Alzamend Neuro, Inc. — Form 10-Q
Reporting period: Three months ended July 31, 2022 (fiscal 2023 first quarter), compared with the three months ended July 31, 2021. Financial statements are unaudited.
Business context
Alzamend is an early clinical-stage biopharmaceutical company developing treatments for Alzheimer’s disease and other neurodegenerative and psychiatric conditions. Its two principal candidates are AL001, a lithium-based ionic cocrystal, and AL002, a cell-based therapeutic vaccine. The company has generated no product revenue and expects continuing losses while it advances development and seeks capital.
Financial highlights
| Metric | Three months ended July 31, 2022 | Prior-year period |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.376 million | $0.916 million |
| General and administrative expense | $1.660 million | $1.390 million |
| Total operating expenses | $3.036 million | $2.306 million |
| Net loss | $3.037 million | $2.320 million |
| Net loss per share | $0.03 | $0.03 |
| Cash used in operating activities | $2.537 million | $1.223 million |
Operating expenses rose 32% and net loss increased 31% year over year. R&D expense increased 50%, primarily due to AL001 Phase IIA trial monitoring and AL002 IND preparation. G&A expense increased 19%, including higher stock-based compensation and insurance costs. With no revenue, profit and operating margins are not meaningful. Stock-based compensation was $867,338, a non-cash expense.
Cash was $11.527 million at July 31, 2022, down from $14.064 million at April 30, 2022. Total assets were $12.210 million; current liabilities and total liabilities were $1.029 million, primarily accounts payable and accrued liabilities. The balance sheet reports no debt outstanding. Stockholders’ equity was $11.182 million, and accumulated deficit was $32.232 million. There were no financing or investing cash flows in the quarter.
Material developments, outlook and risks
- AL001’s Phase I study was completed in March 2022. A Phase IIA multiple-ascending-dose study in patients with mild-to-moderate Alzheimer’s began enrollment in May 2022; the filing describes it as a 12-month study, with up to 40 subjects.
- Management expected to submit the AL002 IND in the third calendar quarter of 2022, after the FDA agreed to a combined Phase I/II approach. The company planned to begin the trial following FDA approval and identification of a manufacturing partner.
- Management stated that cash at July 31, 2022 was expected to fund anticipated requirements for 12 months following issuance of the financial statements. It also expects ongoing losses and says additional capital will be needed to fund development and operations. Failure to obtain financing could delay, reduce or end programs.
- DPL had a right, for 18 months after its April 28, 2022 final tranche payment, to invest an additional $10 million on specified terms; the filing says milestones for that additional investment had not been determined. This is a potential financing source, not reported funding received in the quarter.
- License agreements include royalties and development and regulatory milestones, including substantial payments upon later clinical, commercialization or approval events. Missing specified milestones may allow the licensor to terminate a license.
- Management reported that internal control over financial reporting was not effective at quarter-end because previously disclosed material weaknesses remained unremediated. These concerned accounting-function resources and review controls, as well as user-access and IT change-management controls. Remediation efforts were ongoing.
- The company reported no legal proceedings believed likely to have a material adverse effect, no material off-balance-sheet arrangements, and no subsequent events requiring disclosure.
Important facts for investors to verify
- Share-count inconsistency: The financial statements report weighted-average shares of 97,481,790 for 2022 and 84,588,492 for 2021, while the MD&A comparison table reports 77,338,492 for 2021. The filing text does not reconcile these figures. Verify against the filed statements and XBRL.
- Confirm clinical-trial progress, AL002 IND timing and FDA status, and the availability of a manufacturing partner.
- Assess cash burn against the stated 12-month runway, future clinical and licensing milestone costs, and the likelihood and terms of additional financing, including DPL’s potential investment.
- Review the related-party $14.883 million note receivable for common stock, recorded as a reduction of additional paid-in capital and secured by pledged shares; its maturity had been extended to December 31, 2023.
- Track remediation and testing of the disclosed material weaknesses in financial reporting controls.