Alzamend Neuro, Inc. — Form 10-Q Summary
Business context and reporting period
Unaudited fiscal second-quarter and six-month results for the period ended October 31, 2021; comparisons are with the periods ended October 31, 2020. Alzamend is a pre-revenue, early clinical-stage biopharmaceutical company developing AL001, a lithium-based therapy, and AL002, a cell-based therapeutic vaccine, primarily for Alzheimer’s disease.
Key financial metrics
| Metric | Three months ended October 31, 2021 | Six months ended October 31, 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.75 million | $2.67 million |
| General and administrative expense | $1.83 million | $3.22 million |
| Net loss | $3.60 million | $5.92 million |
| Basic and diluted loss per share | $0.04 | $0.07 |
| Net cash used in operating activities | Not separately stated | $3.27 million |
- At October 31, cash was $13.57 million; current assets were $14.50 million and current liabilities were $1.48 million. The filing reports no other asset categories or long-term liabilities on the balance sheet presented.
- Current liabilities included $344,893 of convertible notes, net. The notes had a 10% interest rate and principal and accrued interest due December 31, 2021, with conversion at $1.50 per share.
- Six-month financing cash flow was $14.91 million, mainly from $12.91 million net IPO proceeds and a $2.00 million related-party stock sale. Ending cash increased by $11.64 million.
Material changes versus prior comparable periods
- Quarterly net loss increased 166% from $1.35 million; six-month net loss increased 122% from $2.67 million.
- Quarterly R&D expense rose 268% and six-month R&D expense rose 240%, principally reflecting AL001 Phase I study and related scientific and regulatory work, as well as license fees.
- Quarterly G&A expense rose 123% and six-month G&A expense rose 76%. Drivers included stock-based compensation, professional fees, insurance, and personnel costs.
- Cash used in operations increased to $3.27 million for the six months, from $648,023 a year earlier. The company raised substantial equity capital, including its June 2021 IPO, and common shares outstanding increased to 88,850,358 at October 31 from 67,429,525 at April 30.
Outlook, risks, contingencies, and unusual items
- Management expects continuing losses and says additional capital will be needed to fund development until revenue is generated. It believes October 31 cash is sufficient for anticipated requirements for the 12 months after issuance of the financial statements; this is not a longer-term funding assurance.
- AL001 received FDA “Study May Proceed” status in July 2021; its six-month Phase I relative-bioavailability study began in September. Management expected topline data in mid-to-late December 2021 and a full report in March 2022.
- For AL002, the FDA agreed to a combined Phase 1/2 development path. The company expected to file an IND in Q2 2022, later than previously anticipated, citing the revised study plan and selection of a manufacturing partner.
- License agreements include royalties and development and regulatory milestone payments, including substantial payments upon later-stage milestones or approval. Failure to meet specified milestones may allow the licensor to terminate a license.
- COVID-19 had previously delayed third-party manufacturing and laboratory work and affected capital-raising conditions. The company noted uncertainty about future pandemic effects.
- The company disclosed a material weakness in internal control over financial reporting, attributed to insufficient accounting resources and/or procedures. Management was using additional procedures and external accounting consultants to address it.
- Related-party financing and arrangements are notable: DPL purchased shares for $2.00 million during the period and received warrants; it may purchase a further $4.00 million tranche upon completion of the AL001 Phase I study. Separately, a $14.88 million related-party note receivable for common stock remained outstanding and was extended to December 31, 2023.
- No material legal proceedings or off-balance-sheet arrangements were reported. No subsequent events requiring recognition or disclosure were identified through issuance.
Important facts for investors to verify
- Progress, safety findings, timing, and data release for the AL001 Phase I study, and whether the expected milestones were achieved.
- AL002 IND filing and trial-start timing, including availability of a manufacturing partner and any resulting cost or schedule changes.
- Cash burn and liquidity against management’s 12-month estimate, and the timing and terms of any additional financing.
- Terms and consequences of the convertible note due December 31, 2021, DPL’s remaining purchase commitment, and potential warrant and equity dilution.
- Status of remediation of the disclosed material weakness and the company’s ability to meet reporting and accounting requirements.
- License milestone obligations and termination rights, as well as collection and repayment terms for the related-party note receivable.