Alzamend Neuro, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of our operations together with our financial statements and the notes thereto appearing elsewhere in this Annual Report. This discussion contains forward-looking statements reflecting our current expectations, whose actual outcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements,” and elsewhere in this Annual Report. Overview We were incorporated on February 26, 2016, as Alzamend Neuro, Inc. under the laws of the State of Delaware. We were formed to acquire and commercialize patented intellectual property and know-how to prevent, treat and potentially cure the crippling and deadly Alzheimer’s. With our two product candidates, we aim to bring treatment or cures not only for Alzheimer’s, but also, bipolar disorder (“BD”), major depressive disorder (“MDD”) and post-traumatic stress disorder (“PTSD”). Existing Alzheimer’s treatments only temporarily relieve symptoms but do not, to our knowledge, slow or halt the underlying worsening of the disease. We have developed a novel approach to combat Alzheimer’s through immunotherapy. Critical Accounting Policies and Estimates Research and Development Expenses . Research and development costs are expensed as incurred. Research and development costs consist of scientific consulting fees and lab supplies, as well as fees paid to other entities that conduct certain research and development activities on behalf of our company. We have acquired and may continue to acquire the rights to develop and commercialize new product candidates from third parties. The upfront payments to acquire license, product or rights, as well as any future milestone payments, are immediately recognized as research and development expense provided that there is no alternative future use of the rights in other research and development projects. Stock-Based Compensation. We maintain a stock-based compensation plan as a long-term incentive for employees, non-employee directors and consultants. The plan allows for the issuance of incentive stock options, non-qualified stock options, restricted stock units, and other forms of equity awards. We recognize stock-based compensation expense for stock options on a straight-line basis over the requisite service period and account for forfeitures as they occur. Our stock-based compensation costs are based upon the grant date fair value of options estimated using the Black-Scholes option pricing model. To the extent any stock option grants are made subject to the achievement of a performance-based milestone, management evaluates when the achievement of any such performance-based milestone is probable based on the relative satisfaction of the performance conditions as of the reporting date. The Black-Scholes option pricing model utilizes inputs which are highly subjective assumptions and generally require significant judgment. These assumptions include: · Fair Value of Common Stock. See the subsection titled “– Common Stock Valuations” below; · Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option; · Expected Volatility. Because we do not have an extensive trading history for our common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded life sciences companies over a period equal to the expected term of the stock option grants. Comparable companies were chosen based on the similar size, stage in life cycle or area of specialty. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available; · Expected Term. The expected term represents the period that the stock-based awards are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term), as we do not have sufficient historical data to use any other method to estimate expected term; and · Expected Dividend Yield. We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero. - 48 - Certain of such assumptions involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different. Common Stock Valuations. Prior to our IPO in June 2021, there was no public market for our common stock, and, as a result, the fair value of the shares of common stock underlying our stock-based awards was estimated on each grant date by our Board of Directors. To determine the fair value of our common stock underlying option grants, our Board of Directors considered, among other things, input from management, and our Board of Directors’ assessment of additional objective and subjective factors that it believed were relevant, and factors that may have changed from the date of the most recent valuation through the date of the grant. These factors included, but were not limited to: · our results of operations and financial position, including our levels of available capital resources; · our stage of development and material risks related to our business; · progress of our research and development activities; · our business conditions and projections; · the valuation of publicly traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of peer companies; · the lack of marketability of our common stock as a private company; · the prices at which we sold shares of our common stock to outside investors in arms-length transactions; · the likelihood of achieving a liquidity event for our security holders, such as an initial public offering or a sale of our company, given prevailing market conditions; · trends and developments in our industry; and · external market conditions affecting the life sciences and biotechnology industry sectors. Income Taxes. We recognize deferred income taxes for the future tax consequences attribute to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. In accordance with Internal Revenue Code §382 (“IRC §382”), the future deductibility of our net operating losses (“NOLs”) may be subject to an annual limitation in the event of a change in control as defined by applicable regulations. We have yet to complete a formal study to confirm NOLs are not limited in utilization per IRC §382 and may reduce applicable deferred tax assets upon completion of such a study, in future periods. The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. We had no uncertain tax positions as of April 30, 2023. Recent Accounting Pronouncements See Note 3 to our financial statements included elsewhere in this report for additional information. Emerging Growth Company Status We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. - 49 - Plan of Operations We intend to develop and commercialize therapeutics that are better than existing treatments and have the potential to significantly improve the lives of individuals afflicted by Alzheimer’s, BD, MDD and PTSD. To achieve these goals, we are pursuing the following key business strategies: · Advance clinical development of AL001 for Alzheimer’s, BD, MDD and PTSD treatment; · Advance clinical development of ALZN002 for Alzheimer’s treatment; · Expand our pipeline of pharmaceuticals to include additional indications for AL001 and delivery methods; · Focus on translational and functional endpoints to efficiently develop product candidates; and · Optimize the value of AL001 and ALZN002 in major markets. Our pipeline consists of two novel therapeutic drug candidates: · AL001 - A patented ionic cocrystal technology delivering a therapeutic combination of lithium, salicylate and proline through three royalty-bearing exclusive worldwide licenses from the University of South Florida Research Foundation, Inc., as licensor (the “Licensor”); and · ALZN002 - 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 through a royalty-bearing exclusive worldwide license from the Licensor. Our most advanced product candidate (lead product) licensed and in clinical development in humans is AL001, an ionic cocrystal of lithium for the treatment of Alzheimer’s, BD, MDD and PTSD. Based on our preclinical data involving mice models, AL001 treatment prevented cognitive deficits, depression and irritability and is superior in improving associative learning and memory and irritability compared with lithium carbonate treatments, supporting the potential of this lithium formulation for the treatment of Alzheimer’s, BD, MDD and PTSD in humans. Lithium has been marketed for more than 35 years and human toxicology regarding lithium use has been well characterized, potentially mitigating the regulatory burden for safety data. On May 5, 2022, we initiated a multiple-dose, steady-state, double-blind, ascending dose safety, tolerability, pharmacokinetic clinical trial of AL001 in patients with mild to moderate Alzheimer’s and healthy subjects. We completed the Phase IIA clinical trial in March 2023 and announced positive topline data in June 2023. We announced that we successfully identified a maximum tolerated dose (“MTD”) for development of AL001 from a multiple-ascending dose study as assessed by an independent safety review committee. This dose, providing lithium at a lithium carbonate equivalent dose of 240 mg 3-times daily (“TID”), is designed to be unlikely to require lithium therapeutic drug monitoring (“TDM”). Also, this MTD is risk mitigated for the purpose of treating fragile populations, such as Alzheimer’s patients. Lithium is a commonly prescribed drug for manic episodes in BP type 1 as well as maintenance therapy of BP in patients with a history of manic episodes. Lithium is also prescribed off-label for MDD, BP and treatment of PTSD, among other disorders. Lithium was the first mood stabilizer approved by the FDA and is still a first-line treatment option (considered the “gold standard”) but is underutilized perhaps because of the need for TDM. Lithium was the first drug that required TDM by regulatory authorities in product labelling because the effective and safe range of therapeutic drug blood concentrations is narrow and well defined for treatment of BP when using lithium salts. Excursions above this range can be toxic, and below can impair effectiveness. Based on the results from our Phase IIA MAD study, we plan to initiate two safety and efficacy clinical trials in subjects with mild to moderate dementia of the Alzheimer’s type. Additionally, we intend to investigate the potential of AL001 for patients suffering from BD, MDD and PTSD by submitting IND applications to the FDA for these indication by the end of 2023. After FDA permission to proceed on the INDs, we intend to initiate clinical trials at this MTD to determine relative increased lithium levels in the brain compared to a marketed lithium salt for BD, MDD and PTSD, based on published mouse studies that predict that lithium can be given at lower doses for equivalent therapeutic benefit when treating with AL001. For example, the goal is to replace a 300 mg TID lithium carbonate dose for treatment of BD with a 240 mg TID AL001 lithium equivalent, which represents a daily decrease of 20% of lithium given to a patient. - 50 - We submitted a pre-IND meeting request for ALZN002 and supporting briefing documents to the Center for Biological Evaluation and Research of the FDA on July 30, 2021. We received a written response relating to the pre-IND from the FDA providing a path for Alzamend’s planned clinical development of ALZN002 on September 30, 2021. The FDA agreed to allow Alzamend to submit an IND to conduct a combined Phase I/II study. On September 28, 2022, we submitted an IND application to the FDA for ALZN002 and received a “study may proceed” letter on October 31, 2022. The product candidate is an immunotherapy vaccine designed to treat mild to moderate dementia of the Alzheimer’s type. ALZN002 is a proprietary “active” immunotherapy product, which means it is produced by each patient’s immune system. It consists of autologous DCs that are activated white blood cells taken from each individual patient so that they can be engineered outside of the body to attack Alzheimer’s-related amyloid-beta proteins. These DCs are pulsed with a novel amyloid-beta peptide (E22W) designed to bolster the ability of the patient’s immune system to combat Alzheimer’s; the goal being to foster tolerance to treatment for safety purposes while stimulating the immune system to reduce the brain’s beta-amyloid protein burden, resulting in reduced Alzheimer’s signs and symptoms. Compared to passive immunization treatment approaches that use foreign blood products (such as monoclonal antibodies), active immunization with ALZN002 is anticipated to offer a more robust and long-lasting effect on the clearance of amyloid. This could provide a safer approach due to its reliance on autologous immune components, using each individual patient’s own white blood cells rather than foreign cells and/or blood products. On April 3, 2023, we announced the initiation of a Phase I/IIA clinical trial for ALZN002 to treat mild to moderate dementia of the Alzheimer’s type. The purpose of this trial is to assess the safety, tolerability, and efficacy of multiple ascending doses of ALZN002 compared with that of placebo in 20-30 subjects with mild to moderate morbidity. The primary goal of this clinical trial is to determine an appropriate dose of ALZN002 for treatment of patients with Alzheimer’s in a larger Phase IIB efficacy and safety clinical trial, which Alzamend expects to initiate within three months of receiving data from the initial trial. The continuation of our current plan of operations with respect to completing our IND applications and conducting the series of human clinical trials for each of our therapeutics requires us to raise additional capital to fund our operations. Because our working capital requirements depend upon numerous factors, including the progress of our preclinical and clinical testing, timing and cost of obtaining regulatory approvals, changes in levels of resources that we devote to the development of manufacturing and marketing capabilities, competitive and technological advances, status of competitors, and our ability to establish collaborative arrangements with other organizations, we will require additional financing to fund future operations. Results of Operations Results of Operations for the Year Ended April 30, 2023 Compared to Year Ended April 30, 2022 The following table summarizes the results of our operations for the years ended April 30, 2023 and 2022: For the Year Ended April 30, 2023 2022 $ Change % Change OPERATING EXPENSES Research and development $ 7,445,857 $ 5,201,314 $ 2,244,543 43 % General and administrative 7,424,609 7,118,221 306,388 4 % Total operating expenses 14,870,466 12,319,535 2,550,931 21 % Loss from operations (14,870,466 ) (12,319,535 ) (2,550,931 ) 21 % OTHER INCOME (EXPENSE), NET Interest expense (7,701 ) (46,524 ) 38,823 -83 % Gain on extinguishment of debt - 4,000 (4,000 ) * Total other income (expense), net (7,701 ) (42,524 ) 34,823 -82 % NET LOSS $ (14,878,167 ) $ (12,362,059 ) $ (2,516,108 ) 20 % Basic and diluted net loss per common share $ (0.15 ) $ (0.14 ) $ (0.01 ) * Basic and diluted weighted average common shares outstanding 97,519,016 89,095,274 * - 51 - Revenue We currently have only two product candidates, AL001 and ALZN002. These products are in the 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, and any respective successors, will provide us with any revenue. We did not generate any revenues during the years ended April 30, 2023 and 2022, and we do not anticipate that we will generate revenue for the foreseeable future. Research and Development Expenses Research and development expenses for the years ended April 30, 2023 and 2022 were $7.4 million and $5.2 million, respectively. As reflected in the table below, research and development expenses primarily consisted of professional fees, clinical trial fees, licenses and fees, as well as stock compensation expense: For the Year Ended April 30, 2023 2022 $ Change % Change Professional fees $ 4,617,816 $ 3,669,009 $ 948,807 26 % Clinical trial fees 2,465,437 200,023 2,265,414 1,133 % Licenses and fees 50,000 715,000 (665,000 ) -93 % Stock compensation expense (42,589 ) 423,167 (465,756 ) -110 % Other research and development expenses 355,193 194,115 161,078 83 % Total research and development expenses $ 7,445,857 $ 5,201,314 $ 2,244,543 43 % Professional Fees During the years ended April 30, 2023 and 2022, we incurred professional fees of $4.6 million and $3.7 million, 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 the Phase IIA study for AL001 for dementia related to Alzheimer’s. Clinical Trial Fees During the years ended April 30, 2023 and 2022, we incurred clinical trial fees of $2.5 million and $0.2 million, respectively, which were principally comprised of clinical trial fees attributed to our Phase I and Phase IIA clinical trials for AL001. 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 Standard Exclusive License Agreement with Sublicensing Terms. During the year ended April 30, 2023, we incurred $50,000 in license fees related to the IND filing for ALZN002. During the year ended April 30, 2022, we incurred $715,000 in license fees related to the completion of the Phase I study for AL001 for dementia related to Alzheimer’s. Stock Compensation Expense During the years ended April 30, 2023 and 2022, we incurred $(43,000) and $423,000, 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 our common stock from authorized shares instead of settling such obligations with cash payments. The gain in research and development stock compensation expense for the year ended April 30, 2023 was a result of forfeitures of stock options previously expensed. Other Research and Development Expenses During the years ended April 30, 2023 and 2022, we incurred other fees of $0.4 million and $0.2 million, respectively, which were principally comprised of scientific materials required for our clinical trials. - 52 - General and Administrative Expenses General and administrative expenses for the years ended April 30, 2023 and 2022 were $7.4 million and $7.1 million, respectively. As reflected in the table below, general and administrative expenses primarily consisted of the following expense categories: stock compensation expense; salary and benefits; professional fees; marketing fees; insurance; travel and entertainment; as well as board of director fees. For the years ended April 30, 2023 and 2022, the remaining general and administrative expenses of $319,000 and $336,000, respectively, primarily consisted of payments for advertising and promotion, transfer agent fees, travel, and other office expenses, none of which is significant individually. For the Year Ended April 30, 2023 2022 $ Change % Change Stock compensation expense $ 3,625,214 $ 3,985,403 $ (360,189 ) -9 % Salary and benefits 1,042,860 873,013 169,847 19 % Professional fees 762,396 714,036 48,360 7 % Marketing fees 742,601 17,654 724,947 4106 % Insurance expense 587,427 714,329 (126,902 ) -18 % Travel and entertainment 194,746 175,261 19,485 11 % Board of director fees 150,000 302,089 (152,089 ) -50 % Other general and administrative expenses 319,365 336,436 (17,071 ) -5 % Total general and administrative expenses $ 7,424,609 $ 7,118,221 $ 306,388 4 % Stock Compensation Expense During the years ended April 30, 2023 and 2022, we incurred general and administrative stock compensation expense of $3.6 million and $4.0 million, respectively, related to stock option grants to executives, employees and 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. We valued the shares issued for services at their intrinsic value on the date of issuance. Stock compensation is a non-cash expense because we settle these obligations by issuing shares of our common stock from authorized shares instead of settling such obligations with cash payments. Salary and Benefits The second largest component of general and administrative expenses is salary and benefits expense. During the years ended April 30, 2023 and 2022, we incurred $1.0 million and $873,000, respectively, in employee-related expenses. As of April 30, 2023, we had four full-time and three part-time employees. Professional Fees During the years ended April 30, 2023 and 2022, we reported professional fees of $762,000 and $714,000, respectively, which were principally comprised of the following items: Year Ended April 30, 2023 · In June 2017, we entered into a five-year consulting agreement with Spartan Capital pursuant to which Spartan Capital agreed to provide consulting services with respect to general corporate matters. In December 2017, we paid to Spartan Capital a consulting fee of $1.4 million for the services to be rendered over the 60-month term of this consulting agreement. During the year ended April 30, 2023, we recorded an expense of $187,000 as a result of this consulting agreement. · During the year ended April 30, 2023, we incurred $189,000 in consulting fees, mainly for Sarbanes-Oxley compliance, $187,000 in audit and tax fees, $126,000 in legal fees, $50,000 in related party consulting and $22,000 in investor relations expenses. Year Ended April 30, 2022 · During the year ended April 30, 2022, we incurred $249,000 in audit and tax fees, $248,000 in Spartan Capital consulting fees, $89,000 in legal fees, $88,000 in related party consulting and $40,000 in investor relations expenses. - 53 - Marketing Fees During the years ended April 30, 2023 and 2022, we incurred marketing fees of $743,000 and $18,000, respectively, which was primarily expenses related to the marketing and brand development agreement with AULT. Insurance Expense During the years ended April 30, 2023 and 2022, we incurred insurance expense of $587,000 and $714,000, respectively, which was primarily directors and officers insurance. Other Expense, Net Interest expense was $8,000 for the year ended April 30, 2023 related to the financing of D&O insurance. Interest expense was $47,000 for the year ended April 30, 2022 related to the convertible promissory note issued in August 2020, including non-cash interest expense of $13,000 recorded from the amortization of debt discount. Current and Deferred Income Taxes As of April 30, 2023 and 2022, we had deferred tax assets totaling $10.8 million and $10.1 million, respectively. The ultimate realization of deferred tax assets is dependent upon the existence, or generation, of taxable income in the periods when those temporary differences and net operating loss carryovers are deductible. Management considers the scheduled reversal of deferred tax liabilities, taxes paid in carryover years, projected future taxable income, available tax planning strategies, and other factors in making this assessment. Based on available evidence, management believes it is more likely than not that some or all of the deferred tax assets will not be realized. Accordingly, we have established a 100% valuation allowance. As a result of the full valuation allowance, we did not record an income tax benefit for the years ended April 30, 2023 and 2022. Liquidity and Capital Resources The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred recurring net losses and operations have not provided sufficient cash flows. We believe that we will continue to incur operating and net losses each quarter until at least the time we begin significant deliveries of our products. We believe our current cash on hand is insufficient to fund our planned operations through one year after the date the financial statements are issued. These factors create substantial doubt about our ability to continue as a going concern for at least one year after the date that our audited financial statements are issued. Our inability to continue as a going concern could have a negative impact on our company, including our ability to obtain needed financing. We intend to finance our future development activities and our working capital needs largely through the sale of equity securities with some additional funding from other sources, including debt financing, until such time as funds provided by operations are sufficient to fund working capital requirements. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should we be unable to continue as a going concern. As of April 30, 2023, we had cash of $5.1 million and an accumulated deficit of $44.1 million. We have incurred recurring losses and reported losses for the year ended April 30, 2023 totaling $14.9 million. In the past, we have financed our operations principally through sales of equity securities. In March of 2021, we entered into a securities purchase agreement with AL, 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 between March 2021 and April 2022. In addition, we issued AL warrants to purchase an aggregate of 3,333,333 shares of common stock at an exercise price of $3.00 per share. Finally, we agreed that for a period of 18 months following the date of the payment of the final tranche of $4 million on April 26, 2022, AL will have the right to invest an additional $10 million on the same terms, except that no specific milestones have been determined with respect to the additional $10 million as of the date of this Annual Report. On June 17, 2021, we announced the closing of our 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 commissions and offering expenses, were approximately $12.9 million. Our common stock is listed on The Nasdaq Capital Market under the ticker symbol “ALZN”. 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 efforts. Our future capital requirements will depend on many factors, including: · successful enrollment in and completion of clinical trials; - 54 - · 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 programs; · 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 claims; and · 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. Cash Flows The following table summarizes our cash flows for the years ended April 30, 2023 and 2022: For the Year Ended April 30, 2023 2022 Net cash (used in) provided by: Operating activities $ (8,923,152 ) $ (6,613,990 ) Investing activities - (106,458 ) Financing activities 200 18,854,989 Net (decrease) increase in cash and cash equivalents $ (8,922,952 ) $ 12,134,541 Operating Activities During the year ended April 30, 2023, net cash used in operating activities was $8.9 million. This consisted primarily of a net loss of $14.9 million, partially offset by non-cash charges of $3.6 million in stock-based compensation expense and an increase in our net operating assets and liabilities of $2.3 million. The increase in our net operating assets and liabilities was primarily due to an increase in accounts payable and accrued liabilities and a decrease in prepaid expenses – related party. During the year ended April 30, 2022, net cash used in operating activities was $6.6 million. This consisted primarily of a net loss of $12.4 million, partially offset by non-cash charges of $4.4 million in stock-based compensation expense and an increase in our net operating assets and liabilities of $1.3 million. The increase in our net operating assets and liabilities was primarily due to an increase in accounts payable and accrued liabilities and a decrease in prepaid expenses and other current assets. Investing Activities During the year ended April 30, 2022, net cash used in investing activities was $106,000, from the purchase of equipment and machinery. We purchased a CliniMACS Plus instrument to be used on the ALZN002 project at the University of Miami. The machine was purchased from Miltenyi Biotec and is utilized to separate monocytes from blood. We purchased this equipment to streamline the development of DCs to create the ALZN002 vaccine for patients in the Phase I/IIA clinical trial. - 55 - Financing Activities During the year ended April 30, 2023, net cash provided by financing activities was $200 from the exercise of stock options. During the year ended April 30, 2022, net cash provided by financing activities was $18.9 million. This consisted primarily of proceeds from our initial public offering of $12.9 million, net of costs, and proceeds of $6 million from the issuance of common stock and warrants to AL. Contractual Obligations On July 2, 2018, we entered into two Standard Exclusive License Agreements with Sublicensing Terms for AL001 with the Licensor and its affiliate, the University of South Florida (the “AL001 Licenses”), pursuant to which the Licensor granted us a royalty bearing exclusive worldwide licenses limited to the field of Alzheimer’s, under United States Patent Nos. (i) 9,840,521, entitled “Organic Anion Lithium Ionic Cocrystal Compounds and Compositions”, filed September 24, 2015 and granted December 12, 2017, and (ii) 9,603,869, entitled “Lithium Co-Crystals for Treatment of Neuropsychiatric Disorders”, filed May 21, 2016 and granted March 28, 2017. On February 1, 2019, we entered into the First Amendments to the AL001 Licenses, on March 30, 2021, we entered into the Second Amendments to the AL001 Licenses and on June 8, 2023, we entered into the Third Amendments to the AL001 Licenses (collectively, the “AL001 License Agreements”). The AL001 License Agreements 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 AL001. 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 License Agreements are $40,000 on the first anniversary of the first commercial sale, $80,000 on the second anniversary first commercial sale and $100,000 on the third anniversary of the first commercial sale and every year thereafter, for the life of the AL001 License Agreements. On May 1, 2016, we entered into a Standard Exclusive License Agreement with Sublicensing Terms for ALZN002 with the Licensor (the “ALZN002 License”), 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. On August 18, 2017, we entered into the First Amendment to the ALZN002 License, on May 7, 2018, we entered into the Second Amendment to the ALZN002 License, on January 31, 2019, we entered into the Third Amendment to the ALZN002 License, on January 24, 2020, we entered into the Fourth Amendment to the ALZN002 License, on March 30, 2021, we entered into the Fifth Amendment to the ALZN002 License and on April 17, 2023, we entered into the Sixth Amendment to the ALZN002 License (collectively, the “ALZN002 License Agreement”). The ALZN002 License Agreement requires us to pay royalty payments of 4% on net sales of products developed from the licensed technology for ALZN002. We have already paid an initial license fee of $200,000 for ALZN002. As an additional licensing fee for the license of ALZN002, the Licensor received 3,601,809 shares of our common stock. Minimum royalties for ALZN002 are $20,000 on the first anniversary of the first commercial sale, $40,000 on the second anniversary first commercial sale and $50,000 on the third anniversary of the first commercial sale and every year thereafter, for the life of the ALZN002 License Agreement. On November 19, 2019, we entered into two Standard Exclusive License Agreements with Sublicensing Terms for two additional indications of AL001 with the Licensor (the “November AL001 License”), pursuant to which the Licensor granted us a royalty bearing exclusive worldwide licenses limited to the fields of (i) neurodegenerative diseases excluding Alzheimer’s and (ii) psychiatric diseases and disorders. On March 30, 2021, we entered into the First Amendments to the November AL001 License and on April 17, 2023, we entered into the Second Amendments to the November AL001 License (collectively, the “November AL001 License Agreements”). The November AL001 License Agreements require us to pay royalty payments of 3% on net sales of products developed from the licensed technology for AL001 in those fields. We paid an initial license fee of $20,000 for the additional indications. Minimum royalties for November AL001 License Agreements are $40,000 on the first anniversary of the first commercial sale, $80,000 on the second anniversary first commercial sale and $100,000 on the third anniversary of the first commercial sale and every year thereafter, for the life of the November AL001 License Agreements. These license agreements have an indefinite term that continue until the later of the date no licensed patent under the applicable agreement remains a pending application or enforceable patent, the end date of any period of market exclusivity granted by a governmental regulatory body, or the date on which the licensee’s obligations to pay royalties expire under the applicable license agreement. Under our various license agreements, 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. - 56 - 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 ALZN002 technology, as follows: Original AL001 Licenses: Payment Due Date Event $ 50,000 * Completed September 2019 Pre-IND meeting $ 65,000 * Completed June 2021 IND application filing $ 190,000 * Completed December 2021 Upon first dosing of patient in a clinical trial $ 500,000 * Completed March 2022 Upon Completion of first clinical trial $ 1,250,000 24 months from completion of the first Phase II clinical trial Upon first patient treated in a Phase III clinical trial $ 10,000,000 8 years from the effective date of the agreement Upon FDA NDA approval * Milestone met and completed ALZN002 License: Payment Due Date Event $ 50,000 * Upon IND application filing Upon IND application filing $ 50,000 September 2023 Upon first dosing of patient in first Phase I clinical trial $ 500,000 24 months from completion of first Phase I clinical trial Upon completion of first Phase II clinical trial $ 1,000,000 12 months from completion of the first Phase II clinical trial Upon first patient treated in a Phase III clinical trial $ 10,000,000 7 years from the effective date of the agreement Upon FDA BLA approval * Milestone met and completed Additional AL001 Licenses: Payment Due Date Event $ 2,000,000 36 months from completion of the first Phase II clinical trial Upon first patient treated in a Phase III clinical trial $ 16,000,000 August 1, 2029 First commercial sale Recent Accounting Standards For information about recent accounting pronouncements that may impact our financial statements, please refer to Note 3 of Notes to Financial Statements under the heading “Recent Accounting Standards.” ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Because we are a smaller reporting company, this section is not applicable.