Alzamend Neuro, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended January 31, 2023; filed March 15, 2023. The company is an early clinical-stage biopharmaceutical developer and has not generated product revenue.
Financial position and results
| Metric | Period / amount |
|---|---|
| Revenue | None in the three- and nine-month periods; management does not expect revenue in the foreseeable future. |
| Operating expenses | Quarter: $5.42 million, up 112% year over year. Nine months: $11.57 million, up 37%. |
| Research and development | Quarter: $2.89 million, up 231%. Nine months: $5.80 million, up 64%. |
| General and administrative | Quarter: $2.53 million, up 51%. Nine months: $5.77 million, up 18%. |
| Net loss | Quarter: $5.43 million, versus $2.57 million. Nine months: $11.57 million, versus $8.49 million. |
| Loss per share | Quarter: $0.06; nine months: $0.12, compared with $0.03 and $0.09, respectively, in the prior periods. |
| Cash and liquidity | Cash was $7.38 million at January 31, 2023, down from $14.06 million at April 30, 2022. Current assets were $8.42 million and current liabilities $2.64 million. |
| Cash flow | Nine-month operating cash use was $6.69 million, versus $5.05 million. No financing cash flow was reported in the current nine-month period; cash declined by $6.69 million. |
| Assets and equity | Total assets were $8.50 million; stockholders’ equity was $5.86 million at January 31, 2023. |
The company reported no revenue or gross profit, so gross margin is not applicable. The balance sheet reports no debt balance; total liabilities were $2.64 million, all current accounts payable and accrued liabilities. The $14.88 million related-party note receivable for common stock is recorded as a reduction of equity, not as cash or an operating asset.
Changes versus prior comparable periods
- Quarterly net loss more than doubled, principally alongside higher clinical-trial spending and research and development expenses. Quarterly clinical-trial fees were $2.05 million, compared with $283,000.
- For the nine months, R&D costs increased by $2.26 million, including higher scientific/professional fees and clinical-trial fees. G&A rose by $861,000, including a substantial increase in marketing fees.
- Cash fell by $6.69 million from April 30, 2022, and there were no financing proceeds in the nine-month period, unlike the prior-year period, which included IPO proceeds.
- Common shares outstanding increased from 95.48 million at April 30, 2022 to 96.43 million at January 31, 2023. The company issued 933,334 shares to related party Ault Alliance for marketing services.
Outlook, risks, contingencies, and notable items
- Management said January 31 cash was expected to cover anticipated cash requirements for the 12 months after issuance of the financial statements. It also expects continuing losses and says additional capital will be needed for development and operations; failure to obtain funding could delay, reduce, or end programs.
- AL001 is being developed for Alzheimer’s disease and other indications. The filing describes an ongoing Phase IIA multiple-ascending-dose study in Alzheimer’s patients and states that management anticipated pursuing INDs for bipolar disorder, major depressive disorder, and PTSD after completion of that study.
- ALZN002 received an FDA “study may proceed” letter for a Phase I/IIA Alzheimer’s trial. At the time of the filing, the company expected first-patient dosing in the first quarter of 2023; this was a forward-looking expectation, not a reported completed milestone.
- License agreements include royalties, minimum annual royalties, and development and approval milestones. Potential payments include a $1.25 million AL001 milestone tied to first Phase III patient treatment and a $10 million milestone upon FDA approval; missed milestones may permit the licensor to terminate a license.
- Ault Alliance, a related party, agreed to provide marketing and brand-development services valued at $1.4 million over 12 months. The company elected to pay with 933,334 shares at $1.50 per share. The related-party note receivable balance was $14.88 million and its term had been extended to December 31, 2023.
- Management concluded disclosure controls and internal control over financial reporting were ineffective because previously identified material weaknesses remained unremediated. The weaknesses involved accounting staffing and review processes, as well as user-access and IT change-management controls.
- The company reported no legal proceedings believed likely to have a material adverse effect and no subsequent events requiring disclosure. It cautioned that clinical, regulatory, financing, and other risks could cause actual results to differ materially from forward-looking statements.
Most important facts for investors to verify
- Actual cash runway and subsequent financing activity, given $6.69 million of operating cash use over nine months and management’s stated need for future capital.
- Enrollment, timing, and results for AL001 and ALZN002 trials, and whether expected clinical and regulatory milestones were achieved.
- Terms, maturity, collectability, and related-party implications of the $14.88 million note receivable, along with Ault Alliance’s share-based marketing arrangement and any further funding rights.
- Potential dilution from outstanding options and warrants, and future equity issuances needed to fund operations.
- Progress in remediating the disclosed material weaknesses and whether controls are tested and found to operate effectively.