Alzamend Neuro, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended January 31, 2024; filed March 25, 2024. The company is a clinical-stage biopharmaceutical developer and reported no product revenue. Share figures reflect the October 2023 1-for-15 reverse split.
Financial position and results
| Metric | Three months ended Jan. 31, 2024 | Nine months ended Jan. 31, 2024 | Comparable prior period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Research and development | $1.91 million | $6.27 million | $2.89 million and $5.80 million |
| General and administrative | $751,000 | $2.82 million | $2.53 million and $5.77 million |
| Total operating expenses | $2.66 million | $9.09 million | $5.42 million and $11.57 million |
| Net loss | $2.66 million | $9.10 million | $5.43 million and $11.57 million |
| Basic and diluted loss per share | $0.38 | $1.35 | $0.83 and $1.78 |
As a pre-revenue company, operating and profit margins are not meaningful. Nine-month operating cash use was $6.84 million, versus $6.69 million in the prior-year period. Investing cash use was $147,000, and financing provided $2.13 million. Cash declined by $4.86 million to $283,000 from $5.14 million at April 30, 2023.
At January 31, 2024, current assets were $594,000 and current liabilities were $3.83 million, a working-capital deficit of approximately $3.2 million. Total liabilities were $4.57 million, including a $742,000 warrant liability; stockholders’ deficit was $4.26 million. The filing does not report conventional interest-bearing debt outstanding at period end.
Changes versus prior comparable periods
- Quarterly net loss declined 51%; G&A fell 70%, largely from lower stock-based compensation and no current-quarter marketing fees. R&D declined 34%, mainly reflecting lower professional and clinical trial fees.
- For the nine-month period, net loss declined 21% and G&A fell 51%, principally due to lower stock-based compensation and marketing costs. R&D rose 8%, as clinical trial expense increased 25% to $3.29 million.
- Cash and total assets fell substantially from April 30, 2023. The company recorded a Series B preferred-stock financing and warrant liability during the period.
Outlook, risks and notable items
- Funding and going concern: Management said cash on hand was insufficient to fund planned operations for one year after issuance of the financial statements, and disclosed substantial doubt about the company’s ability to continue as a going concern. Further equity or debt financing is needed; failure to obtain it could delay, reduce or end development programs.
- Development: AL001 is being developed for Alzheimer’s disease, bipolar disorder, major depressive disorder and PTSD; ALZN002 is an investigational Alzheimer’s immunotherapy. FDA “study may proceed” letters were received for AL001’s additional indications. The company had planned Phase II studies for those indications but had not initiated them due to insufficient financing.
- ALZN002 trial: On February 13, 2024, the CRO notified the company that it was terminating its contract. The company was seeking a replacement CRO. The filing describes the ongoing Phase I/IIA trial as expected to last up to five years.
- Financing and dilution: On January 31, 2024, related party Ault Lending acquired $1.22 million of Series B preferred stock and warrants for 1.22 million common shares at $1.20 per share. The preferred shares have a $1,000 stated value, a $1.00 conversion price, voting rights and liquidation preference; the warrants become exercisable after six months and have a five-year term. The agreement allows for up to $6 million in purchases, subject to its terms. Subsequent to quarter-end, the company sold 248,080 ATM shares for $266,000 gross through March 22, 2024.
- Nasdaq: The company reported an unresolved market-value-of-listed-securities deficiency with a March 25, 2024 compliance deadline, and a separate bid-price deficiency with a July 30, 2024 deadline. Delisting is possible if requirements are not met.
- Controls: Management concluded internal control over financial reporting was ineffective due to unremediated material weaknesses involving accounting resources and reviews, system access, and change management.
- Related-party settlement: ALSF returned 661,168 common shares and warrants to settle a $14.88 million related-party note receivable balance.
Investor verification priorities
- Confirm available cash, subsequent financing proceeds, cash burn and the company’s funding runway; assess the going-concern disclosure.
- Check whether Ault Lending completed additional preferred-stock purchases and review potential conversion, voting, warrant and dilution effects.
- Verify the status of Nasdaq listing deficiencies and any compliance or extension decisions.
- Track replacement of the ALZN002 CRO and trial continuity, as well as funding and timing for planned AL001 studies.
- Review progress in remediating material weaknesses and the terms of the related-party transactions and license milestones.