2016, to acquire and commercialize patented

intellectual property and know-how to prevent, treat and cure the crippling and deadly disease, Alzheimer’s.

We currently have only

two product candidates, AL001 and AL002.

These products are in the early clinical stage of development and will require extensive clinical

study, review and evaluation, regulatory review and approval, significant marketing efforts and substantial investment before either or

both of them, or any respective successors, will provide us with any revenue.

We did not generate any revenues during the three months

ended July 31, 2022 and 2021, and we do not anticipate that we will generate revenue for the foreseeable future.

General and Administrative Expenses

General and administrative

expenses for the three months ended January 31, 2022 and 2021 were $1.7 million and $881,000, respectively.

As reflected in the table

below, general and administrative expenses primarily consisted of the following expense categories:

stock compensation expense;

as well as salaries and benefits.

For the three months ended January 31, 2022 and 2021, the remaining general and administrative

expenses of $94,000 and $12,000, respectively, primarily consisted of payments for filing fees, transfer agent fees, license fees, travel,

and other office expenses, none of which is significant individually.

For the Three Months Ended January 31,

Stock compensation expense

General and administrative expenses for the three months ended July

31, 2022 and 2021 were $1.7 million and $1.4 million, respectively.

As reflected in the table below, general and administrative expenses

primarily consisted of the following expense categories:

stock-based compensation expense;

professional fees;

as well as salaries

and benefits.

For the three months ended July 31, 2022 and 2021, the remaining general and administrative expenses of $83,000 and $232,000,

respectively, primarily consisted of payments for filing fees, transfer agent fees, license fees, travel, and other office expenses, none

of which is significant individually.

For the Three Months Ended July 31,

Stock-based compensation expense

Professional fees

Salary and benefits

Licenses and fees

Board of director fees

Other general and administrative expenses

1 unchanged sentence

*Not meaningful

Stock Compensation Expense

Stock-Based Compensation Expense

During the three months ended

January 31, 2022 and 2021, we incurred general and administrative stock compensation expense of $1.0 million and $553,000, respectively,

related to stock option grants to executives, employees and consultants as well as shares issued for services to Spartan Capital.

option grants are granted at the per share fair value on the grant date.

Vesting of options differs based on the terms of each option.

July 31, 2022 and 2021, we incurred general and administrative stock-based compensation expense of $867,000 and $598,000, respectively, related

to stock option grants to executives, employees and consultants as well as shares issued for services to Spartan Capital Securities, LLC

(“Spartan Capital”).

All option grants are granted at the per share fair value on the grant date.

Vesting of options differs

based on the terms of each option.

We valued the options at their date of grant utilizing the Black-Scholes option pricing model.

We valued the shares issued for services

at their intrinsic value on the date of issuance.

Stock-based compensation is a non-cash expense because we settle these obligations by

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

Insurance Expense

The second largest component

of general and administrative expenses is insurance expense.

During the three months ended January 31, 2022, we incurred insurance expense

of $214,000, which was primarily directors and officers insurance that was required as part of the IPO process.

the shares issued for services at their intrinsic value on the date of issuance.

Stock-based compensation is a non-cash expense because

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

Professional Fees

During the three months ended

January 31, 2022 and 2021, we reported professional fees of $146,000 and $203,000, respectively, which were principally comprised of the

following items:

Three Months Ended January 31, 2022

The second largest component

of our general and administrative expenses is professional fees.

During the three months ended July 31, 2022 and 2021, we reported professional

fees of $243,000 and $300,000, respectively, which were principally comprised of the following items:

Three Months Ended July 31, 2022

· In June 2017, we entered into a five-year consulting agreement with Spartan Capital pursuant to which

2 unchanged sentences

Capital a consulting fee of $1.4 million for the services to be rendered over the 60-month term of this consulting agreement.

the three months ended January 31, 2022, we recorded an expense of $70,000 as a result of this consulting agreement.

· During the three months ended January 31, 2022, we incurred $32,000 in management fees, $20,000 in audit

fees, and $24,000 in related party consulting.

Three Months Ended January 31, 2021

· During the three months ended January 31, 2021, we recorded an expense of $70,000 in connection with the

the three months ended July 31, 2022, we recorded an expense of $70,000 as a result of this consulting agreement.

· During the three months ended July 31, 2022, we incurred $80,000 in audit fees, $24,000 in tax preparation

fees, $23,000 in Sarbanes-Oxley compliance fees and $13,000 in related party consulting.

Three Months Ended July 31, 2021

· During the three months ended July 31, 2021, we recorded an expense of $70,000 in connection with the

five-year consulting agreement with Spartan Capital.

· In June 2019, we entered into a two-year uplisting agreement (the “Uplisting Agreement”) with

Spartan Capital pursuant to which Spartan Capital agreed to provide consulting services with respect to a potential public offering.

under this agreement consisted of a cash payment in the amount of $475,000 and the issuance of 500,000 shares of Common Stock.

amortizing the cost of these services over the two-year term of the Uplisting Agreement.

During the three months ended January 31, 2021,

we recorded an expense of $59,000 in connection with the Uplisting Agreement.

The Uplisting Agreement was terminated on March 3, 2021.

· During the three months ended January 31, 2021, we also incurred $33,000 in audit fees.

· During the three months ended July 31, 2021, we incurred $29,000 in legal fees.

· During the three months ended July 31, 2021, we incurred $79,000 in audit fees.

Salaries and Benefits

During the three months ended

January 31, 2022 and 2021, we incurred $204,000 and $113,000, respectively, in employee-related expenses.

As of January 31, 2022, we had

three full-time and four part-time employees.

We appointed Stephan Jackman, who is a full-time employee, as Chief Executive Officer as

of November 30, 2018, and Lien Escalona as Chief Financial Officer in June 2021.

July 31, 2022 and 2021, we incurred $224,000 and $189,000, respectively, in employee-related expenses.

As of July 31, 2022, we had four

full-time and four part-time employees.

Nisser, our Executive Vice President and General Counsel, Kenneth S.

Cragun, our Senior Vice President of Finance, and David Katzoff,

our Chief Operating Officer, work for us on a part-time basis.

Nisser and Katzoff spend no less than an average of 8 hours per

week on our company’s business and Mr.

Cragun spends no less than an average of 10 hours per week on our company’s business.

Research and Development Expenses

Cragun, our Senior Vice President of Finance, and David J.

our Chief Financial Officer, work for us on a part-time basis.

Katzoff, as a result of his recent appointment as our Chief Financial

Officer, will spend no less than an average of 28 hours per week on our company’s business.

Nisser spends no less than an average

of 8 hours per week on our company’s business and Mr.

Cragun spends no less than an average of 10 hours per week on our company’s

Research and Development Expenses

for the three months ended January 31, 2022 and 2021, were $874,000 and $234,000, respectively.

As reflected in the table below, research

and development expenses primarily consisted of professional fees, licenses and fees, as well as stock compensation expense.

For the Three Months Ended January 31,

Research and development expenses for the three months ended July 31,

2022 and 2021 were $1.4 million and $916,000, respectively.

As reflected in the table below, research and development expenses primarily

consisted of professional fees, licenses and fees, as well as stock-based compensation expense.

For the Three Months Ended July 31,

Professional fees

Licenses and fees

Stock compensation expense

Stock-based compensation expense

Other research and development expenses

3 unchanged sentences

During the three months ended

January 31, 2022 and 2021, we reported professional fees of $763,000 and $192,000, respectively, which were principally comprised of professional

fees attributed to various types of scientific services, including FDA consulting services.

The increase relates to professional fees

incurred related to Phase I relative bioavailability study for AL001 for dementia related to Alzheimer’s.

July 31, 2022 and 2021, we reported professional fees of $1.2 million and $705,000, respectively, which were principally comprised of

professional fees attributed to various types of scientific services, including FDA consulting services.

The increase relates to professional

fees incurred related to Phase IIA clinical trial monitoring AL001 and IND preparation for AL002.

Licenses and Fees

2 unchanged sentences

pursuant to the terms of the License Agreement with Sublicensing Terms.

During the three months ended

January 31, 2022, we had an over accrual of $50,000 in PIND license fees, offset by $5,000 in royalty fee as a result of our first dosage

of patients during the quarter ended January 31, 2022 for the Phase I relative bioavailability study for AL001 for dementia related to

Stock Compensation Expense

Stock-Based Compensation Expense

During the three months ended

January 31, 2022 and 2021, we incurred $106,000 and $22,000, respectively, in research and development stock compensation expense related

to stock option grants to consultants.

All option grants are granted at the per share fair value on the grant date.

Vesting of options

differs based on the terms of each option.

We valued the options at their date of grant utilizing the Black Scholes option pricing model.

Stock-based compensation is a non-cash expense because we settle these obligations by issuing shares of Common Stock from authorized shares

instead of settling such obligations with cash payments.

Other Expense, net

Interest Expense

Interest expense was $16,000

for the three months ended January 31, 2022, primarily related to the convertible promissory note issued in February 2021 including non-cash

interest expense of $3,000 recorded from the amortization of debt discount.

Results of Operations for the Nine Months Ended January 31,

2022 and 2021

The following table summarizes

the results of our operations for the nine months ended January 31, 2022 and 2021.

For the Nine Months Ended January 31,

OPERATING EXPENSES

Research and development

General and administrative

Total operating expenses

Loss from operations

OTHER EXPENSE, NET

Interest expense

Interest expense - related party

Interest income - related party

Gain on extinguishment of debt

Total other expense, net

$ (8,492,661 )

$ (3,789,734 )

$ (4,702,927 )

Basic and diluted net loss per common share

Basic and diluted weighted average common shares outstanding

* Not meaningful

We were formed on February

26, 2016 to acquire and commercialize patented intellectual property and know-how to prevent, treat and cure the crippling and deadly

disease, Alzheimer’s.

We currently have only two product candidates, AL001 and AL002.

These products are in the clinical and preclinical

stage of development, respectively, and will require extensive clinical study, review and evaluation, regulatory review and approval,

significant marketing efforts and substantial investment before either or both of them, and any respective successors, will provide us

with any revenue.

We did not generate any revenues during the nine months ended January 31, 2022 and 2021 and we do not anticipate that

we will generate revenue for the foreseeable future.

General and Administrative Expenses

General and administrative

expenses for the nine months ended January 31, 2022 and 2021 were $4.9 million and $2.7 million, respectively.

As reflected in the table

below, general and administrative expenses primarily consisted of the following expense categories:

stock compensation expense, professional

fees, insurance, as well as salaries and benefits.

For the nine months ended January 31, 2022 and 2021, the remaining general and administrative

expenses of $389,000 and $159,000, respectively, primarily consisted of payments for advertising and promotion, transfer agent fees, license

fees, travel, and other office expenses, none of which is significant individually.

For the Nine Months Ended January 31,

Stock compensation expense

Professional fees

Salary and benefits

Other general and administrative expenses

Total general and administrative expenses

* Not meaningful

Stock Compensation Expense

During the nine months ended

January 31, 2022 and 2021, we incurred general and administrative stock compensation expense of $2.8 million and $1.7 million, respectively,

related to stock option grants to executives, employees and consultants as well as shares issued for services to Spartan Capital.

option grants are granted at the per share fair value on the grant date.

Vesting of options differs based on the terms of each option.

We valued the options at their date of grant utilizing the Black Scholes option pricing model.

We valued the shares issued for services

at their intrinsic value on the date of issuance.

Stock-based compensation is a non-cash expense because we settle these obligations by

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

Professional Fees

The second largest component

of our general and administrative expenses is professional fees.

During the nine months ended January 31, 2022 and 2021, we reported professional

fees of $678,000 and $547,000, respectively, which were principally comprised of the following items:

Nine Months Ended January 31, 2022

· During the nine months ended January 31, 2022, we recorded an expense of $178,000 as a result of the five-year

consulting agreement with Spartan Capital.

· During the nine months ended January 31, 2022, we incurred $134,000 in investor relations, $144,000 in

audit fees, $78,000 in legal fees, $31,000 in Board fees and $72,000 in related party consulting.

Nine Months Ended January 31, 2021

· During the nine months ended January 31, 2021, we recorded an expense of $210,000 in connection with the

five-year consulting agreement with Spartan Capital.

· During the nine months ended January 31, 2021, we recorded an expense of $178,000 in connection with the

Uplisting Agreement.

The Uplisting Agreement was terminated on March 3, 2021.

· During the nine months ended January 31, 2021, we incurred $95,000 in audit fees and $65,000 in legal

Salaries and Benefits

During the nine months ended

January 31, 2022 and 2021, we incurred $547,000 and $338,000, respectively, in employee-related expenses.

As of January 31, 2022, we had

three full-time and four part-time employees.

We appointed Stephan Jackman, who is a full-time employee, as Chief Executive Officer as

of November 30, 2018, and Lien Escalona as Chief Financial Officer in June 2021.

Nisser, our Executive Vice President and General Counsel, Kenneth S.

Cragun, our Senior Vice President of Finance, and David Katzoff,

our Chief Operating Officer, work for us on a part-time basis.

Nisser and Katzoff spend no less than an average of 8 hours per

week on our company’s business and Mr.

Cragun spends no less than an average of 10 hours per week on our company’s business.

Research and Development Expenses

Research and development expenses

for the nine months ended January 31, 2022 and 2021, were $3.5 million and $1.0 million, respectively.

As reflected in the table below, research

and development expenses primarily consisted of professional fees, licenses and fees, as well as stock compensation expense.

For the Nine Months Ended January 31,

Professional fees

Licenses and fees

Stock compensation expense

Other research and development expenses

Total research and development expenses

* Not meaningful

Professional Fees

During the nine months ended

January 31, 2022 and 2021, we reported professional fees of $2.9 million and $903,000, respectively, which were principally comprised

of professional fees attributed to various types of scientific services, including FDA consulting services.

The increase relates to professional

fees incurred related to Phase I relative bioavailability study for AL001 for dementia related to Alzheimer’s.

Licenses and Fees

There are certain initial

license fees and milestone payments required to be paid to the University of South Florida and the Licensor, for the licenses of the technologies,

pursuant to the terms of the AL001 License Agreements.

During the nine months ended

January 31, 2022, we accrued $65,000 in license fees as we have submitted our IND application on June 30, 2021, offset by an over accrual

of $50,000 at the end of 2020.

We also accrued $190,000 in license fees as a result of our first dosage of patients for the Phase I relative

bioavailability study for AL001 for dementia related to Alzheimer’s.

Stock Compensation Expense

During the nine months ended

January 31, 2022 and 2021 we incurred $359,000 and $65,000, respectively, in research and development stock compensation expense related

to stock option grants to consultants.

July 31, 2022 and 2021, we incurred zero and $142,000, respectively, in research and development stock compensation expense related to

stock option grants to consultants.

All option grants are granted at the per share fair value on the grant date.

Vesting of options

differs based on the terms of each option.

Vesting of options differs

based on the terms of each option.

We valued the options at their date of grant utilizing the Black-Scholes option pricing model.

Stock-based compensation is a non-cash expense because we settle these obligations by issuing shares of Common Stock from authorized shares

instead of settling such obligations with cash payments.

compensation is a non-cash expense because we settle these obligations by issuing shares of Common Stock from authorized shares instead

of settling such obligations with cash payments.

Other Expense, Net

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Interest expense was $2,000

for the nine months ended January 31, 2022, primarily related to the convertible promissory note issued in February 2021 including non-cash

interest expense of $13,000 recorded from the amortization of debt discount.

for the three months ended July 31, 2022, primarily related to financing of D&O insurance.

Liquidity and Capital Resources

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

As of January 31, 2022, we had cash of $11.8

As of July 31, 2022, we had cash of $11.5

million and an accumulated deficit of $32.2 million.

We have incurred recurring losses and reported losses for the three and nine months

ended January 31, 2022 totaling $2.6 million and $8.5 million, respectively.

In the past, we have financed our operations principally

through sales of promissory notes and equity securities.

We have incurred recurring losses and reported losses for the three months ended

July 31, 2022 totaling $3.0 million.

In the past, we have financed our operations principally through issuances of promissory notes and

equity securities.

In March of 2021, we entered

into a securities purchase agreement with DPL, pursuant to which we agreed to sell an aggregate of 6,666,667 shares of Common Stock for

an aggregate of $10 million, or $1.50 per share, which sales will be made in tranches.

On March 9, 2021, DPL paid $4 million, less the

$1.8 million in prior advances and the surrender for cancellation of the $50,000 convertible promissory note, previously issued to BitNile,

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

Under the terms of the securities purchase agreement, DPL (i) purchased, in July

2021, an additional 1,333,333 shares of Common Stock upon FDA approval of our IND for our Phase Ia clinical trials for AL001 for a purchase

price of $2 million, and (ii) will purchase 2,666,667 shares of Common Stock once we have completed these Phase Ia clinical trials for

AL001 for a purchase price of $4 million.

We further agreed to issue DPL warrants to purchase a number of shares of Common Stock equal

to 50% of the shares of common stock purchased under the securities purchase agreement at an exercise price of $3.00 per share.

we agreed that for a period of eighteen months following the date of the payment of the final tranche of $4 million, DPL will have the

right to invest an additional $10 million on the same terms, except that no specific milestones have been determined with respect to the

additional $10 million as of the date of this Quarterly Report.

On June 17, 2021, we announced

the closing of our IPO of 2,875,000 shares of Common Stock at a price to the public of $5.00 per share.

The proceeds from the offering

to us, net of underwriting discounts and estimated offering expenses, were approximately $12.9 million.

Our Common Stock is listed on

The Nasdaq Capital Market under the ticker symbol “ALZN”.

We expect to continue to incur

losses for the foreseeable future and need to raise additional capital until we are able to generate revenues from operations sufficient

to fund our development and commercial operations.

However, based on our current business plan, we believe that our cash and cash equivalents

at January 31, 2022, are sufficient to meet our anticipated cash requirements during the twelve-month period subsequent to the issuance

of the financial statements included in this Quarterly Report.

into a securities purchase agreement with DPL, pursuant to which we 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 the $50,000 convertible promissory note, previously issued to BitNile Holdings, Inc.,

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, in July 2021, an additional 1,333,333 shares of Common Stock upon FDA approval of our IND for our Phase IA clinical

trials for AL001 for a purchase price of $2 million, and (ii) purchased, in April 2022, 2,666,667 shares of Common Stock upon completion

of our Phase IA clinical trials for AL001 for a purchase price of $4 million.

We issued DPL warrants to purchase 3,333,333 shares of Common

Stock at an exercise price of $3.00 per share.

Finally, we agreed that for a period of eighteen months following the date of the payment

of the final tranche of $4 million, DPL will have the right to invest an additional $10 million on the same terms, except that no specific

milestones have been determined with respect to the additional $10 million as of the date of this Quarterly Report.

We will need to obtain substantial

additional funding in the future for our clinical development activities and continuing operations.

If we are unable to raise capital

when needed or on favorable terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization

Our future capital requirements will depend on many factors, including:

· successful enrollment in, and completion of, clinical trials;

· our ability to establish agreements with third-party manufacturers for clinical supply for our clinical

trials and, if our product candidates are approved, commercial manufacturing;

· our ability to maintain our current research and development programs and establish new research and development

· addition and retention of key research and development personnel;

· our efforts to enhance operational, financial, and information management systems, and hire additional

personnel, including personnel to support development of our product candidates;

· negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter

and performing our obligations in such collaborations;

· the timing and amount of milestone and other payments we may receive under our collaboration arrangements;

· our eventual commercialization plans for our product candidates;

· the costs involved in prosecuting, defending, and enforcing patent claims and other intellectual property

· the costs and timing of regulatory approvals.

A change in the outcome of

any of these or other variables with respect to the development of any of our product candidates could significantly change the costs

and timing associated with the development of that product candidate.

Furthermore, our operating plans may change in the future, and we

may need additional funds to meet operational needs and capital requirements associated with such operating plans.

We expect to continue to incur losses for the foreseeable future and

need to raise additional capital until we are able to generate revenues from operations sufficient to fund our development and commercial

However, based on our current business plan, we believe that our cash at July 31, 2022, is sufficient to meet our anticipated

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

The following table summarizes our cash flows for

the nine months ended January 31, 2022:

For the Nine Months Ended January 31,

the three months ended July 31, 2022:

For the Three Months Ended July 31,

Net cash provided by (used in):

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$ (1,222,664 )

Investing activities

Financing activities

Net increase (decrease) in cash and cash equivalents

Net increase (decrease) in cash

$ (2,536,690 )

Operating Activities

During the nine months ended

January 31, 2022, net cash used in operating activities was $5.1 million.

This consisted primarily of a net loss of $8.5 million, partially

offset by non-cash charges of $3.2 million in stock-based compensation expense and an increase in our net operating assets and liabilities

The increase in our net operating assets and liabilities were due to an increase in accounts payable and accrued expenses

and a decrease in prepaid expenses and other current assets.

During the nine months ended

January 31, 2021, net cash used in operating activities was $1.5 million.

This consisted primarily of a net loss of $3.8 million, partially

offset by non-cash charges of $1.8 million in stock-based compensation expense and an increase in our net operating assets and liabilities

The increase in our net operating assets and liabilities were due to a decrease in accounts payable and accrued expenses

and an increase in prepaid expenses and other current assets.

During the three months ended July 31, 2022, net cash used in operating

activities was $2.5 million.

This consisted primarily of a net loss of $3.0 million and a decrease in our net operating assets and liabilities

of $374,000, partially offset by non-cash charges of $874,000.

The non-cash charges primarily consisted of stock-based compensation expense.

The decrease in our net operating assets and liabilities were due to a decrease in accounts payable and accrued liabilities and an increase

in prepaid expenses and other current assets.

Investing Activities

There were no investing activities

for the nine months ended January 31, 2022.

During the nine months ended

January 31, 2021, net cash provided by investing activities was $101,000.

This consisted of proceeds from repayment of notes receivable

from a related party, Avalanche International Corp.

for the three months ended July 31, 2022.

Financing Activities

During the nine months ended

January 31, 2022, net cash provided by financing activities was $14.9 million.

This consisted primarily of proceeds from our initial public

offering of $12.9 million, net of costs.

On July 28, 2021, we received from the FDA a “Study May Proceed” letter for a Phase

Ia study under our IND application for AL001.

Based on the achievement of this milestone, we sold an additional 1,333,333 shares of Common

Stock to DPL for $2 million, or $1.50 per share, and issued to DPL warrants to acquire 666,667 shares of our Common Stock with an exercise

price of $3.00 per share.

During the nine months ended

January 31, 2021, net cash provided by financing activities was $1.3 million.

This consisted primarily of proceeds from our convertible

note payable and convertible note payable-related party.

Impact of Coronavirus on Our Operations

In March 2020, the World Health

Organization declared the outbreak of COVID-19 as a pandemic which continues to spread throughout the United States and the world.

are monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its

spread, and its impact on our operations, financial position, cash flows, supply chains, and the industry in general, in addition to the

impact on our employees.

Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its

impact on our operations and liquidity is uncertain as of the date of this Quarterly Report.

The continuing presence of

COVID-19 has adversely impacted our business.

Our drug development and manufacturing activities for A001 were delayed by eight weeks due

to a shutdown at our third-party manufacturing facility during the months of March to May 2020, which resulted in about a one-month overall

delay in our clinical protocol development and IND development and submission as a result of a lack of labor and equipment.

COVID-19 also

delayed our nonclinical studies for AL002 by 12 weeks during the months of March to May 2020 due to shutdowns at our third-party lab facilities

where we were not granted access to perform research.

Moreover, COVID-19 has affected our ability to raise capital due to uncertain capital

We continue to assess and monitor our business operations and system supports and the impact COVID-19 may continue to have on

our operations and financial condition, but there can be no assurance that this analysis will enable us to avoid part or all of any impact

from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sector in particular.

Our operations are located

in Orange County, CA and Atlanta, GA, and one member of our senior management works in New York, NY.

We have been following the recommendations

of local health authorities to minimize exposure risk for our employees, including the temporary closures of our offices where certain

of our employees work and having employees work remotely to the extent possible, has not negatively impacted their efficiency.

we and our third-party facilities are working closely to maintain pre-COVID-19 levels.

Although we currently expect normal operations

for the balance of the fiscal year, recent events, such as the Omicron variant and the various responses that federal, state and local

governments have taken as a result, may have an adverse impact on our operations that is not currently anticipated.

There were no financing activities for the three

months ended July 31, 2022.

Contractual Obligations

On May 1, 2016, we entered

into a Standard Exclusive License Agreement for AL002 with Sublicensing Terms with the Licensor, pursuant to which the Licensor granted

us a royalty bearing exclusive worldwide license limited to the field of Alzheimer’s Immunotherapy and Diagnostics, under United

States Patent No.

8,188,046, entitled “Amyloid Beta Peptides and Methods of Use,” filed April 7, 2009 and granted May

In addition to royalty payments

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

for the license of the technology, as follows:

Original AL001 License:

Paid in November 2021

IND application filing

Paid in November 2021

May 1, 2016, we entered into a Standard Exclusive License Agreement for AL002 with Sublicensing Terms with the University of South Florida

Research Foundation, Inc., as licensor (the “Licensor”), pursuant to which the Licensor granted us a royalty bearing exclusive

worldwide license limited to the field of Alzheimer’s Immunotherapy and Diagnostics, under United States Patent No.

8,188,046, entitled

“Amyloid Beta Peptides and Methods of Use,” filed April 7, 2009 and granted May 29, 2012.

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

we have entered into with the Licensor.

The license agreements for AL002 require us 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 we pay combined royalty payments

of 4.5% on net sales of products developed from the licensed technology for AL001.

We have 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 our common stock.

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

2,227,923 shares of our 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, we are 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:

Original AL001

Completed September 2019

Pre-IND meeting

Completed June 2021

ND application filing

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

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Upon FDA approval

*Milestone met and completed

AL002 License:

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Upon FDA BLA approval

If we fail to meet a milestone

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

The Licensor was also granted

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

the owner of any equity securities of our company.

There are certain license

fees and milestone payments required to be paid pursuant to the terms of 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, we are required to pay milestone payments on the

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

Additional AL001 Licenses:

December 31, 2022

*Milestone met and completed

have met the pre-IND meeting, IND application filing, and successfully completed the Phase I clinical trial milestones encompassing AL001.

If we fail to meet a milestone by its specified date, 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

us while the Licensor remains the owner of any equity securities of our company.

June 10, 2020, we obtained two (2) additional royalty-bearing exclusive worldwide licenses from the Licensor to a therapy named AL001.

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”).

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

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

Additionally, under

each of the June AL001 License Agreements, we are required to pay milestone payments on the due dates to the Licensor for the license

of the technology, as follows:

Additional AL001

Upon IND application filing

IND application filing

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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 2. Management’s Discussion and Analysis