Alzamend Neuro, Inc. — Form 10-Q Summary
Reporting period: Three months ended July 31, 2023, the company’s fiscal first quarter. The filing was signed September 13, 2023. The company is a clinical-stage biopharmaceutical developer and has no product revenue.
Financial performance and position
| Metric | Quarter ended July 31, 2023 | Comparable 2022 period |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2.37 million | $1.38 million |
| General and administrative expense | $1.16 million | $1.66 million |
| Total operating expenses | $3.53 million | $3.04 million |
| Net loss | $3.53 million | $3.04 million |
| Basic and diluted loss per share | $0.04 | $0.03 |
| Cash used in operating activities | $3.30 million | $2.54 million |
| Cash used in investing activities | $147,243 | $0 |
- Cash and liquidity: Cash was $1.70 million at July 31, down from $5.14 million at April 30, 2023. Current assets were $2.41 million and current liabilities were $2.74 million, a working capital deficit of about $327,000.
- Balance sheet: Total assets were $2.63 million; liabilities, all current accounts payable and accrued liabilities, were $2.74 million. Stockholders’ deficit was $113,000, and accumulated deficit was $47.60 million. The balance sheet reports no conventional debt balance; interest expense was $1,835 for the quarter.
- Cash flow and margins: Cash declined by $3.45 million during the quarter. Operating cash use exceeded the prior-year period. Operating or gross margins are not meaningful because the company generated no revenue.
- Related-party note: A $14.88 million note receivable from Ault Life Sciences Fund remained outstanding, recorded as an offset to additional paid-in capital rather than as an asset. It is non-interest-bearing, secured by pledged shares, and was extended to December 31, 2023.
Changes versus the prior comparable period
- Net loss increased $491,000, or 16%; operating expenses rose 16%.
- R&D expense increased $990,000, or 72%, primarily because clinical-trial fees rose to $1.25 million from $24,000. The 2023 trial costs included $926,000 for AL001 and $319,000 for ALZN002.
- G&A expense declined $500,000, or 30%, principally because stock-based compensation fell by $498,000. Marketing expense rose to $247,000 from $600, largely under a related-party marketing agreement with Ault Alliance.
- Cash used in operations increased by approximately $762,000. The company also spent $147,243 on equipment for ALZN002 trials; there were no financing cash flows in either quarter.
Outlook, developments, and risks
- Going concern: Management says current cash is insufficient to fund planned operations for one year after issuance of the financial statements, creating substantial doubt about the company’s ability to continue as a going concern. It expects continuing losses and needs additional capital. Without funding, it may delay, reduce, or discontinue development programs or trials.
- Financing: On September 8, 2023, after quarter-end, the company established an at-the-market offering to sell up to approximately $9.8 million of common stock. This is an offering authorization, not reported proceeds, and any sales could dilute shareholders. The company also identified potential warrant exercises and collection of the related-party note as possible funding sources.
- Pipeline: AL001 completed patient dosing in a Phase IIA study in March 2023; the company announced positive topline data in June and identified a maximum tolerated dose. It planned two further Alzheimer’s safety and efficacy trials. The company filed an IND for AL001 in bipolar disorder in August 2023 and expected to file INDs for major depressive disorder and PTSD by year-end.
- ALZN002 began a Phase I/IIA trial in April 2023 in 20–30 people with mild to moderate Alzheimer’s disease. The company stated that it expected to initiate a Phase IIB trial within three months of receiving initial-trial data. A $50,000 ALZN002 license milestone was due upon first patient dosing in September 2023.
- Other obligations and risks: License agreements include royalties and contingent milestone payments, and failure to meet specified milestones may allow the licensor to terminate agreements. The filing describes no current legal proceedings expected to have a material adverse effect. Clinical, regulatory, financing, and commercialization outcomes remain uncertain.
- Controls: Management concluded internal control over financial reporting was not effective because previously disclosed material weaknesses remained unremediated, including limited accounting resources and deficiencies in system access and change-management controls. Remediation work was ongoing.
Important facts for investors to verify
- Cash burn and available funding, including any actual ATM sales, net proceeds, and resulting dilution.
- Whether the $14.88 million related-party note is collected by its December 31, 2023 maturity and the implications if it is not.
- AL001 and ALZN002 trial progress, data timing, regulatory permissions, and the stated milestones and payment obligations.
- Whether internal-control material weaknesses are remediated and tested as effective.
- Potential dilution from outstanding securities: the filing lists 18.16 million options, 50,000 restricted stock units, and 10.15 million warrants excluded from diluted loss per share as anti-dilutive. The reported weighted-average share count also includes 1.5 million shares treated as issuable for little or no cash consideration.