Alzamend Neuro, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended April 30, 2022; filed July 19, 2022. Although the request identifies “2021 Q4,” this is an annual report for FY2022, not a standalone 2021 fourth-quarter filing.
Business context
Alzamend is an early clinical-stage biopharmaceutical company with no product revenue. Its pipeline comprises AL001, an oral lithium, proline and salicylate cocrystal, and AL002, an experimental cell-based vaccine. The company is focused primarily on Alzheimer’s disease and also plans to study AL001 for bipolar disorder, major depressive disorder and PTSD. Both candidates are licensed from the University of South Florida Research Foundation.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $5.20 million | $1.31 million |
| General and administrative expense | $7.12 million | $3.64 million |
| Total operating expenses | $12.32 million | $4.95 million |
| Net loss | $12.36 million | $5.05 million |
| Basic and diluted loss per share | $0.14 | $0.07 |
| Net cash used in operating activities | $6.61 million | $2.71 million |
Losses increased as clinical-development spending, professional fees, licensing costs, stock compensation and public-company expenses rose. FY2022 stock-based compensation was $4.41 million, a non-cash expense. Profit margins are not meaningful because the company had no revenue.
At April 30, 2022, cash was $14.06 million, current assets were $14.41 million, total assets were $14.52 million and current liabilities were $1.16 million. The company reported no convertible notes payable at year-end; it had $2,082 of related-party payable. Management said existing cash was expected to cover anticipated needs for the 12 months after the financial statements were issued, but stated that further capital would be needed to continue development and operations.
Financing cash inflows were $18.85 million, principally $12.91 million net IPO proceeds and $6.00 million from related-party investor Digital Power Lending (DPL). Common shares outstanding rose from 67.43 million to 95.48 million during the year. A separate $14.88 million note receivable from related party Ault Life Sciences Fund remained recorded as a reduction of equity; its maturity was extended to December 31, 2023.
Material changes versus the prior year
- Operating expenses grew 149% and net loss grew 145%, while operating cash use rose by approximately $3.90 million.
- Cash increased from $1.93 million to $14.06 million, chiefly due to IPO and DPL financing, rather than internally generated cash.
- AL001 completed its first-in-human Phase I study in March 2022; the company reported it was safe and well tolerated in healthy adults, with no serious adverse events or deaths. These results do not establish efficacy.
- AL002 remained preclinical at fiscal year-end. The FDA had agreed to a proposed combined Phase I/II development study, with an IND filing then expected in the third calendar quarter of 2022.
Outlook, risks and unusual items
- Clinical plans: AL001’s Phase IIA multiple-dose study in mild-to-moderate Alzheimer’s patients began in May 2022; topline data were expected in December 2022. The company planned separate INDs and subsequent Phase II studies of AL001 for bipolar disorder, MDD and PTSD after the Alzheimer’s Phase II study. These are forward-looking plans, not achieved milestones.
- Capital needs and dilution: The company expects continuing losses and needs additional financing. DPL had a right, for 18 months after the April 2022 final tranche, to invest an additional $10 million on the same terms, although no specific milestones were set. Financing may dilute shareholders. DPL also received warrants; the filing reports 10.15 million warrants outstanding in total at April 30, 2022.
- Development and licensing exposure: Neither candidate had marketing approval. Clinical failure, safety findings, regulatory delays, manufacturing constraints, competition and reimbursement uncertainty could prevent commercialization. License agreements include royalties, minimum royalties and milestone payments; failure to meet milestones could allow the licensor to terminate rights.
- Internal controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at April 30, 2022. Identified material weaknesses involved insufficient accounting personnel and review/segregation of duties, as well as IT access and change-management controls. Remediation was underway; effectiveness had not yet been established.
- Regulatory and listing matters: The company disclosed an SEC subpoena received in 2019 in an investigation concerning BitNile and related persons or entities; its scope and outcome were unknown, and no loss provision was recorded. It also reported noncompliance with Nasdaq’s minimum bid-price requirement and a deadline of December 19, 2022 to regain compliance.
- Governance and related parties: Insiders and affiliated parties held substantial influence; the filing reported approximately 48.2% beneficial ownership by directors, executive officers and affiliated parties. Related-party financing, shared office space and overlapping personnel create potential conflicts to monitor.
Most important facts for investors to verify
- Whether AL001 Phase IIA results supported a safe and tolerable dose and showed any meaningful clinical or biomarker signal; distinguish safety findings from proof of efficacy.
- Whether AL002’s IND was submitted and cleared, and whether the planned clinical study commenced.
- Cash use and subsequent financing: test the stated 12-month liquidity outlook against actual burn, development costs, license milestones and any additional equity issuance.
- The terms, status and collectability of the $14.88 million related-party note receivable, and the status of DPL’s additional-investment right and warrants.
- Progress in remediating material weaknesses, Nasdaq minimum-bid compliance, and any developments in the SEC investigation.
- Upcoming license obligations, including minimum royalties and milestone payments, and whether the company remains in compliance with the agreements.