Alzamend Neuro, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS Alzamend Neuro, Inc. Condensed Balance Sheets (Unaudited) July 31, 2023 April 30, 2023 ASSETS CURRENT ASSETS Cash $ 1,695,416 $ 5,140,859 Prepaid expenses and other current assets 718,188 447,589 Prepaid expenses - related party - 247,334 TOTAL CURRENT ASSETS 2,413,604 5,835,782 Property, plant and equipment, net 214,401 79,843 TOTAL ASSETS $ 2,628,005 $ 5,915,625 LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 2,740,888 $ 2,870,122 TOTAL LIABILITIES, ALL CURRENT 2,740,888 2,870,122 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ (DEFICIT) EQUITY Convertible Preferred stock, $ 0.0001 par value: 10,000,000 shares authorized; Series A Convertible Preferred Stock, $ 0.0001 stated value per share, 1,360,000 shares designated; nil 0 issued and outstanding as of July 31, 2023 and April 30, 2023 - - Common stock, $ 0.0001 par value: 300,000,000 shares authorized; 96,940,124 issued and outstanding as of July 31, 2023 and April 30, 2023 9,694 9,694 Additional paid-in capital 62,361,146 61,991,766 Note receivable for common stock – related party ( 14,883,295 ) ( 14,883,295 ) Accumulated deficit ( 47,600,428 ) ( 44,072,662 ) TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY ( 112,883 ) 3,045,503 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,628,005 $ 5,915,625 The accompanying notes are an integral part of these unaudited condensed financial statements. 3 Alzamend Neuro, Inc. Condensed Statements of Operations (Unaudited) For the Three Months Ended July 31, 2023 2022 OPERATING EXPENSES Research and development $ 2,366,137 $ 1,375,953 General and administrative 1,159,794 1,659,589 Total operating expenses 3,525,931 3,035,542 Loss from operations ( 3,525,931 ) ( 3,035,542 ) OTHER EXPENSE, NET Interest expense ( 1,835 ) ( 1,532 ) Total other expense, net ( 1,835 ) ( 1,532 ) NET LOSS $ ( 3,527,766 ) $ ( 3,037,074 ) Basic and diluted net loss per common share $ ( 0.04 ) $ ( 0.03 ) Basic and diluted weighted average common shares outstanding 98,440,124 97,481,790 The accompanying notes are an integral part of these unaudited condensed financial statements. 4 Alzamend Neuro, Inc. Condensed Statements of Stockholders’ (Deficit) Equity For the Three Months Ended July 31, 2023 (Unaudited) Series A Convertible Additional Note Receivable for Preferred Stock Common Stock Paid-In Common Stock - Accumulated Shares Amount Shares Amount Capital Related Party Deficit Total BALANCES, April 30, 2023 - $ - 96,940,124 $ 9,694 $ 61,991,766 $ ( 14,883,295 ) $ ( 44,072,662 ) $ 3,045,503 Stock-based compensation - - - - 369,380 - - 369,380 Net loss - - - - - - ( 3,527,766 ) ( 3,527,766 ) BALANCES, July 31, 2023 - $ - 96,940,124 $ 9,694 $ 62,361,146 $ ( 14,883,295 ) $ ( 47,600,428 ) $ ( 112,883 ) The accompanying notes are an integral part of these unaudited condensed financial statements. 5 Alzamend Neuro, Inc. Condensed Statements of Stockholders’ (Deficit) Equity For the Three Months Ended July 31, 2022 (Unaudited) Series A Convertible Additional Note Receivable for Preferred Stock Common Stock Paid-In Common Stock - Accumulated Shares Amount Shares Amount Capital Related Party Deficit Total BALANCES, April 30, 2022 - $ - 95,481,790 $ 9,548 $ 57,419,753 $ ( 14,883,295 ) $ ( 29,194,495 ) $ 13,351,511 Stock-based compensation - - - - 867,338 - - 867,338 Net loss - - - - - - ( 3,037,074 ) ( 3,037,074 ) BALANCES, July 31, 2022 - $ - 95,481,790 $ 9,548 $ 58,287,091 $ ( 14,883,295 ) $ ( 32,231,569 ) $ 11,181,775 The accompanying notes are an integral part of these unaudited condensed financial statements. 6 Alzamend Neuro, Inc. Condensed Statements of Cash Flows (Unaudited) For the Three Months Ended July 31, 2023 2022 Cash flows from operating activities: Net loss $ ( 3,527,766 ) $ ( 3,037,074 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 12,685 7,097 Stock-based compensation to employees and consultants 369,380 867,338 Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 270,599 ) ( 237,819 ) Prepaid expenses - related party 247,334 - Accounts payable and accrued liabilities ( 129,234 ) ( 136,232 ) Net cash used in operating activities ( 3,298,200 ) ( 2,536,690 ) Cash flows from investing activities: Purchase of machinery ( 147,243 ) - Net cash used in investing activities ( 147,243 ) - Net decrease in cash ( 3,445,443 ) ( 2,536,690 ) Cash at beginning of period 5,140,859 14,063,811 Cash at end of period $ 1,695,416 $ 11,527,121 The accompanying notes are an integral part of these unaudited condensed financial statements. 7 Alzamend Neuro, Inc. Notes to Unaudited Condensed Financial Statements 1. DESCRIPTION OF BUSINESS Organization Alzamend Neuro, Inc. (the “Company” or “Alzamend”), is a clinical-stage biopharmaceutical company focused on developing novel products for the treatment of Alzheimer’s disease (“Alzheimer’s”), bipolar disorder (“BD”), major depressive disorder (“MDD”) and post-traumatic stress disorder (“PTSD”). With two current product candidates, Alzamend aims to bring treatments or cures to market at a reasonable cost as quickly as possible. The Company’s current pipeline consists of two novel therapeutic drug candidates: (i) a patented ionic cocrystal technology delivering a therapeutic combination of lithium, proline and salicylate, known as AL001, through two royalty-bearing exclusive worldwide licenses from the University of South Florida Research Foundation, Inc., as licensor (the “Licensor”); and (ii) a patented method using a mutant peptide sensitized cell as a cell-based therapeutic vaccine that seeks to restore the ability of a patient’s immunological system to combat Alzheimer’s, known as ALZN002, through a royalty-bearing exclusive worldwide license from the same Licensor. The Company is devoting substantially all its efforts towards research and development of its two product candidates and raising capital. The Company has not generated any product revenue to date. The Company has financed its operations to date primarily through debt financings and through the sale of its common stock, par value $ 0.0001 per share (“Common Stock”). The Company expects to continue to incur net losses in the foreseeable future. 2. LIQUIDITY AND GOING CONCERN The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern. As of July 31, 2023, the Company had cash of $ 1.7 million, an accumulated deficit of $ 47.6 million and stockholders’ deficit of $ 113,000 . For the three months ended July 31, 2023, the Company had a net loss of $ 3.5 million and cash used in operating activities of $ 3.3 million. Historically, the Company has financed its operations principally through issuances of equity and debt instruments. The Company believes its current cash on hand is not sufficient to fund its planned operations through one year after the date the financial statements are issued. These factors create substantial doubt about the Company’s ability to continue as a going concern for at least one year after the date that these condensed financial statements are issued. The Company’s inability to continue as a going concern could have a negative impact on the company, including our ability to obtain needed financing. The Company’s 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 it be unable to continue as a going concern. In order to continue as a going concern, the Company will need to raise additional funds. The Company plans to seek additional funding through public equity, private equity and debt financings. Additional funds may also be received from the exercise of warrants (Note 7) and the receipt of funds from the note receivable (Note 4). The terms of any additional financing may adversely affect the holdings or rights of the Company’s stockholders. If the Company is unable to obtain funding, it could be required to delay, reduce or eliminate research and development programs and planned clinical trials which could adversely affect the Company’s business operations. 3. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) applicable to interim reports of companies filing as a smaller reporting company. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Report on Form 10-K for the year ended April 30, 2023, filed with the SEC on July 27, 2023. In the opinion of management, the accompanying condensed interim financial statements include all adjustments necessary in order to make the financial statements not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period. Certain notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Company’s Report on Form 10-K have been omitted. The accompanying condensed balance sheet at April 30, 2023 has been derived from the audited balance sheet at April 30, 2023 contained in such Form 10-K. 8 Accounting Estimates The preparation of financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The Company’s significant accounting policies that involve significant judgment and estimates include stock-based compensation, warrant valuation, and valuation of deferred income taxes. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with a remaining maturity of three months or less when purchased to be cash equivalents. As of July 31, 2023 and April 30, 2023, the Company had no cash equivalents. Fair Value of Financial Instruments Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurement , defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last is considered unobservable: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 assumptions: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities including liabilities resulting from imbedded derivatives associated with certain warrants to purchase Common Stock. The fair values of warrants are determined using the Black-Scholes valuation model, a “Level 3” fair value measurement, based on the estimated fair value of Common Stock, volatility based on the historical volatility data of similar companies, considering the industry, products and market capitalization of such other entities, the expected life based on the remaining contractual term of the warrants and the risk free interest rate based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the warrants’ contractual life. Property and Equipment, Net Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of five years. Significant additions and improvements are capitalized, while repairs and maintenance are charged to expense as incurred. Research and Development Expenses Research and development costs are expensed as incurred. Research and development costs consist of scientific consulting fees, clinical trial fees and lab supplies, as well as fees paid to other entities that conduct certain research and development activities on behalf of the Company. The Company has acquired and may continue to acquire the rights to develop and commercialize new product candidates from third parties. The upfront payments to acquire license, products or rights, as well as any future milestone payments, are immediately recognized as research and development expense provided that there is no alternative future use of the rights in other research and development projects. Stock-Based Compensation The Company recognizes stock-based compensation expense for stock options on a straight-line basis over the requisite service period and account for forfeitures as they occur. The Company’s 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. 9 The Company recognizes stock-based compensation expense for restricted stock units on a straight-line basis over the requisite service period and account for forfeitures as they occur. The Company’s stock-based compensation for restricted stocks is based upon the estimated fair value of the Common Stock. The Black-Scholes option pricing model utilizes inputs which are highly subjective assumptions and generally require significant judgment. Certain of such assumptions involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and the Company uses significantly different assumptions or estimates, the Company’s stock-based compensation could be materially different. Warrants The Company accounts for stock warrants as either equity instruments, derivative liabilities, or liabilities in accordance with FASB ASC 480, Distinguishing Liabilities from Equity and FASB ASC 815, Derivatives and Hedging, depending on the specific terms of the warrant agreement. Loss per Common Share The Company utilizes FASB ASC 260, Earnings per Share . Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted loss per common share reflects the potential dilution that could occur if convertible preferred stock, options and warrants were to be exercised or converted or otherwise resulted in the issuance of Common Stock that then shared in the earnings of the entity. Since the effects of outstanding stock options, restricted stock units and warrants are anti-dilutive in the periods presented, shares of Common Stock underlying these instruments have been excluded from the computation of loss per common share. The following sets forth the number of shares of Common Stock underlying outstanding stock options, restricted stock units and warrants that have been excluded from the computation of loss per common share: Schedule of antidilutive securities excluded from computation of earnings per share For the Three Months Ended July 31, 2023 2022 Stock options (1) 18,158,329 18,600,000 Restricted stock units 50,000 75,000 Warrants 10,149,788 10,149,788 28,358,117 28,824,788 (1) The Company has excluded 1,500,000 and 2,000,000 stock options for the three months ended July 31, 2023 and 2022, respectively, with an exercise price of $0.0004, from its anti-dilutive securities as these shares have been included in our determination of basic loss per share as they represent shares issuable for little or no cash consideration upon the satisfaction of certain conditions pursuant to FASB ASC 260-10-45-14. Recent Accounting Standards From time to time, new accounting pronouncements are issued by the FASB and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective are not expected to have a material impact on the Company’s financial position or results of operations upon adoption. The Company has considered all other recently issued accounting standards and does not believe the adoption of such standards will have a material impact on its financial statements. 4. NOTE RECEIVABLE FOR COMMON STOCK, RELATED PARTY On April 30, 2019, the Company and Ault Life Sciences Fund, LLC (“ALSF”) entered into a securities purchase agreement for the purchase of 10,000,000 shares of Common Stock for a total purchase price of $ 15,000,000 , or $1.50 per share with 5,000,000 warrants with a 5 -year life and an exercise price of $ 3.00 per share and vesting upon issuance. The total purchase price of $ 15,000,000 was in the form of a non-interest bearing note receivable with a 12-month term from ALSF, a related party. In November 2019, the term of the note receivable was extended to December 31, 2021, and in May 2021, the term of the note receivable was extended to December 31, 2023. The note is secured by a pledge of the purchased shares. As the note receivable from ALSF is related to the issuance of Common Stock, it is recorded as an offset to additional paid-in capital. At July 31, 2023 and April 30, 2023, the outstanding balance of the note receivable was $ 14,883,295 . ALSF is wholly owned by Ault Life Sciences, Inc. (“ALSI”). ALSI is majority owned by Ault & Company, Inc. (“Ault & Co.”). Messrs. Horne and Nisser, directors of the Company, are also directors of Ault & Co. 10 5. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets are as follows: Schedule of prepaid expenses and other current assets July 31, 2023 April 30, 2023 Prepaid clinical trial fees $ 394,821 $ 352,635 Prepaid insurance 311,533 92,154 Other prepaid expenses 11,834 2,800 Total prepaid expenses and other current assets $ 718,188 $ 447,589 During the three months ended July 31, 2023, the Company prepaid $ 313,000 for clinical trial fees related to ALZN002. During the year ended April 30, 2023, the Company prepaid $ 936,000 for clinical trial fees related to ALZN002. Prepaid clinical trial fees at July 31, 2023 and April 30, 2023 represented the unused portion of the prepaid clinical trial fees. On June 14, 2023, the Company purchased directors’ and officers’ insurance for 12 months in the amount of $ 337,000 . Prepaid insurance at July 31, 2023 represented the unamortized portion of annual insurance premium. 6. STOCK-BASED COMPENSATION 2016 Stock Incentive Plan On April 30, 2016, the Company’s stockholders approved the Company’s 2016 Stock Incentive Plan (the “Plan”). The Plan provides for the issuance of a maximum of 12,500,000 shares of Common Stock to be offered to the Company’s directors, officers, employees, and consultants. On March 1, 2019, the Company’s stockholders approved an additional 7,500,000 shares to be available for issuance under the Plan. Options granted under the Plan have an exercise price equal to or greater than the fair value of the underlying Common Stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant. The options expire between five and 10 years from the date of grant. Restricted stock awards granted under the Plan are subject to a vesting period determined at the date of grant. 2021 Stock Incentive Plan In February 2021, the Company’s board of directors (the “Board”) adopted, and the stockholders approved, the Alzamend Neuro, Inc. 2021 Stock Incentive Plan (the “2021 Plan”). The 2021 Plan authorizes the grant to eligible individuals of (1) stock options (incentive and non-statutory), (2) restricted stock, (3) stock appreciation rights, or SARs, (4) restricted stock units, and (5) other stock-based compensation. Stock Subject to the 2021 Plan. The maximum number of shares of Common Stock that may be issued under the 2021 Plan is 10,000,000 shares, which number will be increased to the extent that compensation granted under the 2021 Plan is forfeited, expires or is settled for cash (except as otherwise provided in the 2021 Plan). Substitute awards (awards made or shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company that the Company acquires or any subsidiary of the Company or with which the Company or any subsidiary combines) will not reduce the shares authorized for grant under the 2021 Plan, nor will shares subject to a substitute award be added to the shares available for issuance or transfer under the 2021 Plan. All options that the Company grants are granted at the per share fair value on the grant date. Vesting of options differs based on the terms of each option. The Company has valued the options at their date of grant utilizing the Black-Scholes option pricing model. As of the date of issuance of these options, there was not an active public market for the Company’s shares. Accordingly, the fair value of the underlying options was determined based on the historical volatility data of similar companies, considering the industry, products and market capitalization of such other entities. The risk-free interest rate used in the calculations is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options as calculated using the simplified method. The expected life of the options used was based on the contractual life of the option granted. Stock-based compensation is a non-cash expense because the Company settles these obligations by issuing shares of Common Stock from its authorized shares instead of settling such obligations with cash payments. 11 A summary of stock option activity for the three months ended July 31, 2023 is presented below: Schedule of share-based payment arrangement, option, activity Outstanding Options Shares Available for Grant Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value Balance at April 30, 2023 9,191,671 14,808,329 $ 1.22 6.18 $ 819,900 Options granted - - $ - - Options exercised - - $ - - Options expired - - $ - - Balance at July 31, 2023 9,191,671 14,808,329 $ 1.22 5.93 $ 678,900 Options vested and expected to vest at July 31, 2023 13,808,329 $ 1.22 5.68 $ 678,900 Options exercisable at July 31, 2023 13,401,031 $ 1.20 5.61 $ 678,900 The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e., the difference between the estimated fair value on the respective date and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their options. Performance Contingent Stock Options Granted to Employee On November 26, 2019, the Board granted 4,250,000 performance- and market-contingent awards to certain key employees and a director. These grants were made outside of the Plan. These awards have an exercise price of $1.50 per share. These awards have multiple separate market triggers for vesting based upon either (i) the successful achievement of tiered target closing prices on a national securities exchange for 90 consecutive trading days later than 180 days after the Company’s initial public offering (“IPO”) for its Common Stock, or (ii) tiered target prices for a change in control transaction. The target prices ranged from $10 per share to $40 per share. In the event any of the stock price milestones are not achieved within three years , the unvested portion of the performance options will be reduced by 25%. On November 22, 2022, the Compensation Committee of the Board modified the performance criteria for these awards. The target price range is now $10 per share to $20 per share. Additionally, if the stock price milestones are now not achieved by November 27, 2026, as opposed to within three years, the unvested portion of the performance options will be reduced by 25%. Due to the significant risks and uncertainties associated with achieving the market-contingent awards, as of July 31, 2023, the Company believes that the achievement of the requisite performance conditions is not probable and, as a result, no compensation cost has been recognized for these awards. On November 29, 2022, the Compensation Committee of the Board granted 2,000,000 performance-based stock option to the Chief Executive Officer at an exercise price of $1.17 per share, of which 50% vest upon the completion and announcement of topline data from the Company’s Phase II clinical trial of AL001 within three years from grant date and the remaining 50% vest upon the completion and announcement of topline data from the Company’s Phase I/IIA clinical trial of ALZN002 within four years from the grant date. As of July 31, 2023, the Company believes that it is probable that the performance condition of the completion and announcement of topline data from the Company’s Phase II clinical trial of AL001 will be achieved and had recognized the related stock-based compensation during the three months ended January 31, 2023. As of July 31, 2023, the Company believes that the achievement of the second performance condition is not probable and, as a result, no compensation cost has been recognized related to Phase I/IIA of ALZN002. Performance Contingent Stock Options Granted to TAMM Net On March 23, 2021, the Company issued performance-based stock options to certain team members at TAMM Net, Inc. (“TAMM Net”) to purchase an aggregate of 450,000 shares of Common Stock at a per share exercise price of $1.50 per share, of which 50% vest upon the completion of Phase I of AL001 by March 31, 2022, and the remaining 50% vest upon completion of Phase I/IIA of ALZN002 by December 31, 2022. On January 19, 2023, the Board modified the performance criteria for these awards. The remaining 50% of the grant will now vest upon the completion and announcement of topline data of the first cohort from a Phase I/IIA clinical trial of ALZN002 on/or before March 31, 2024. Due to the significant risks and uncertainties associated with achieving the completion of Phase I/IIA for ALZN002, as of July 31, 2023, the Company believes that the achievement of the requisite performance conditions is not probable and, as a result, no compensation cost has been recognized for these awards related to ALZN002. 12 Performance Contingent Stock Options Granted to Consultants On October 14, 2021, the Company issued performance-based stock options to two consultants to purchase an aggregate of 200,000 shares of Common Stock with an exercise price of $2.42 per share, of which 50,000 vest upon completion of each of the Phase II clinical trials of AL001 for a BD indication, AL001 for a PTSD indication, AL001 for a depression indication and ALZN002 for an Alzheimer’s indication. On January 19, 2023, the Board modified the performance criteria for these awards. The revised grant will vest 25% if the Company (a) completes and announces topline data from a Phase II clinical trial of AL001 and ALZN002, as applicable, that would support a new drug application for the drug candidate and the indication listed below, and (b) obtained a “Study May Proceed” letter from the U.S. Food and Drug Administration (“FDA”) for the additional Investigational New Drug (“IND”) on/or before December 31, 2023, as follows: (i) AL001 – bipolar disorder; (ii) AL001- major depressive disorder; (iii) AL001 – post-traumatic stress disorder; and (iv) ALZN002 – Alzheimer’s disease. As of July 31, 2023, the Company believes that the achievement of the requisite performance conditions is not probable and, as a result, no compensation cost has been recognized for these awards related to Phase II of AL001 and ALZN002. Stock-Based Compensation Expense The Company’s results of operations include expenses relating to stock-based compensation for three months ended July 31, 2023 and 2022, that were comprised as follows: Schedule of stock-based compensation For the Three Months Ended July 31, 2023 2022 General and administrative $ 369,380 $ 867,338 As of July 31, 2023, total unamortized stock-based compensation expense related to unvested employee and non-employee awards that are expected to vest was $ 1.0 million. The weighted-average period over which such stock-based compensation expense will be recognized is approximately 1.3 years. 7. WARRANTS The following table summarizes information about Common Stock warrants outstanding and exercisable at July 31, 2023: Schedule of common stock warrants outstanding Outstanding Exercisable Weighted Average Weighted Weighted Remaining Average Average Exercise Number Contractual Exercise Number Exercise Price Outstanding Life (years) Price Exercisable Price $ 1.00 500,000 0.6 $ 1.00 500,000 $ 1.00 $ 1.75 161,342 1.3 $ 1.75 161,342 $ 1.75 $ 3.00 9,427,196 1.7 $ 3.00 9,427,196 $ 3.00 $ 6.25 61,250 2.9 $ 6.25 61,250 $ 6.25 $ 1.00 - $ 6.25 10,149,788 1.6 $ 2.90 10,149,788 $ 2.90 8. COMMITMENTS AND CONTINGENCIES Contractual Obligations On July 2, 2018, the Company 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 the Company 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, the Company entered into the First Amendments to the AL001 Licenses, on March 30, 2021, the Company entered into the Second Amendments to the AL001 Licenses and on June 8, 2023, the Company entered into the Third Amendments to the AL001 Licenses (collectively, the “AL001 License Agreements”). The Third Amendments to the AL001 Licenses modified the timing of the payments license fees. The AL001 License Agreements require that the Company pay combined royalty payments of 4.5% on net sales of products developed from the licensed technology for AL001. The Company has already paid an initial license fee of $200,000 for AL001. As an additional licensing fee for the license of the AL001 technologies, the Licensor received 2,227,923 shares of the Company’s 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 of the 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. 13 On May 1, 2016, the Company entered into a Standard Exclusive License Agreement with Sublicensing Terms for ALZN002 with the Licensor (the “ALZN002 License”), pursuant to which the Licensor granted the Company 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, the Company entered into the First Amendment to the ALZN002 License, on May 7, 2018, the Company entered into the Second Amendment to the ALZN002 License, on January 31, 2019, the Company entered into the Third Amendment to the ALZN002 License, on January 24, 2020, the Company entered into the Fourth Amendment to the ALZN002 License, on March 30, 2021, the Company entered into the Fifth Amendment to the ALZN002 License and on April 17, 2023, the Company entered into the Sixth Amendment to the ALZN002 License (collectively, the “ALZN002 License Agreement”). The Sixth Amendments to the ALZN002 License modified the timing of the payments license fees. The ALZN002 License Agreement requires the Company to pay royalty payments of 4% on net sales of products developed from the licensed technology for ALZN002. The Company has 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 the Company’s common stock. Minimum royalties for ALZN002 are $20,000 on the first anniversary of the first commercial sale, $40,000 on the second anniversary of the 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, the Company 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 the Company 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, the Company entered into the First Amendments to the November AL001 License and on April 17, 2023, the Company entered into the Second Amendments to the November AL001 License (collectively, the “November AL001 License Agreements”). The Second Amendments to the November AL001 License modified the timing of the payments license fees. The November AL001 License Agreements require the Company to pay royalty payments of 3% on net sales of products developed from the licensed technology for AL001 in those fields. The Company 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 of the 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 Company’s obligations to pay royalties expire under the applicable license agreement. Under the various license agreements, if the Company fails 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 the Company while the Licensor remains the owner of any equity securities of the Company. Additionally, the Company is required to pay milestone payments on the due dates to the Licensor for the license of the AL001 technologies and for the ALZN002 technology, as follows: Original AL001 Licenses: Schedule of contractual obligation, fiscal year maturity 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 first Phase II clinical trial Upon first patient treated in a Phase III clinical trial $ 10,000,000 8 years from the effective date of the agreement Upon FDA approval * Milestone met and completed 14 ALZN002 License: Payment Due Date Event $ 50,000 * Completed January 2022 Upon IND application filing $ 50,000 September 2023 Upon first dosing of patient in 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 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 Biologics License Application approval * Milestone met and completed Additional AL001 Licenses: Payment Due Date Event $ 2,000,000 36 months from completion of first Phase II clinical trial Upon first patient treated in a Phase III clinical trial $ 16,000,000 August 1, 2029 First commercial sale 9. EQUITY TRANSACTIONS The Company is authorized to issue 10,000,000 shares of Preferred Stock $ 0.0001 par value. The Board has designated 1,360,000 shares as the Series A Convertible Preferred Stock. The rights, preferences, privileges and restrictions on the remaining authorized 8,640,000 shares of Preferred Stock have not been determined. The Board is authorized to create a new series of preferred shares and determine the number of shares, as well as the rights, preferences, privileges and restrictions granted to or imposed upon any series of preferred shares. Series A Convertible Preferred Stock As of July 31, 2023, there were no shares of Series A Convertible Preferred Stock issued or outstanding. Common Stock On April 30, 2019, the Company and ALSF entered into a securities purchase agreement (the “SPA”) for the purchase of 10,000,000 shares of Common Stock for a total purchase price of $ 15,000,000 , or $ 1.50 per share with 5,000,000 warrants with a 5 -year life and an exercise price of $ 3.00 per share and vesting upon issuance. The total purchase price of $ 15,000,000 was in the form of a non-interest bearing note receivable with a 12 -month term from ALSF, a related party. The note is secured by a pledge of the purchased shares. Pursuant to the SPA, ALSF is entitled to full ratchet anti-dilution protection, most-favored nation status, denying the Company the right to enter into a variable rate transaction absent its consent, a right to participate in any future financing the Company may consummate and to have all the shares of Common Stock to which it is entitled under the SPA registered under the Securities Act within 180 days of the final closing of the IPO. In May 2021, the term of the note receivable was extended to December 31, 2023. The note is secured by a pledge of the purchased shares. In March 2021, the Company entered into a securities purchase agreement with Ault Lending, LLC, formerly known as Digital Power Lending, LLC (“Ault Lending”) pursuant to which the Company agreed to sell an aggregate of 6,666,667 shares of Common Stock for an aggregate of $ 10 million, or $ 1.50 per share, which sales will be made in tranches. On March 9, 2021, Ault Lending paid $ 4 million, less the $ 1.8 million in prior advances and the surrender for cancellation of a $ 50,000 convertible promissory note held by BitNile, for an aggregate of 2,666,667 shares of Common Stock. Under the terms of the securities purchase agreement, Ault Lending (i) purchased an additional 1,333,333 shares of Common Stock upon approval by the FDA of the Company’s IND for its Phase IA clinical trials for AL001 for a purchase price of $2 million, and (ii) purchased 2,666,667 shares of Common Stock upon the completion of these Phase IA clinical trials for AL001 for a purchase price of $4 million. In addition, the Company issued to Ault Lending warrants to purchase 3,333,333 shares of Common Stock at an exercise price of $3.00 per share. The term of the warrants is five years. Finally, the Company agreed that for a period of 18 months following the date of the payment of the final tranche of $4 million, on April 28, 2022, DPL will have the right to invest an additional $ 10 million on the same terms, except that no specific milestones have been determined with respect to the additional $ 10 million as of the date of this Quarterly Report. 15 10. OTHER RELATED PARTY TRANSACTIONS In November 2022, the Company entered into a marketing and brand development agreement with Ault Alliance, Inc. (“AULT”), effective August 1, 2022, whereby AULT will provide various marketing services over twelve months valued at $1.4 million. The Company had the right to pay the fee in cash or shares of its common stock with a value of $1.50 per share. On November 11, 2022, the Company elected to pay the fee with 933,334 shares of its common stock. The Company recorded the value of the agreement using the closing price of the Company’s common stock on November 11, 2022, and will amortize the expense over twelve months beginning in August 2022. At July 31, 2023, the balance of related party prepaid expenses was zero. 11. SUBSEQUENT EVENTS On September 8, 2023, the Company entered into an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC, as sales agent to sell shares of its Common stock, having an aggregate offering price of up to approximately $ 9.8 million (the “Shares”) from time to time, through an “at the market offering” (the “ATM Offering”) as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). On September 8, 2023, the Company filed a prospectus supplement with the SEC relating to the offer and sale of up to approximately $ 9.8 million in shares of common stock in the ATM Offering. The offer and sale of the Shares will be made pursuant to the Company’s effective “shelf” registration statement on Form S-3 and an accompanying base prospectus contained therein (Registration Statement No. 333-273610) filed with the SEC on August 2, 2023 and declared effective by the SEC on August 10, 2023. 16