What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-09-11 compared with 2024-03-25 · 268 added, 406 removed, 294 unchanged (70% of the section changed)

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and “us” refer to Alzamend Neuro, Inc., a Delaware corporation.

were incorporated on February 26, 2016, as Alzamend Neuro, Inc.

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.

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 disease (“Alzheimer’s”).

With our two product candidates, we aim to bring treatment or cures not only for Alzheimer’s, but also bipolar disorder (“BD”),

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Existing Alzheimer’s treatments

only temporarily relieve symptoms but do not, to our knowledge, slow or halt the underlying worsening of the disease.

only temporarily relieve symptoms but do not, to our knowledge, slow or halt the underlying progression of the disease.

We have developed

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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 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.

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.

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These assumptions include:

· Fair Value of Common Stock.

See the subsection titled “Common Stock Valuations”

· Risk-Free Interest Rate.

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Therefore, we used an expected dividend yield of zero.

Certain of such assumptions

Certain of these assumptions

involve inherent uncertainties and the application of significant judgment.

1 unchanged sentence

use significantly different assumptions or estimates, our stock-based compensation could be materially different.

Common Stock Valuations.

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:

· 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 IPO or a sale of our

company, given prevailing market conditions;

· trends and developments in our industry;

· external market conditions affecting the life sciences and biotechnology industry sectors.

Following the closing of our

IPO, our Board determined the fair market value of our Common Stock based on the closing price of our Common Stock as reported on the

date of grant.

Preferred Stock Classification.

We analyze the terms of our preferred stock using Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities

from Equity , to determine whether our preferred stock should be classified as a liability or equity, and if classified as equity,

permanent or temporary.

Common criteria we consider are redemption provisions, conversion options, cumulative of mandatory fixed dividends,

discretionary dividends based on earning, voting rights and collateral requirements.

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:

intend to develop and commercialize therapeutics and vaccines 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;

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· Optimize the value of AL001 and ALZN002 in major markets.

Our pipeline consists of two

novel therapeutic drug candidates:

pipeline consists of two novel therapeutic drug candidates:

· AL001 - A patented ionic cocrystal technology delivering a therapeutic combination of lithium, salicylate

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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.

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.

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 patient dosing

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.

We completed the Phase IIA clinical trial in March

2023 and announced positive topline data in June 2023.

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

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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 are investigating the potential of AL001 for patients suffering from BD, MDD and PTSD, and submitted

Investigational New Drug (“IND”) applications to the FDA for these indications.

The IND for BD was filed in August 2023 and

we received a “study may proceed” letter from the FDA in September 2023.

The IND for MDD was filed in October 2023 and we

received a “study may proceed” letter from the FDA in November 2023.

The IND for PTSD was filed in November 2023 and we received

a “study may proceed” letter from the FDA in December 2023.

After FDA permission to proceed on the INDs, we intend to initiate

clinical trials at the 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.

We anticipate beginning Phase II studies for

the additional indications after we have obtained the necessary financing for the trials and payment to Phase IIA MAD study vendor for

the final reports of that study.

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.

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.

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.

We expect this trial to last for up to five years.

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.

On February 13,

2024, we received notice from the company we engaged as our contract research organization (“CRO”), Biorasi, LLC.

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 are investigating the potential of AL001 for patients suffering from BD, MDD

and PTSD, and submitted investigational new drug (“IND”) applications to the FDA for these indications.

The IND for BD was

submitted in August 2023 and we received a “study may proceed” letter from the FDA in September 2023.

The IND for MDD was

submitted in October 2023 and we received a “study may proceed” letter from the FDA in November 2023.

The IND for PTSD was

submitted in November 2023 and we received a “study may proceed” from the FDA in December 2023.

intend to initiate clinical trials in 2025 at this MTD to determine relative increased lithium levels in the brain compared to a marketed

lithium salt for Alzheimer’s, 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.

In August 2024, we announced that we had partnered with Massachusetts General Hospital to serve as the CRO for these clinical trials.

September 28, 2022, we submitted an IND application to the FDA for ALZN002 and received a “study may proceed” letter on October

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, with 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.

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

The purpose of this trial is to assess the safety, tolerability, and efficacy of multiple ascending doses of ALZN002 compared with

that of a 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.

13, 2024, we received notice from the company we engaged as our contract research organization (“CRO”), Biorasi, LLC (“Biorasi”)

that Biorasi was terminating our contract with them.

We are currently pursuing the engagement of a replacement CRO.

The continuation of our current

plan of operations with respect to initiating 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.

Recent Developments

Nasdaq Listing

Deficiency Letter from Nasdaq – Market Value

September 26, 2023, we received a notice from the staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, for the

previous 30 consecutive business days, the minimum Market Value of Listed Securities (“MVLS”) for our Common Stock was below

the $35 million minimum MVLS requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2) (the

“MVLS Rule”).

In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have 180 calendar days, or until March 25, 2024, to

regain compliance with the MVLS Rule.

To regain compliance with the MVLS Rule, the MVLS for our Common Stock must close at $35 million

or more for a minimum of 10 consecutive business days at any time during this 180-day period.

If we regain compliance with the MVLS Rule,

Nasdaq will provide us with written confirmation and will close the matter.

If we do not regain compliance with the rule by March 25,

2024, Nasdaq will provide notice that our Common Stock will be delisted from the Nasdaq Capital Market.

In the event of such notification,

the Nasdaq rules permit us an opportunity to appeal Nasdaq’s determination.

Deficiency Letter from Nasdaq – Bid Price

On February 1, 2024, we received

a notice in the form of a letter (“Deficiency Letter”) from the Listing Qualifications Staff of the Nasdaq stating that we

were not in compliance with Nasdaq Listing Rule 5550(a)(2) because the bid price for the Common Stock had closed below $1.00 per share

for the previous 30 consecutive business days.

In accordance with Nasdaq listing rule 5810(c)(3)(A), we have 180 calendar days, or until

July 30, 2024, to regain compliance.

The Deficiency Letter states that to regain compliance, the bid price for the Common Stock must close

at $1.00 per share or more (the “Minimum Bid Price”) for a minimum of 10 consecutive business days during the compliance period

ending July 30, 2024.

In the event that we do not regain compliance within this 180-day period, we may be eligible to seek an additional

compliance period of 180 calendar days if we meet the continued listing requirement for market value of publicly held shares and all other

initial listing standards for the Nasdaq Capital Market, with the exception of the Minimum Bid Price, and provides written notice to Nasdaq

of its intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary.

if it appears to the Nasdaq Staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq will provide

notice to us that our Common Stock will be subject to delisting.

At that time, we may appeal any such delisting determination to a Nasdaq

hearings panel.

continuation of our current plan of operations with respect to initiating and conducting the series of human clinical trials for each

of our therapeutics requires us to raise additional capital to fund our operations.

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 Three Months Ended January 31,

Results of Operations for the Three Months Ended July 31,

2024 and 2023

The following table summarizes

the results of our operations for the three months ended January 31, 2024 and 2023:

For the Three Months Ended January 31,

the results of our operations for the three months ended July 31, 2024 and 2023:

For the Three Months Ended July 31,

OPERATING EXPENSES

Research and development

$ (2,159,566 )

General and administrative

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$ (3,527,766 )

$ (5,425,574 )

Basic and diluted net loss per common share

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We did not generate any revenues

during the three months ended January 31, 2024 and 2023, and we do not anticipate that we will generate revenue for the foreseeable future.

during the three months ended July 31, 2024 and 2023, and we do not anticipate that we will generate revenue for the foreseeable future.

Research and Development Expenses

Research and development expenses

for the three months ended January 31, 2024 and 2023 were $1.9 million and $2.9 million, respectively.

As reflected in the table below,

research and development expenses primarily consisted of professional fees and clinical trial fees:

For the Three Months Ended January 31,

for the three months ended July 31, 2024 and 2023 were $207,000 and $2.4 million, respectively.

As reflected in the table below, research

and development expenses primarily consisted of professional fees and clinical trial fees:

For the Three Months Ended July 31,

Professional fees

Clinical trial fees

Stock-based compensation expense

Other research and development expenses

Total research and development expenses

* Not meaningful

$ (2,159,566 )

Professional Fees

During the three months ended

January 31, 2024 and 2023, we incurred professional fees of $557,000 and $861,000, respectively, which were principally comprised of professional

July 31, 2024 and 2023, we incurred professional fees of $184,000 and $1.1 million, respectively, which were primarily comprised of professional

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

The decrease relates to lower professional

fees incurred related to the preparation for the clinical trial for ALZN002.

fees incurred related to minimal clinical trial activities.

Clinical Trial Fees

During the three months ended

January 31, 2024 and 2023, we incurred clinical trial fees of $1.3 million and $2.1 million, respectively.

Clinical trial fees for the

three months ended January 31, 2024, consisted of $503,000 for our Phase IIA clinical trial for AL001 and $750,000 for our Phase IIA clinical

trial for ALZN002.

Clinical trial fees for the three months ended January 31, 2023 were for our Phase I clinical trial for AL001.

Stock-Based Compensation Expense

During the three months ended

January 31, 2024 and 2023, we incurred stock-based compensation of $71,000 and $(43,000), respectively, related to stock option grants

to consultants.

The increase in research and development stock compensation expense for the three months ended January 31, 2024 was a

result of the vesting of performance stock options grants.

July 31, 2024 and 2023, we incurred clinical trial fees of nil and $1.2 million, respectively.

We had no clinical trial activity for the

three months ended July 31, 2024.

Clinical trial fees for the three months ended July 31, 2023 were for our Phase IIA clinical trial for

AL001 and our Phase I/IIA clinical trial for ALZN002.

Other Research and Development Expenses

During the three months ended

January 31, 2024 and 2023, we incurred other fees of $27,000 and $21,000, respectively, which were principally comprised of scientific

materials required for our clinical trials.

July 31, 2024 and 2023, we incurred other fees of $22,000 and $51,000, respectively, which were primarily comprised of scientific materials

required for our clinical trials.

General and Administrative Expenses

General and administrative

expenses for the three months ended January 31, 2024 and 2023 were $751,000 and $2.5 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;

expenses for the three months ended July 31, 2024 and 2023 were $756,000 and $1.2 million, respectively.

As reflected in the table below,

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

salaries and benefits;

as well as marketing fees.

For the three months ended January 31, 2024 and 2023,

the remaining general and administrative expenses of $137,000 and $182,000, respectively, primarily consisted of payments for filing fees,

transfer agent fees, travel and entertainment, board of director fees and other office expenses, none of which was significant individually.

For the Three Months Ended January 31,

professional fees;

stock-based compensation expense;

$ (1,435,573 )

marketing fees;

as well as board of director fees.

For the three months ended July 31, 2024

and 2023, the remaining general and administrative expenses of $62,000 and $83,000, respectively, primarily consisted of payments for

filing fees, transfer agent fees, travel and entertainment and other office expenses, none of which was significant individually.

For the Three Months Ended July 31,

Salaries and benefits

Professional fees

Salary and benefits

Stock-based compensation expense

Marketing fees

Board of director fees

Other general and administrative expenses

Total general and administrative expenses

$ (1,783,492 )

Stock-Based Compensation Expense

Salaries and Benefits

During the three months ended

January 31, 2024 and 2023, we incurred stock-based compensation expense of $115,000 and $1.6 million, respectively, related to stock option

grants and restricted stock grants to executives, employees and consultants.

The decrease in stock-based compensation expense for the

three months ended January 31, 2024 was a result of fewer stock options vesting during the period compared to the prior year period.

July 31, 2024 and 2023, we incurred $228,000 and $153,000, respectively, in employee-related expenses.

The decrease in salaries and benefits

was due to a reversal of bonus accrual.

As of July 31, 2024, we had four full-time and three part-time employees.

Professional Fees

During the three months ended January 31, 2024 and 2023, we incurred

professional fees of $185,000 and $190,000, respectively.

During the three months ended January 31, 2024, we incurred $54,000 in audit

fees, $52,000 in investor relations, $30,000 in legal fees, $30,000 in consulting, $13,000 in related party consulting and $6,000 in Sarbanes-Oxley

compliance fees.

During the three months ended January 31, 2023, we recorded an expense of $47,000 in connection with the five-year consulting

agreement with Spartan Capital, $87,000 in Sarbanes-Oxley compliance fees, $24,000 in audit fees, $12,000 in related party consulting,

$8,000 in tax preparation fees and $12,000 in other professional fees.

During the three months ended

July 31, 2024 and 2023, we incurred professional fees of $222,000 and $151,000, respectively.

During the three months ended July 31, 2024,

we incurred $85,000 in investor relations fees, $74,000 in legal fees, $56,000 in audit fees, and $7,000 in tax preparation fees.

the three months ended July 31, 2023, we incurred $78,000 in audit fees, $29,000 in investor relations fees, $16,000 in tax preparation

fees, $13,000 in related party consulting, $6,000 in Sarbanes-Oxley compliance fees and $9,000 in other professional fees.

in professional fees was due mainly to investor relations related to our reverse split and legal fees, partially offset by lower related

party consulting, audit fees and tax preparation fees.

Insurance Expense

During the three months ended

January 31, 2024 and 2023, we incurred insurance expense of $88,000 and $131,000, respectively, which was primarily directors’ and

July 31, 2024 and 2023, we incurred insurance expense of $78,000 and $118,000, respectively, which was primarily directors’ and

officers’ insurance.

Salaries and Benefits

Stock-Based Compensation Expense

During the three months ended

January 31, 2024 and 2023, we incurred $227,000 and $233,000, respectively, in employee-related expenses.

As of January 31, 2024, we had

four full-time and three part-time employees.

July 31, 2024 and 2023, we incurred general and administrative stock-based compensation expense of $81,000 and $369,000, respectively,

related to stock option grants and restricted stock grants to executives, employees and consultants.

The decrease in stock-based compensation

expense for the three months ended July 31, 2024 was a result of fewer stock options vesting during the period compared to the prior year

Marketing Fees

During the three months ended

January 31, 2023, we incurred marketing fees of $247,000, which was primarily expenses related to the marketing and brand development

agreement with Ault Alliance, Inc.

(“AAI”), a related party.

No such fees were incurred during the three months ended January

Results of Operations for the Nine Months Ended January 31,

2024 and 2023

The following table summarizes

the results of our operations for the nine months ended January 31, 2024 and 2023:

For the Nine Months Ended January 31,

OPERATING EXPENSES

Research and development

General and administrative

Total operating expenses

Loss from operations

(11,565,457 )

OTHER EXPENSE, NET

Interest expense

Total other expense, net

$ (9,096,217 )

$ (11,572,639 )

Basic and diluted net loss per common share

Basic and diluted weighted average common shares outstanding

* Not meaningful

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 nine months ended January 31, 2024 and 2023, and we do not anticipate that we will generate revenue for the foreseeable future.

Research and Development Expenses

Research and development expenses

for the nine months ended January 31, 2024 and 2023 were $6.3 million and $5.8 million, respectively.

As reflected in the table below,

research and development expenses primarily consisted of professional fees, clinical trial fees and licenses and fees.

For the Nine Months Ended January 31,

Professional fees

Clinical trials

Licenses and fees

Stock-based compensation expense

Other research and development expenses

Total research and development expenses

Professional Fees

During each of the nine months

ended January 31, 2024 and 2023, we incurred professional fees of $2.7 million and $3.0 million, respectively, which were principally

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

Clinical Trial Fees

During the nine months ended

January 31, 2024 and 2023, we incurred clinical trial fees of $3.3 million and $2.6 million, respectively.

Clinical trial fees for the

nine months ended January 31, 2024 consisted of $1.9 million for our Phase IIA clinical trial for AL001 and $1.4 million for our Phase

IIA clinical trial for ALZN002.

Clinical trial fees for the nine months ended January 31, 2023 were for our Phase I clinical trial for

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 License Agreement with Sublicensing Terms.

Stock-Based Compensation Expense

During the nine months ended

January 31, 2024 and 2023, we incurred stock-based compensation of $214,000 and $(43,000), respectively, related to stock option grants

to consultants.

The increase in research and development stock compensation expense for the nine months ended January 31, 2024, was a

result of the vesting of performance stock options grants.

Other Research and Development Expenses

During the nine months ended

January 31, 2024 and 2023, we incurred other fees of $93,000 and $190,000, respectively, which were principally comprised of scientific

materials required for our clinical trials.

General and Administrative Expenses

General and administrative

expenses for the nine months ended January 31, 2024 and 2023 were $2.8 million and $5.8 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;

salaries and benefits;

as well as marketing fees.

For the nine months ended January 31, 2024 and 2023, the

remaining general and administrative expenses of $388,000 and $439,000, respectively, primarily consisted of payments for filing fees,

transfer agent fees, travel and entertainment, board of director fees and other office expenses, none of which was significant individually.

For the Nine Months Ended January 31,

Stock-based compensation expense

$ (2,473,437 )

Professional fees

Salary and benefits

Marketing fees

Other general and administrative expenses

Total general and administrative expenses

$ (2,951,764 )

Stock-Based Compensation Expense

During the nine months ended

January 31, 2024 and 2023, we incurred stock-based compensation expense of $660,000 and $3.1 million, respectively, related to stock option

grants and restricted stock grants to executives, employees and consultants.

The decrease in stock-based compensation for the nine months

ended January 31, 2024 was a result of fewer stock options vesting during the period compared to the prior year period.

Professional Fees

During the nine months ended

January 31, 2024 and 2023, we incurred professional fees of $620,000 and $567,000, respectively.

During the nine months ended January

31, 2024, we incurred $224,000 in audit fees, $170,000 in investor relations, $99,000 in legal fees, $38,000 in related party consulting,

$30,000 in tax preparation fees, $24,000 in Sarbanes-Oxley compliance fees and $35,000 in other professional fees.

During the nine months

ended January 31, 2023, we recorded an expense of $187,000 in connection with the five-year consulting agreement with Spartan Capital,

$128,000 in Sarbanes-Oxley compliance fees, $124,000 in audit fees, $38,000 in related party consulting, $33,000 in tax preparation fees

and $57,000 in other professional fees.

Insurance Expense

During the nine months ended

January 31, 2024 and 2023, we incurred insurance expense of $294,000 and $457,000, respectively, which was primarily directors’

and officers’ insurance.

Salaries and Benefits

During the nine months ended

January 31, 2024 and 2023, we incurred $606,000 and $676,000, respectively, in employee-related expenses.

As of January 31, 2024, we had

four full-time and three part-time employees.

Marketing Fees

During the nine months ended

January 31, 2024 and 2023, we incurred marketing fees of $247,000 and $495,000, respectively, which was primarily expenses related to

the marketing and brand development agreement with AAI, a related party.

July 31, 2024 and 2023, we incurred marketing fees of $40,000 and $247,000, respectively.

The decrease was due to the completion of the

marketing and branding agreement with Ault Alliance, Inc.

Liquidity and Capital Resources

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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.

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

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as a going concern.

As of January 31, 2024, we had cash of $283,000, a working capital deficiency of $3.2 million, an accumulated deficit

As of July 31, 2024, we had cash of $1.2 million, a working capital deficiency of $1.5 million, an accumulated deficit

of $55.0 million and stockholders’ deficit of $1.2 million.

We have incurred recurring losses and reported losses for the three

and nine months ended January 31, 2024 totaling $2.7 million and $9.1 million, respectively.

In the past, we have financed our operations

principally through sales of equity securities and debt instruments.

ended July 31, 2024 totaling $974,000.

In the past, we have financed our operations principally through sales of equity securities and

debt instruments.

We will need to obtain substantial

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

As previously disclosed we had anticipated beginning Phase II clinical trials for AL001 additional indications in the first quarter

of calendar 2024.

Due to the Company’s inability to obtain significant additional financing, we have been unable to initiate those

clinical trials and reduce the working capital deficiency.

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

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

On September 8, 2023, we entered

into an At-the-Market Issuance Sales Agreement with Ascendiant Capital Markets, LLC, as sales agent to sell shares of our 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.

On September 8, 2023, we

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.

During the nine months ended January 31,

2024, we sold an aggregate of 816,426 shares of Common Stock pursuant to the ATM Offering for gross proceeds of $1.0 million.

the period between February 1, 2024 through March 22, 2024, we sold an aggregate of 248,080 shares of Common Stock pursuant to the

ATM Offering for gross proceeds of $266,000.

On January 31, 2024, we entered

into the AL SPA with Ault Lending whereby Ault Lending may purchase of up to 6,000 shares of series B convertible preferred stock (“Series

B Convertible Preferred Stock”) and warrants to purchase shares up to 6,000,000 shares of our Common Stock.

The AL SPA provides

that Ault Lending may purchase up to $6 million of Series B Convertible Preferred Stock in one or more closings.

Ault Lending has the

right to purchase up to $2 million of series B Series B Convertible Preferred Stock, on or before March 31, 2024, and the right to purchase

up to $4 million of Series B Convertible Preferred Stock after March 31, 2024, but on or before March 31, 2025 (the “Termination

The Agreement will automatically terminate if the final closing has not occurred prior to the Termination Date.

On January 31, 2024, we sold 1,220 shares

of Series B Convertible Preferred Stock and warrants to purchase 1,220,000 shares of Common Stock with an exercise price of $1.20, for

a total purchase price of $1.22 million.

The purchase price was paid by the cancellation of $1.15

million of cash advances made by Ault Lending to the Company between November 9, 2023 and January 31, 2024 and a subscription receivable

Series B Convertible Preferred Stock has a stated value of $1,000 per share (“Stated

B Preferred Financing

January 31, 2024, we entered into a securities purchase agreement (“AL SPA”) with Ault Lending, LLC (“Ault Lending”)

whereby Ault Lending may purchase of up to 6,000 shares of series B convertible preferred stock (“Series B Convertible Preferred

Stock”) and warrants to purchase shares up to 600,000 shares of our common stock.

The AL SPA provides that Ault Lending may purchase

up to $6 million of Series B Convertible Preferred Stock in one or more closings.

Ault Lending has the right to purchase up to $2 million

of Series B Convertible Preferred Stock, on or before March 31, 2024, and the right to purchase up to $4 million of Series B Convertible

Preferred Stock after March 31, 2024, but on or before March 31, 2025 (the “Termination Date”).

The Agreement will automatically

terminate if the final closing has not occurred prior to the Termination Date.

the year ended April 30, 2024, we sold an aggregate of 2,100 shares of Series B Convertible Preferred Stock and warrants to purchase 210,000

shares of common stock with an exercise price of $12.00, for a total purchase price of $2.1 million.

purchase price was paid by the cancellation of $1.15 million of cash advances made by Ault Lending to us between November 9, 2023 and

January 31, 2024 and the remaining $950,000 in cash.

B Convertible Preferred Stock has a stated value of $1,000 per share (“Series B Stated

Value”) and does not accrue dividends.

Each share of Series B Convertible Preferred Stock is convertible into a number of

shares of Common Stock determined by dividing the Stated Value by $1.00 (the “Conversion

The Conversion Price is subject to adjustment in the event of an issuance of Common Stock at a price per share lower than

the Conversion Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events.

of the Series B Convertible Preferred Stock are entitled to vote with the Common Stock as a single class on an as-converted basis, subject

to applicable law provisions of the Delaware General Company Law and Nasdaq, provided however, that for purposes of complying with Nasdaq

regulations, the conversion price, for purposes of determining the number of votes the holder of Series B Convertible Preferred Stock

is entitled to cast, shall not be lower than $0.873 (the “Voting Floor Price”), which represents the closing sale price of

the Common Stock on the trading day immediately prior to the Execution Date.

The Voting Floor Price shall be adjusted for stock dividends,

stock splits, stock combinations and other similar transactions.

The warrants have an exercise

price of $1.20 (the “Exercise Price”) and become exercisable on the first business day after the six-month anniversary of

issuance (the “Initial Exercise Date”) and have a five-year term, expiring on the fifth anniversary of the Initial Exercise

The Exercise Price is subject to adjustment in the event of an issuance of Common Stock at a price per share lower than the Exercise

Each share of Series B Convertible Preferred Stock is convertible into a number

of shares of common stock determined by dividing the Series B Stated Value by $10.00 (the

“ Series B Conversion Price”).

B Conversion Price is subject to adjustment in the event of an issuance of common stock at a price per share lower than the Series

B Conversion Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events.

The holders of the Series B Convertible Preferred Stock are entitled to vote with the common stock as a single class on an as-converted

basis, subject to applicable law provisions of the Delaware General Corporation Law and Nasdaq, provided however, that for purposes of

complying with Nasdaq regulations, the conversion price, for purposes of determining the number of votes the holder of Series B Convertible

Preferred Stock is entitled to cast, shall not be lower than $8.73 (the “Voting Floor Price”), which represents the closing

sale price of the common stock on the trading day immediately prior to the date of execution of the AL SPA.

The Voting Floor Price shall

be adjusted for stock dividends, stock splits, stock combinations and other similar transactions.

warrants have an exercise price of $12.00 (the “ Series B Exercise Price”)

and become exercisable on the first business day after the six-month anniversary of issuance (the “ Series

B Initial Exercise Date”) and have a five-year term, expiring on the fifth anniversary of the Series

B Initial Exercise Date.

The Series B Exercise Price is subject to

adjustment in the event of an issuance of common stock at a price per share lower than the Series

B Exercise Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events.

Series A Preferred Financing

May 8, 2024, we and Orchid Finance, LLC (“Orchid”) , entered into a securities purchase agreement (the “Orchid

SPA”) for the purchase of up to 2,500 shares of Series A Convertible Preferred Stock (“Series A Convertible Preferred Stock”)

and warrants to purchase shares up to 2,500,000 shares of common stock in several tranche closings.

On May 10, 2024, we sold 100

shares of Series A Convertible Preferred Stock and warrants to purchase 80,000 shares of common stock with an exercise price of $12.50,

for a total purchase price of $1.0 million.

The purchase price was paid by the surrender and cancellation

of a term note issued by us to Orchid of $311,356, consisting of $310,000 of principal and $1,356 of accrued and unpaid interest, $100,000

discount and net cash of $588,644.

On June 25, 2024, we sold 150 shares of Series A Convertible Preferred Stock and warrants to

purchase 120,000 shares of common stock with an exercise price of $12.50, for a total purchase price of $1.5 million.

purchase price was paid in cash.

On August 19, 2024, we sold 200 shares of Series A Convertible Preferred Stock and warrant to purchase

160,000 shares of common stock with an exercise price of $12.50, for a total purchase price of $2.0 million.

The purchase price was paid

On August 21, 2024, we sold 250 shares of Series A Convertible Preferred Stock and warrant to purchase 200,000 shares of common

stock with an exercise price of $12.50, for a total purchase price of $2.5 million less $100,000 discount.

The purchase price was paid

to the Orchid SPA, Orchid has agreed to purchase the remaining 1,800 Preferred Shares based on our achievement of the milestones set forth

below (the “Milestones”):

200 Preferred Shares, for $2,000,000, within 60 days of the effectiveness of the resale registration statement (the “Registration Statement”) and the execution of a partnership agreement with a nationally renowned research facility for a clinical trial (the “Fourth Tranche”);

100 Preferred Shares, for $1,000,000, on each monthly anniversary of the effectiveness of the resale registration statement, which was declared effective on July 9, 2024, until all remaining 1,600 Preferred Shares have been sold (each, a “Final Tranche”).

Notwithstanding

the foregoing Milestones, Orchid has the ability to invest any amount in its sole discretion in advance of the dates that the foregoing

Milestones shall have been met.

In the event that the average closing price of the common stock during the three trading days preceding

the date of a tranche closing shall not be equal to or greater than $2.50 a share (the “Floor Price”), then the applicable

closing shall be delayed until such time as the price meets the required threshold.

pay Ault Lending an origination fee of five percent (5%) of the total gross proceeds we receive from Orchid upon each purchase of Series

A Convertible Preferred Stock.

We also agreed to pay Orchid a fee of $100,000 upon the first closing, which occurred on May 10, 2024,

the Fourth Tranche and the third, eighth and thirteenth closings constituting parts of the Final Tranche.

Registration Statement registering for resale the shares of common stock issuable upon conversion of the Series A Convertible Preferred

Stock and exercise of the warrants was declared effective on July 9, 2024.

In addition, we agreed to use our best efforts to hold a special

meeting of our stockholders within 90 days of the execution date of the Orchid SPA for purposes of seeking stockholder approval of the

issuance of all the shares of common stock issuable upon conversion of the Series A Convertible Preferred Stock and the exercise of the

warrants in excess of the “Nasdaq Limit,” which is 19.99% of our shares of common stock issued and outstanding on the execution

date of the Orchid SPA.

We held a special meeting of stockholders on July 8, 2024, at which time, the stockholders approved the issuance

of all the shares of common stock issuable upon conversion of the Series A Convertible Preferred Stock and the exercise of the warrants

in excess of the “Nasdaq Limit.”

Series A Convertible Preferred Stock has a stated value of $10,000 per share (“Series

A Stated Value”) and accrues dividends at the rate of 15% per annum, payable quarterly in arrears in cash or paid-in-kind

shares, in Orchid’s sole discretion.

Each share of Series A Convertible Preferred Stock is convertible into a number of shares of

common stock determined by dividing the Series A Stated Value by (y)

the greater of (i) the Floor Price and (ii) the lesser of (A) $15.00 and (B) 80% of the lowest closing price of our common stock during

the three trading days immediately prior to the date of conversion into conversion shares (the “ Series

A Conversion Price”).

The Series A Conversion Price is subject to adjustment

in the event of an issuance of common stock at a price per share lower than the Series A Conversion

Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events.

The holders of the Series

A Convertible Preferred Stock are entitled to vote with the common stock as a single class on an as-converted basis, subject to applicable

law provisions of the Delaware General Corporation Law and Nasdaq, provided however, that for purposes of complying with Nasdaq regulations,

the conversion price, for purposes of determining the number of votes the holder of Series B Convertible Preferred Stock is entitled to

cast, shall not be lower than $5.63 (the “Series A Voting Floor Price”), which represents the closing sale price of the common

stock on the trading day immediately prior to the date of execution of the Orchid SPA.

The Series A Voting Floor Price shall be adjusted

for stock dividends, stock splits, stock combinations and other similar transactions.

The warrants have an exercise

price of $12.50 (the “ Series A Exercise Price”) and are exercisable upon issuance

and have a five-year term, expiring on the fifth anniversary of issuance.

The Series A Exercise

Price is subject to adjustment in the event of an issuance of common stock at a price per share lower than the Series

A Exercise Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events.

are exercisable on a cashless basis in the event that there is not then an effective resale registration statement for the common stock

issuable upon exercise of the warrants.

The following table summarizes

our cash flows for the nine months ended January 31, 2024 and 2023:

For the Nine Months Ended January 31,

our cash flows for the three months ended July 31, 2024 and 2023:

For the Three Months Ended July 31,

Net cash provided by (used in):

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Financing activities

Net decrease in cash and cash equivalents

$ (4,857,992 )

Net increase (decrease) in cash and cash equivalents

$ (3,445,443 )

Operating Activities

During the nine months ended

January 31, 2024, net cash used in operating activities was $6.8 million.

This consisted primarily of a net loss of $9.1 million partially

offset by an increase in our net operating assets and liabilities of $1.3 million and non-cash charges of $912,000.

The non-cash charges

primarily consisted of stock-based compensation expense.

The increase in our net operating assets and liabilities was due to an increase

in accounts payable and accrued liabilities, an decrease in prepaid expenses and other current assets and an decrease in prepaid expenses

- related party.

During the three months ended

July 31, 2024, net cash used in operating activities was $1.1 million.

This consisted primarily of a net loss of $974,000 and a decrease

in our net operating assets and liabilities of $185,000, partially offset by non-cash charges of $103,000.

The non-cash charges primarily

consisted of stock-based compensation expense.

The decrease in our net operating assets and liabilities was due to a decrease in accounts

payable and accrued liabilities and an increase in prepaid expenses and other current assets.

Investing Activities

During the nine months ended

January 31, 2024, net cash used in investing activities was $147,000 from the purchase of machinery and equipment.

We purchased equipment,

which draws blood from patients and separates the monocytes from their blood, to be used in the ALZN002 clinical trial.

During the three months ended

July 31, 2024, net cash used in investing activities was $90,000 from the purchase of equipment.

We purchased equipment, which measures

lithium levels in the brain, to be used in the AL001 clinical trial.

Financing Activities

During the nine months ended

January 31, 2024, net cash provided by financing activities was $1.2 million from the sale of convertible preferred stock to a related

party and $1.0 million from proceeds from the ATM Offering.

During the three months ended

July 31, 2024, net cash provided by financing activities was $2.0 million from the sale of Series A Convertible Preferred Stock.

Contractual Obligations

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and on June 8, 2023, we 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 for the license fees.

The Third Amendments to the AL001 Licenses modified the timing of the payments of the license fees.

The AL001 License Agreements

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The Seventh Amendment to

the ALZN002 License modified the timing of the payments for the license fees.

the ALZN002 License modified the timing of the payments of the license fees.

The ALZN002 License Agreement

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The Second Amendments to the November

AL001 License modified the timing of the payments for the license fees.

AL001 License modified the timing of the payments of the license fees.

The November AL001 License

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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

to complete milestones and make 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:

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8 years from the effective date of the agreement

Upon FDA NDA approval

* Milestone met and completed

Upon FDA new drug application approval

* Milestone met and payment made

ALZN002 License:

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Upon first patient treated in a Phase III clinical trial

Upon fist commercial sale

* Milestone met and completed

Upon first commercial sale

* Milestone met and payment made

Additional AL001 Licenses:

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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