Alzamend Neuro Inc
For the period ended Jul 31, 2024. Filed Sep 11, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 31, 2024 · Filed Sep 11, 2024
ALZN$1.41-9.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-01-31; filed 2024-03-25.
0001214659-24-005088
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-07-31; filed 2024-09-11.
0001214659-24-016346
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 114 previous paragraphs and 93 current paragraphs.
45 unchanged; 33 reworded; 13 added; 28 removed; 8 previous and 2 current paragraphs rearranged.
Tables are not compared: 46 previous and 33 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
Preferred Stock Classification. We analyze the terms of our preferred stock using Accounting Standards Codification (“ASC”) 480,Distinguishing Liabilities from Equity, to determine whether our preferred stock should be classified as a liability or equity, and if classified as equity, permanent or temporary. Common criteria we consider are redemption provisions, conversion options, cumulative of mandatory fixed dividends, discretionary dividends based on earning, voting rights and collateral requirements.
Current report
Research and Development Expenses
Current report
Professional Fees
Current report
Professional Fees
Current report
Stock-Based Compensation Expense
Current report
Series B Preferred Financing
Current report
Series A Preferred Financing
Current report
On May 8, 2024, we and Orchid Finance, LLC (“Orchid”), entered into a securities purchase agreement (the “Orchid SPA”) for the purchase of up to 2,500 shares of Series A Convertible Preferred Stock (“Series A Convertible Preferred Stock”) and warrants to purchase shares up to 2,500,000 shares of common stock in several tranche closings.
Current report
On May 10, 2024, we sold 100 shares of Series A Convertible Preferred Stock and warrants to purchase 80,000 shares of common stock with an exercise price of $12.50, for a total purchase price of $1.0 million. The purchase price was paid by the surrender and cancellation of a term note issued by us to Orchid of $311,356, consisting of $310,000 of principal and $1,356 of accrued and unpaid interest, $100,000 discount and net cash of $588,644. On June 25, 2024, we sold 150 shares of Series A Convertible Preferred Stock and warrants to purchase 120,000 shares of common stock with an exercise price of $12.50, for a total purchase price of $1.5 million. The purchase price was paid in cash. On August 19, 2024, we sold 200 shares of Series A Convertible Preferred Stock and warrant to purchase 160,000 shares of common stock with an exercise price of $12.50, for a total purchase price of $2.0 million. The purchase price was paid in cash. On August 21, 2024, we sold 250 shares of Series A Convertible Preferred Stock and warrant to purchase 200,000 shares of common stock with an exercise price of $12.50, for a total purchase price of $2.5 million less $100,000 discount. The purchase price was paid in cash.
Current report
Pursuant to the Orchid SPA, Orchid has agreed to purchase the remaining 1,800 Preferred Shares based on our achievement of the milestones set forth below (the “Milestones”):
Current report
Notwithstanding the foregoing Milestones, Orchid has the ability to invest any amount in its sole discretion in advance of the dates that the foregoing Milestones shall have been met. In the event that the average closing price of the common stock during the three trading days preceding the date of a tranche closing shall not be equal to or greater than $2.50 a share (the “Floor Price”), then the applicable closing shall be delayed until such time as the price meets the required threshold. We agreed to pay Ault Lending an origination fee of five percent (5%) of the total gross proceeds we receive from Orchid upon each purchase of Series A Convertible Preferred Stock. We also agreed to pay Orchid a fee of $100,000 upon the first closing, which occurred on May 10, 2024, the Fourth Tranche and the third, eighth and thirteenth closings constituting parts of the Final Tranche.
Current report
The Registration Statement registering for resale the shares of common stock issuable upon conversion of the Series A Convertible Preferred Stock and exercise of the warrants was declared effective on July 9, 2024. In addition, we agreed to use our best efforts to hold a special meeting of our stockholders within 90 days of the execution date of the Orchid SPA for purposes of seeking stockholder approval of the issuance of all the shares of common stock issuable upon conversion of the Series A Convertible Preferred Stock and the exercise of the warrants in excess of the “Nasdaq Limit,” which is 19.99% of our shares of common stock issued and outstanding on the execution date of the Orchid SPA. We held a special meeting of stockholders on July 8, 2024, at which time, the stockholders approved the issuance of all the shares of common stock issuable upon conversion of the Series A Convertible Preferred Stock and the exercise of the warrants in excess of the “Nasdaq Limit.”
Current report
The warrants have an exercise price of $12.50 (the “Series AExercise Price”) and are exercisable upon issuance and have a five-year term, expiring on the fifth anniversary of issuance. The Series AExercise Price is subject to adjustment in the event of an issuance of common stock at a price per share lower than the Series AExercise Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events. The warrants are exercisable on a cashless basis in the event that there is not then an effective resale registration statement for the common stock issuable upon exercise of the warrants.
Removed paragraphs (28)
Previous report
***Common Stock Valuations.***Prior to our initial public offering (“IPO”) in June 2021, there was no public market for our Common Stock, and, as a result, the fair value of the shares of Common Stock underlying our stock-based awards was estimated on each grant date by our Board. To determine the fair value of our Common Stock underlying option grants, our Board considered, among other things, input from management, and our Board’s assessment of additional objective and subjective factors that it believed were relevant, and factors that may have changed from the date of the most recent valuation through the date of the grant. These factors included, but were not limited to:
Previous report
Following the closing of our IPO, our Board determined the fair market value of our Common Stock based on the closing price of our Common Stock as reported on the date of grant.
Previous report
We submitted a pre-IND meeting request for ALZN002 and supporting briefing documents to the Center for Biological Evaluation and Research of the FDA on July 30, 2021. We received a written response relating to the pre-IND from the FDA providing a path for Alzamend’s planned clinical development of ALZN002 on September 30, 2021. The FDA agreed to allow Alzamend to submit an IND to conduct a combined Phase I/II study.
Previous report
Recent Developments
Previous report
Nasdaq Listing
Previous report
Deficiency Letter from Nasdaq – Market Value
Previous report
On September 26, 2023, we received a notice from the staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, for the previous 30 consecutive business days, the minimum Market Value of Listed Securities (“MVLS”) for our Common Stock was below the $35 million minimum MVLS requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2) (the “MVLS Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have 180 calendar days, or until March 25, 2024, to regain compliance with the MVLS Rule. To regain compliance with the MVLS Rule, the MVLS for our Common Stock must close at $35 million or more for a minimum of 10 consecutive business days at any time during this 180-day period. If we regain compliance with the MVLS Rule, Nasdaq will provide us with written confirmation and will close the matter. If we do not regain compliance with the rule by March 25, 2024, Nasdaq will provide notice that our Common Stock will be delisted from the Nasdaq Capital Market. In the event of such notification, the Nasdaq rules permit us an opportunity to appeal Nasdaq’s determination.
Previous report
Deficiency Letter from Nasdaq – Bid Price
Previous report
On February 1, 2024, we received a notice in the form of a letter (“Deficiency Letter”) from the Listing Qualifications Staff of the Nasdaq stating that we were not in compliance with Nasdaq Listing Rule 5550(a)(2) because the bid price for the Common Stock had closed below $1.00 per share for the previous 30 consecutive business days. In accordance with Nasdaq listing rule 5810(c)(3)(A), we have 180 calendar days, or until July 30, 2024, to regain compliance. The Deficiency Letter states that to regain compliance, the bid price for the Common Stock must close at $1.00 per share or more (the “Minimum Bid Price”) for a minimum of 10 consecutive business days during the compliance period ending July 30, 2024. In the event that we do not regain compliance within this 180-day period, we may be eligible to seek an additional compliance period of 180 calendar days if we meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the Minimum Bid Price, and provides written notice to Nasdaq of its intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary. However, if it appears to the Nasdaq Staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq will provide notice to us that our Common Stock will be subject to delisting. At that time, we may appeal any such delisting determination to a Nasdaq hearings panel.
Previous report
Not meaningful
Previous report
During the three months ended January 31, 2024 and 2023, we incurred stock-based compensation of $71,000 and $(43,000), respectively, related to stock option grants to consultants. The increase in research and development stock compensation expense for the three months ended January 31, 2024 was a result of the vesting of performance stock options grants.
Previous report
During the three months ended January 31, 2023, we incurred marketing fees of $247,000, which was primarily expenses related to the marketing and brand development agreement with Ault Alliance, Inc. (“AAI”), a related party. No such fees were incurred during the three months ended January 31, 2024.
Previous report
Results of Operations for the Nine Months Ended January 31, 2024 and 2023
Previous report
Revenue
Previous report
Research and development expenses for the nine months ended January 31, 2024 and 2023 were $6.3 million and $5.8 million, respectively. As reflected in the table below, research and development expenses primarily consisted of professional fees, clinical trial fees and licenses and fees.
Previous report
Clinical Trial Fees
Previous report
During the nine months ended January 31, 2024 and 2023, we incurred clinical trial fees of $3.3 million and $2.6 million, respectively. Clinical trial fees for the nine months ended January 31, 2024 consisted of $1.9 million for our Phase IIA clinical trial for AL001 and $1.4 million for our Phase IIA clinical trial for ALZN002. Clinical trial fees for the nine months ended January 31, 2023 were for our Phase I clinical trial for AL001.
Previous report
Licenses and Fees
Previous report
There are certain initial license fees and milestone payments required to be paid to the University of South Florida and the Licensor, for the licenses of the technologies, pursuant to the terms of the License Agreement with Sublicensing Terms.
Previous report
During the nine months ended January 31, 2024 and 2023, we incurred stock-based compensation of $214,000 and $(43,000), respectively, related to stock option grants to consultants. The increase in research and development stock compensation expense for the nine months ended January 31, 2024, was a result of the vesting of performance stock options grants.
Previous report
Other Research and Development Expenses
Previous report
General and Administrative Expenses
Previous report
During the nine months ended January 31, 2024 and 2023, we incurred professional fees of $620,000 and $567,000, respectively. During the nine months ended January 31, 2024, we incurred $224,000 in audit fees, $170,000 in investor relations, $99,000 in legal fees, $38,000 in related party consulting, $30,000 in tax preparation fees, $24,000 in Sarbanes-Oxley compliance fees and $35,000 in other professional fees. During the nine months ended January 31, 2023, we recorded an expense of $187,000 in connection with the five-year consulting agreement with Spartan Capital, $128,000 in Sarbanes-Oxley compliance fees, $124,000 in audit fees, $38,000 in related party consulting, $33,000 in tax preparation fees and $57,000 in other professional fees.
Previous report
Insurance Expense
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Salaries and Benefits
Previous report
Marketing Fees
Previous report
On September 8, 2023, we entered into an At-the-Market Issuance Sales Agreement with Ascendiant Capital Markets, LLC, as sales agent to sell shares of our Common stock, having an aggregate offering price of up to approximately $9.8 million (the “Shares”) from time to time, through an “at the market offering” (the “ATM Offering”) as defined in Rule 415 under the Securities Act. On September 8, 2023, we filed a prospectus supplement with the SEC relating to the offer and sale of up to approximately $9.8 million in shares of Common Stock in the ATM Offering.
Previous report
During the nine months ended January 31, 2024, we sold an aggregate of 816,426 shares of Common Stock pursuant to the ATM Offering for gross proceeds of $1.0 million. During the period between February 1, 2024 through March 22, 2024, we sold an aggregate of 248,080 shares of Common Stock pursuant to the ATM Offering for gross proceeds of $266,000.
Reworded paragraphs (33)
Previous wording
We were incorporated on February 26, 2016, as Alzamend Neuro, Inc. under the laws of the State of Delaware. We were formed to acquire and commercialize patented intellectual property and know-how to prevent, treat and potentially cure the crippling and deadly Alzheimer’s. With our two product candidates, we aim to bring treatment or cures not only for Alzheimer’s, but also, bipolar disorder (“BD”), major depressive disorder (“MDD”) and post-traumatic stress disorder (“PTSD”). Existing Alzheimer’s treatments only temporarily relieve symptoms but do not, to our knowledge, slow or halt the underlying worsening of the disease. We have developed a novel approach to combat Alzheimer’s through immunotherapy.
Current wording
We were incorporated on February 26, 2016, as Alzamend Neuro, Inc. under the laws of the State of Delaware. We were formed to acquire and commercialize patented intellectual property and know-how to prevent, treat and potentially cure the crippling and deadly Alzheimer’s disease (“Alzheimer’s”). With our two product candidates, we aim to bring treatment or cures not only for Alzheimer’s, but also bipolar disorder (“BD”), major depressive disorder (“MDD”) and post-traumatic stress disorder (“PTSD”). Existing Alzheimer’s treatments only temporarily relieve symptoms but do not, to our knowledge, slow or halt the underlying progression of the disease. We have developed a novel approach to combat Alzheimer’s through immunotherapy.
Previous wording
Certain of such assumptions involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different.
Current wording
Certain of these assumptions involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different.
Previous wording
We intend to develop and commercialize therapeutics that are better than existing treatments and have the potential to significantly improve the lives of individuals afflicted by Alzheimer’s, BD, MDD and PTSD. To achieve these goals, we are pursuing the following key business strategies:
Current wording
We intend to develop and commercialize therapeutics and vaccines that are better than existing treatments and have the potential to significantly improve the lives of individuals afflicted by Alzheimer’s, BD, MDD and PTSD. To achieve these goals, we are pursuing the following key business strategies:
Previous wording
On May 5, 2022, we initiated a multiple-dose, steady-state, double-blind, ascending dose safety, tolerability, pharmacokinetic clinical trial of AL001 in patients with mild to moderate Alzheimer’s and healthy subjects. We completed the Phase IIA clinical trial patient dosing in March 2023 and announced positive topline data in June 2023.
Current wording
On May 5, 2022, we initiated a multiple-dose, steady-state, double-blind, ascending dose safety, tolerability, pharmacokinetic clinical trial of AL001 in patients with mild to moderate Alzheimer’s and healthy subjects. We completed the Phase IIA clinical trial in March 2023 and announced positive topline data in June 2023.
Previous wording
Based on the results from our Phase IIA MAD study, we plan to initiate two safety and efficacy clinical trials in subjects with mild to moderate dementia of the Alzheimer’s type. Additionally, we are investigating the potential of AL001 for patients suffering from BD, MDD and PTSD, and submitted Investigational New Drug (“IND”) applications to the FDA for these indications. The IND for BD was filed in August 2023 and we received a “study may proceed” letter from the FDA in September 2023. The IND for MDD was filed in October 2023 and we received a “study may proceed” letter from the FDA in November 2023. The IND for PTSD was filed in November 2023 and we received a “study may proceed” letter from the FDA in December 2023. After FDA permission to proceed on the INDs, we intend to initiate clinical trials at the MTD to determine relative increased lithium levels in the brain compared to a marketed lithium salt for BD, MDD and PTSD, based on published mouse studies that predict that lithium can be given at lower doses for equivalent therapeutic benefit when treating with AL001. For example, the goal is to replace a 300 mg TID lithium carbonate dose for treatment of BD with a 240 mg TID AL001 lithium equivalent, which represents a daily decrease of 20% of lithium given to a patient. We anticipate beginning Phase II studies for the additional indications after we have obtained the necessary financing for the trials and payment to Phase IIA MAD study vendor for the final reports of that study.
Current wording
Based on the results from our Phase IIA MAD study, we plan to initiate two safety and efficacy clinical trials in subjects with mild to moderate dementia of the Alzheimer’s type. Additionally, we are investigating the potential of AL001 for patients suffering from BD, MDD and PTSD, and submitted investigational new drug (“IND”) applications to the FDA for these indications. The IND for BD was submitted in August 2023 and we received a “study may proceed” letter from the FDA in September 2023. The IND for MDD was submitted in October 2023 and we received a “study may proceed” letter from the FDA in November 2023. The IND for PTSD was submitted in November 2023 and we received a “study may proceed” from the FDA in December 2023.
Previous wording
On September 28, 2022, we submitted an IND application to the FDA for ALZN002 and received a “study may proceed” letter on October 31, 2022. The product candidate is an immunotherapy vaccine designed to treat mild to moderate dementia of the Alzheimer’s type. ALZN002 is a proprietary “active” immunotherapy product, which means it is produced by each patient’s immune system. It consists of autologous DCs that are activated white blood cells taken from each individual patient so that they can be engineered outside of the body to attack Alzheimer’s-related amyloid-beta proteins. These DCs are pulsed with a novel amyloid-beta peptide (E22W) designed to bolster the ability of the patient’s immune system to combat Alzheimer’s; the goal being to foster tolerance to treatment for safety purposes while stimulating the immune system to reduce the brain’s beta-amyloid protein burden, resulting in reduced Alzheimer’s signs and symptoms. Compared to passive immunization treatment approaches that use foreign blood products (such as monoclonal antibodies), active immunization with ALZN002 is anticipated to offer a more robust and long-lasting effect on the clearance of amyloid. This could provide a safer approach due to its reliance on autologous immune components, using each individual patient’s own white blood cells rather than foreign cells and/or blood products.
Current wording
On September 28, 2022, we submitted an IND application to the FDA for ALZN002 and received a “study may proceed” letter on October 31, 2022. The product candidate is an immunotherapy vaccine designed to treat mild to moderate dementia of the Alzheimer’s type. ALZN002 is a proprietary “active” immunotherapy product, which means it is produced by each patient’s immune system. It consists of autologous DCs that are activated white blood cells taken from each individual patient so that they can be engineered outside of the body to attack Alzheimer’s-related amyloid-beta proteins. These DCs are pulsed with a novel amyloid-beta peptide (E22W) designed to bolster the ability of the patient’s immune system to combat Alzheimer’s, with the goal being to foster tolerance to treatment for safety purposes while stimulating the immune system to reduce the brain’s beta-amyloid protein burden, resulting in reduced Alzheimer’s signs and symptoms. Compared to passive immunization treatment approaches that use foreign blood products (such as monoclonal antibodies), active immunization with ALZN002 is anticipated to offer a more robust and long-lasting effect on the clearance of amyloid. This could provide a safer approach due to its reliance on autologous immune components, using each individual patient’s own white blood cells rather than foreign cells and/or blood products.
Previous wording
On April 3, 2023, we announced the initiation of a Phase I/IIA clinical trial for ALZN002 to treat mild to moderate dementia of the Alzheimer’s type. The purpose of this trial is to assess the safety, tolerability, and efficacy of multiple ascending doses of ALZN002 compared with that of placebo in 20-30 subjects with mild to moderate morbidity. We expect this trial to last for up to five years. The primary goal of this clinical trial is to determine an appropriate dose of ALZN002 for treatment of patients with Alzheimer’s in a larger Phase IIB efficacy and safety clinical trial, which Alzamend expects to initiate within three months of receiving data from the initial trial. On February 13, 2024, we received notice from the company we engaged as our contract research organization (“CRO”), Biorasi, LLC. (“Biorasi”) that Biorasi was terminating our contract with them. We are currently pursuing the engagement of a replacement CRO.
Current wording
On April 3, 2023, we announced the initiation of a Phase I/IIA clinical trial for ALZN002 to treat mild to moderate dementia of the Alzheimer’s type. The purpose of this trial is to assess the safety, tolerability, and efficacy of multiple ascending doses of ALZN002 compared with that of a placebo in 20-30 subjects with mild to moderate morbidity. The primary goal of this clinical trial is to determine an appropriate dose of ALZN002 for treatment of patients with Alzheimer’s in a larger Phase IIB efficacy and safety clinical trial. On February 13, 2024, we received notice from the company we engaged as our contract research organization (“CRO”), Biorasi, LLC (“Biorasi”) that Biorasi was terminating our contract with them. We are currently pursuing the engagement of a replacement CRO.
Previous wording
Research and development expenses for the three months ended January 31, 2024 and 2023 were $1.9 million and $2.9 million, respectively. As reflected in the table below, research and development expenses primarily consisted of professional fees and clinical trial fees:
Current wording
Research and development expenses for the three months ended July 31, 2024 and 2023 were $207,000 and $2.4 million, respectively. As reflected in the table below, research and development expenses primarily consisted of professional fees and clinical trial fees:
Previous wording
During the three months ended January 31, 2024 and 2023, we incurred professional fees of $557,000 and $861,000, respectively, which were principally comprised of professional fees attributed to various types of scientific services, including FDA consulting services. The decrease relates to lower professional fees incurred related to the preparation for the clinical trial for ALZN002.
Current wording
During the three months ended July 31, 2024 and 2023, we incurred professional fees of $184,000 and $1.1 million, respectively, which were primarily comprised of professional fees attributed to various types of scientific services, including FDA consulting services. The decrease relates to lower professional fees incurred related to minimal clinical trial activities.
Previous wording
During the three months ended January 31, 2024 and 2023, we incurred clinical trial fees of $1.3 million and $2.1 million, respectively. Clinical trial fees for the three months ended January 31, 2024, consisted of $503,000 for our Phase IIA clinical trial for AL001 and $750,000 for our Phase IIA clinical trial for ALZN002. Clinical trial fees for the three months ended January 31, 2023 were for our Phase I clinical trial for AL001.
Current wording
During the three months ended July 31, 2024 and 2023, we incurred clinical trial fees of nil and $1.2 million, respectively. We had no clinical trial activity for the three months ended July 31, 2024. Clinical trial fees for the three months ended July 31, 2023 were for our Phase IIA clinical trial for AL001 and our Phase I/IIA clinical trial for ALZN002.
Previous wording
During the three months ended January 31, 2024 and 2023, we incurred other fees of $27,000 and $21,000, respectively, which were principally comprised of scientific materials required for our clinical trials.
Current wording
During the three months ended July 31, 2024 and 2023, we incurred other fees of $22,000 and $51,000, respectively, which were primarily comprised of scientific materials required for our clinical trials.
Previous wording
General and administrative expenses for the three months ended January 31, 2024 and 2023 were $751,000 and $2.5 million, respectively. As reflected in the table below, general and administrative expenses primarily consisted of the following expense categories: stock-based compensation expense; professional fees; insurance; salaries and benefits; as well as marketing fees. For the three months ended January 31, 2024 and 2023, the remaining general and administrative expenses of $137,000 and $182,000, respectively, primarily consisted of payments for filing fees, transfer agent fees, travel and entertainment, board of director fees and other office expenses, none of which was significant individually.
Current wording
General and administrative expenses for the three months ended July 31, 2024 and 2023 were $756,000 and $1.2 million, respectively. As reflected in the table below, general and administrative expenses primarily consisted of the following expense categories: salaries and benefits; professional fees; insurance; stock-based compensation expense; marketing fees; as well as board of director fees. For the three months ended July 31, 2024 and 2023, the remaining general and administrative expenses of $62,000 and $83,000, respectively, primarily consisted of payments for filing fees, transfer agent fees, travel and entertainment and other office expenses, none of which was significant individually.
Previous wording
During the three months ended January 31, 2024 and 2023, we incurred $227,000 and $233,000, respectively, in employee-related expenses. As of January 31, 2024, we had four full-time and three part-time employees.
Current wording
During the three months ended July 31, 2024 and 2023, we incurred $228,000 and $153,000, respectively, in employee-related expenses. The decrease in salaries and benefits was due to a reversal of bonus accrual. As of July 31, 2024, we had four full-time and three part-time employees.
Previous wording
During the three months ended January 31, 2024 and 2023, we incurred professional fees of $185,000 and $190,000, respectively. During the three months ended January 31, 2024, we incurred $54,000 in audit fees, $52,000 in investor relations, $30,000 in legal fees, $30,000 in consulting, $13,000 in related party consulting and $6,000 in Sarbanes-Oxley compliance fees. During the three months ended January 31, 2023, we recorded an expense of $47,000 in connection with the five-year consulting agreement with Spartan Capital, $87,000 in Sarbanes-Oxley compliance fees, $24,000 in audit fees, $12,000 in related party consulting, $8,000 in tax preparation fees and $12,000 in other professional fees.
Current wording
During the three months ended July 31, 2024 and 2023, we incurred professional fees of $222,000 and $151,000, respectively. During the three months ended July 31, 2024, we incurred $85,000 in investor relations fees, $74,000 in legal fees, $56,000 in audit fees, and $7,000 in tax preparation fees. During the three months ended July 31, 2023, we incurred $78,000 in audit fees, $29,000 in investor relations fees, $16,000 in tax preparation fees, $13,000 in related party consulting, $6,000 in Sarbanes-Oxley compliance fees and $9,000 in other professional fees. The increase in professional fees was due mainly to investor relations related to our reverse split and legal fees, partially offset by lower related party consulting, audit fees and tax preparation fees.
Previous wording
During the three months ended January 31, 2024 and 2023, we incurred insurance expense of $88,000 and $131,000, respectively, which was primarily directors’ and officers’ insurance.
Current wording
During the three months ended July 31, 2024 and 2023, we incurred insurance expense of $78,000 and $118,000, respectively, which was primarily directors’ and officers’ insurance.
Previous wording
During the three months ended January 31, 2024 and 2023, we incurred stock-based compensation expense of $115,000 and $1.6 million, respectively, related to stock option grants and restricted stock grants to executives, employees and consultants. The decrease in stock-based compensation expense for the three months ended January 31, 2024 was a result of fewer stock options vesting during the period compared to the prior year period.
Current wording
During the three months ended July 31, 2024 and 2023, we incurred general and administrative stock-based compensation expense of $81,000 and $369,000, respectively, related to stock option grants and restricted stock grants to executives, employees and consultants. The decrease in stock-based compensation expense for the three months ended July 31, 2024 was a result of fewer stock options vesting during the period compared to the prior year period.
Previous wording
During the nine months ended January 31, 2024 and 2023, we incurred marketing fees of $247,000 and $495,000, respectively, which was primarily expenses related to the marketing and brand development agreement with AAI, a related party.
Current wording
During the three months ended July 31, 2024 and 2023, we incurred marketing fees of $40,000 and $247,000, respectively. The decrease was due to the completion of the marketing and branding agreement with Ault Alliance, Inc.
Previous wording
Our inability to continue as a going concern could have a negative impact on our company, including our ability to obtain needed financing. We intend to finance our future development activities and our working capital needs largely through the sale of equity securities with some additional funding from other sources, including debt financing, until such time as funds provided by operations are sufficient to fund working capital requirements. Our condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should we be unable to continue as a going concern. As of January 31, 2024, we had cash of $283,000, a working capital deficiency of $3.2 million, an accumulated deficit of $53.2 million and stockholders’ deficit of $4.3 million. We have incurred recurring losses and reported losses for the three and nine months ended January 31, 2024 totaling $2.7 million and $9.1 million, respectively. In the past, we have financed our operations principally through sales of equity securities and debt instruments.
Current wording
Our inability to continue as a going concern could have a negative impact on our company, including our ability to obtain needed financing. We intend to finance our future development activities and our working capital needs largely through the sale of equity securities with some additional funding from other sources, including debt financing, until such time as funds provided by operations are sufficient to fund working capital requirements. Our condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should we be unable to continue as a going concern. As of July 31, 2024, we had cash of $1.2 million, a working capital deficiency of $1.5 million, an accumulated deficit of $55.0 million and stockholders’ deficit of $1.2 million. We have incurred recurring losses and reported losses for the three ended July 31, 2024 totaling $974,000. In the past, we have financed our operations principally through sales of equity securities and debt instruments.
Previous wording
We will need to obtain substantial additional funding in the future for our clinical development activities and continuing operations. If we are unable to raise capital when needed or on favorable terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts. As previously disclosed we had anticipated beginning Phase II clinical trials for AL001 additional indications in the first quarter of calendar 2024. Due to the Company’s inability to obtain significant additional financing, we have been unable to initiate those clinical trials and reduce the working capital deficiency. Our future capital requirements will depend on many factors, including:
Current wording
We will need to obtain substantial additional funding in the future for our clinical development activities and continuing operations. If we are unable to raise capital when needed or on favorable terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts. Our future capital requirements will depend on many factors, including:
Previous wording
On January 31, 2024, we entered into the AL SPA with Ault Lending whereby Ault Lending may purchase of up to 6,000 shares of series B convertible preferred stock (“Series B Convertible Preferred Stock”) and warrants to purchase shares up to 6,000,000 shares of our Common Stock. The AL SPA provides that Ault Lending may purchase up to $6 million of Series B Convertible Preferred Stock in one or more closings. Ault Lending has the right to purchase up to $2 million of series B Series B Convertible Preferred Stock, on or before March 31, 2024, and the right to purchase up to $4 million of Series B Convertible Preferred Stock after March 31, 2024, but on or before March 31, 2025 (the “Termination Date”). The Agreement will automatically terminate if the final closing has not occurred prior to the Termination Date.
Current wording
On January 31, 2024, we entered into a securities purchase agreement (“AL SPA”) with Ault Lending, LLC (“Ault Lending”) whereby Ault Lending may purchase of up to 6,000 shares of series B convertible preferred stock (“Series B Convertible Preferred Stock”) and warrants to purchase shares up to 600,000 shares of our common stock. The AL SPA provides that Ault Lending may purchase up to $6 million of Series B Convertible Preferred Stock in one or more closings. Ault Lending has the right to purchase up to $2 million of Series B Convertible Preferred Stock, on or before March 31, 2024, and the right to purchase up to $4 million of Series B Convertible Preferred Stock after March 31, 2024, but on or before March 31, 2025 (the “Termination Date”). The Agreement will automatically terminate if the final closing has not occurred prior to the Termination Date.
Previous wording
On January 31, 2024, we sold 1,220 shares of Series B Convertible Preferred Stock and warrants to purchase 1,220,000 shares of Common Stock with an exercise price of $1.20, for a total purchase price of $1.22 million. The purchase price was paid by the cancellation of $1.15 million of cash advances made by Ault Lending to the Company between November 9, 2023 and January 31, 2024 and a subscription receivable of $70,000.
Current wording
During the year ended April 30, 2024, we sold an aggregate of 2,100 shares of Series B Convertible Preferred Stock and warrants to purchase 210,000 shares of common stock with an exercise price of $12.00, for a total purchase price of $2.1 million. The purchase price was paid by the cancellation of $1.15 million of cash advances made by Ault Lending to us between November 9, 2023 and January 31, 2024 and the remaining $950,000 in cash.
Previous wording
The Series B Convertible Preferred Stockhas a stated value of $1,000 per share (“Stated Value”) and does not accrue dividends. Each share of Series B Convertible Preferred Stock is convertible into a number of shares of Common Stock determined by dividing the Stated Value by $1.00 (the “Conversion Price”). The Conversion Price is subject to adjustment in the event of an issuance of Common Stock at a price per share lower than the Conversion Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events. The holders of the Series B Convertible Preferred Stock are entitled to vote with the Common Stock as a single class on an as-converted basis, subject to applicable law provisions of the Delaware General Company Law and Nasdaq, provided however, that for purposes of complying with Nasdaq regulations, the conversion price, for purposes of determining the number of votes the holder of Series B Convertible Preferred Stock is entitled to cast, shall not be lower than $0.873 (the “Voting Floor Price”), which represents the closing sale price of the Common Stock on the trading day immediately prior to the Execution Date. The Voting Floor Price shall be adjusted for stock dividends, stock splits, stock combinations and other similar transactions.
Current wording
The Series B Convertible Preferred Stockhas a stated value of $1,000 per share (“Series B Stated Value”) and does not accrue dividends. Each share of Series B Convertible Preferred Stock is convertible into a number of shares of common stock determined by dividing the Series B Stated Value by $10.00 (the “Series BConversion Price”). The Series BConversion Price is subject to adjustment in the event of an issuance of common stock at a price per share lower than the Series BConversion Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events. The holders of the Series B Convertible Preferred Stock are entitled to vote with the common stock as a single class on an as-converted basis, subject to applicable law provisions of the Delaware General Corporation Law and Nasdaq, provided however, that for purposes of complying with Nasdaq regulations, the conversion price, for purposes of determining the number of votes the holder of Series B Convertible Preferred Stock is entitled to cast, shall not be lower than $8.73 (the “Voting Floor Price”), which represents the closing sale price of the common stock on the trading day immediately prior to the date of execution of the AL SPA. The Voting Floor Price shall be adjusted for stock dividends, stock splits, stock combinations and other similar transactions.
Previous wording
The warrants have an exercise price of $1.20 (the “Exercise Price”) and become exercisable on the first business day after the six-month anniversary of issuance (the “Initial Exercise Date”) and have a five-year term, expiring on the fifth anniversary of the Initial Exercise Date. The Exercise Price is subject to adjustment in the event of an issuance of Common Stock at a price per share lower than the Exercise Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events.
Current wording
The warrants have an exercise price of $12.00 (the “Series BExercise Price”) and become exercisable on the first business day after the six-month anniversary of issuance (the “Series BInitial Exercise Date”) and have a five-year term, expiring on the fifth anniversary of the Series BInitial Exercise Date. The Series BExercise Price is subject to adjustment in the event of an issuance of common stock at a price per share lower than the Series BExercise Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events.
Previous wording
The following table summarizes our cash flows for the nine months ended January 31, 2024 and 2023:
Current wording
The following table summarizes our cash flows for the three months ended July 31, 2024 and 2023:
Previous wording
During the nine months ended January 31, 2024, net cash used in operating activities was $6.8 million. This consisted primarily of a net loss of $9.1 million partially offset by an increase in our net operating assets and liabilities of $1.3 million and non-cash charges of $912,000. The non-cash charges primarily consisted of stock-based compensation expense. The increase in our net operating assets and liabilities was due to an increase in accounts payable and accrued liabilities, an decrease in prepaid expenses and other current assets and an decrease in prepaid expenses - related party.
Current wording
During the three months ended July 31, 2024, net cash used in operating activities was $1.1 million. This consisted primarily of a net loss of $974,000 and a decrease in our net operating assets and liabilities of $185,000, partially offset by non-cash charges of $103,000. The non-cash charges primarily consisted of stock-based compensation expense. The decrease in our net operating assets and liabilities was due to a decrease in accounts payable and accrued liabilities and an increase in prepaid expenses and other current assets.
Previous wording
During the nine months ended January 31, 2024, net cash used in investing activities was $147,000 from the purchase of machinery and equipment. We purchased equipment, which draws blood from patients and separates the monocytes from their blood, to be used in the ALZN002 clinical trial.
Current wording
During the three months ended July 31, 2024, net cash used in investing activities was $90,000 from the purchase of equipment. We purchased equipment, which measures lithium levels in the brain, to be used in the AL001 clinical trial.
Previous wording
During the nine months ended January 31, 2024, net cash provided by financing activities was $1.2 million from the sale of convertible preferred stock to a related party and $1.0 million from proceeds from the ATM Offering.
Current wording
During the three months ended July 31, 2024, net cash provided by financing activities was $2.0 million from the sale of Series A Convertible Preferred Stock.
Previous wording
On July 2, 2018, we entered into two Standard Exclusive License Agreements with Sublicensing Terms for AL001 with the Licensor and its affiliate, the University of South Florida (the “AL001 Licenses”), pursuant to which the Licensor granted us a royalty bearing exclusive worldwide licenses limited to the field of Alzheimer’s, under United States Patent Nos. (i) 9,840,521, entitled “Organic Anion Lithium Ionic Cocrystal Compounds and Compositions”, filed September 24, 2015 and granted December 12, 2017, and (ii) 9,603,869, entitled “Lithium Co-Crystals for Treatment of Neuropsychiatric Disorders”, filed May 21, 2016 and granted March 28, 2017. On February 1, 2019, we entered into the First Amendments to the AL001 Licenses, on March 30, 2021, we entered into the Second Amendments to the AL001 Licenses and on June 8, 2023, we entered into the Third Amendments to the AL001 Licenses (collectively, the “AL001 License Agreements”). The Third Amendments to the AL001 Licenses modified the timing of the payments for the license fees.
Current wording
On July 2, 2018, we entered into two Standard Exclusive License Agreements with Sublicensing Terms for AL001 with the Licensor and its affiliate, the University of South Florida (the “AL001 Licenses”), pursuant to which the Licensor granted us a royalty bearing exclusive worldwide licenses limited to the field of Alzheimer’s, under United States Patent Nos. (i) 9,840,521, entitled “Organic Anion Lithium Ionic Cocrystal Compounds and Compositions,” filed September 24, 2015 and granted December 12, 2017, and (ii) 9,603,869, entitled “Lithium Co-Crystals for Treatment of Neuropsychiatric Disorders,” filed May 21, 2016 and granted March 28, 2017. On February 1, 2019, we entered into the First Amendments to the AL001 Licenses, on March 30, 2021, we entered into the Second Amendments to the AL001 Licenses and on June 8, 2023, we entered into the Third Amendments to the AL001 Licenses (collectively, the “AL001 License Agreements”). The Third Amendments to the AL001 Licenses modified the timing of the payments of the license fees.
Previous wording
The AL001 License Agreements require that we pay combined royalty payments of 4.5% on net sales of products developed from the licensed technology for AL001. We have already paid an initial license fee of $200,000 for AL001. As an additional licensing fee for the license of the AL001 technologies, the Licensor received 148,528 shares of our common stock. Minimum royalties for AL001 License Agreements are $40,000 on the first anniversary of the first commercial sale, $80,000 on the second anniversary of the first commercial sale and $100,000 on the third anniversary of the first commercial sale and every year thereafter, for the life of the AL001 License Agreements.
Current wording
The AL001 License Agreements require that we pay combined royalty payments of 4.5% on net sales of products developed from the licensed technology for AL001. We have already paid an initial license fee of $200,000 for AL001. As an additional licensing fee for the license of the AL001 technologies, the Licensor received 14,853 shares of our common stock. Minimum royalties for AL001 License Agreements are $40,000 on the first anniversary of the first commercial sale, $80,000 on the second anniversary of the first commercial sale and $100,000 on the third anniversary of the first commercial sale and every year thereafter, for the life of the AL001 License Agreements.
Previous wording
On May 1, 2016, we entered into a Standard Exclusive License Agreement with Sublicensing Terms for ALZN002 with the Licensor (the “ALZN002 License”), pursuant to which the Licensor granted us a royalty bearing exclusive worldwide license limited to the field of Alzheimer’s Immunotherapy and Diagnostics, under United States Patent No. 8,188,046, entitled “Amyloid Beta Peptides and Methods of Use”, filed April 7, 2009 and granted May 29, 2012. On August 18, 2017, we entered into the First Amendment to the ALZN002 License, on May 7, 2018, we entered into the Second Amendment to the ALZN002 License, on January 31, 2019, we entered into the Third Amendment to the ALZN002 License, on January 24, 2020, we entered into the Fourth Amendment to the ALZN002 License, on March 30, 2021, we entered into the Fifth Amendment to the ALZN002 License, on April 17, 2023, we entered into the Sixth Amendment to the ALZN002 License and on December 11, 2023, we entered into the Seventh Amendment to the ALZN002 License (collectively, the “ALZN002 License Agreement”). The Seventh Amendment to the ALZN002 License modified the timing of the payments for the license fees.
Current wording
On May 1, 2016, we entered into a Standard Exclusive License Agreement with Sublicensing Terms for ALZN002 with the Licensor (the “ALZN002 License”), pursuant to which the Licensor granted us a royalty bearing exclusive worldwide license limited to the field of Alzheimer’s Immunotherapy and Diagnostics, under United States Patent No. 8,188,046, entitled “Amyloid Beta Peptides and Methods of Use,” filed April 7, 2009 and granted May 29, 2012. On August 18, 2017, we entered into the First Amendment to the ALZN002 License, on May 7, 2018, we entered into the Second Amendment to the ALZN002 License, on January 31, 2019, we entered into the Third Amendment to the ALZN002 License, on January 24, 2020, we entered into the Fourth Amendment to the ALZN002 License, on March 30, 2021, we entered into the Fifth Amendment to the ALZN002 License, on April 17, 2023, we entered into the Sixth Amendment to the ALZN002 License and on December 11, 2023, we entered into the Seventh Amendment to the ALZN002 License (collectively, the “ALZN002 License Agreement”). The Seventh Amendment to the ALZN002 License modified the timing of the payments of the license fees.
Previous wording
The ALZN002 License Agreement requires us to pay royalty payments of 4% on net sales of products developed from the licensed technology for ALZN002. We have already paid an initial license fee of $200,000 for ALZN002. As an additional licensing fee for the license of ALZN002, the Licensor received 240,120 shares of our common stock. Minimum royalties for ALZN002 are $20,000 on the first anniversary of the first commercial sale, $40,000 on the second anniversary of the first commercial sale and $50,000 on the third anniversary of the first commercial sale and every year thereafter, for the life of the ALZN002 License Agreement.
Current wording
The ALZN002 License Agreement requires us to pay royalty payments of 4% on net sales of products developed from the licensed technology for ALZN002. We have already paid an initial license fee of $200,000 for ALZN002. As an additional licensing fee for the license of ALZN002, the Licensor received 24,012 shares of our common stock. Minimum royalties for ALZN002 are $20,000 on the first anniversary of the first commercial sale, $40,000 on the second anniversary of the first commercial sale and $50,000 on the third anniversary of the first commercial sale and every year thereafter, for the life of the ALZN002 License Agreement.
Previous wording
On November 19, 2019, we entered into two Standard Exclusive License Agreements with Sublicensing Terms for two additional indications of AL001 with the Licensor (the “November AL001 License”), pursuant to which the Licensor granted us a royalty bearing exclusive worldwide licenses limited to the fields of (i) neurodegenerative diseases excluding Alzheimer’s and (ii) psychiatric diseases and disorders. On March 30, 2021, we entered into the First Amendments to the November AL001 License and on April 17, 2023, we entered into the Second Amendments to the November AL001 License (collectively, the “November AL001 License Agreements”). The Second Amendments to the November AL001 License modified the timing of the payments for the license fees.
Current wording
On November 19, 2019, we entered into two Standard Exclusive License Agreements with Sublicensing Terms for two additional indications of AL001 with the Licensor (the “November AL001 License”), pursuant to which the Licensor granted us a royalty bearing exclusive worldwide licenses limited to the fields of (i) neurodegenerative diseases excluding Alzheimer’s and (ii) psychiatric diseases and disorders. On March 30, 2021, we entered into the First Amendments to the November AL001 License and on April 17, 2023, we entered into the Second Amendments to the November AL001 License (collectively, the “November AL001 License Agreements”). The Second Amendments to the November AL001 License modified the timing of the payments of the license fees.
Previous wording
Additionally, we are required to pay milestone payments on the due dates to the Licensor for the license of the AL001 technologies and for the ALZN002 technology, as follows:
Current wording
Additionally, we are required to complete milestones and make payments on the due dates to the Licensor for the license of the AL001 technologies and for the ALZN002 technology, as follows:
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
We intend to initiate clinical trials in 2025 at this MTD to determine relative increased lithium levels in the brain compared to a marketed lithium salt for Alzheimer’s, BD, MDD and PTSD, based on published mouse studies that predict that lithium can be given at lower doses for equivalent therapeutic benefit when treating with AL001. For example, the goal is to replace a 300 mg TID lithium carbonate dose for treatment of BD with a 240 mg TID AL001 lithium equivalent, which represents a daily decrease of 20% of lithium given to a patient. In August 2024, we announced that we had partnered with Massachusetts General Hospital to serve as the CRO for these clinical trials.
Current report — wording carried from elsewhere
The Series A Convertible Preferred Stockhas a stated value of $10,000 per share (“Series A Stated Value”) and accrues dividendsat the rate of 15% per annum, payable quarterly in arrears in cash or paid-in-kind shares, in Orchid’s sole discretion. Each share of Series A Convertible Preferred Stock is convertible into a number of shares of common stock determined by dividing the Series A Stated Valueby(y) the greater of (i) the Floor Price and (ii) the lesser of (A) $15.00 and (B) 80% of the lowest closing price of our common stock during the three trading days immediately prior to the date of conversion into conversion shares (the “Series AConversion Price”). The Series AConversion Price is subject to adjustment in the event of an issuance of common stock at a price per share lower than the Series AConversion Price then in effect, as well as upon customary stock splits, stock dividends, combinations or similar events. The holders of the Series A Convertible Preferred Stock are entitled to vote with the common stock as a single class on an as-converted basis, subject to applicable law provisions of the Delaware General Corporation Law and Nasdaq, provided however, that for purposes of complying with Nasdaq regulations, the conversion price, for purposes of determining the number of votes the holder of Series B Convertible Preferred Stock is entitled to cast, shall not be lower than $5.63 (the “Series A Voting Floor Price”), which represents the closing sale price of the common stock on the trading day immediately prior to the date of execution of the Orchid SPA. The Series A Voting Floor Price shall be adjusted for stock dividends, stock splits, stock combinations and other similar transactions.
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
The following table summarizes the results of our operations for the nine months ended January 31, 2024 and 2023:
Previous report — wording carried elsewhere
We currently have only two product candidates, AL001 and ALZN002. These products are in the clinical stage of development and will require extensive clinical study, review and evaluation, regulatory review and approval, significant marketing efforts and substantial investment before either or both of them, and any respective successors, will provide us with any revenue. We did not generate any revenues during the nine months ended January 31, 2024 and 2023, and we do not anticipate that we will generate revenue for the foreseeable future.
Previous report — wording carried elsewhere
During each of the nine months ended January 31, 2024 and 2023, we incurred professional fees of $2.7 million and $3.0 million, respectively, which were principally comprised of professional fees attributed to various types of scientific services, including FDA consulting services.
Previous report — wording carried elsewhere
During the nine months ended January 31, 2024 and 2023, we incurred other fees of $93,000 and $190,000, respectively, which were principally comprised of scientific materials required for our clinical trials.
Previous report — wording carried elsewhere
General and administrative expenses for the nine months ended January 31, 2024 and 2023 were $2.8 million and $5.8 million, respectively. As reflected in the table below, general and administrative expenses primarily consisted of the following expense categories: stock-based compensation expense; professional fees; insurance; salaries and benefits; as well as marketing fees. For the nine months ended January 31, 2024 and 2023, the remaining general and administrative expenses of $388,000 and $439,000, respectively, primarily consisted of payments for filing fees, transfer agent fees, travel and entertainment, board of director fees and other office expenses, none of which was significant individually.
Previous report — wording carried elsewhere
During the nine months ended January 31, 2024 and 2023, we incurred stock-based compensation expense of $660,000 and $3.1 million, respectively, related to stock option grants and restricted stock grants to executives, employees and consultants. The decrease in stock-based compensation for the nine months ended January 31, 2024 was a result of fewer stock options vesting during the period compared to the prior year period.
Previous report — wording carried elsewhere
During the nine months ended January 31, 2024 and 2023, we incurred insurance expense of $294,000 and $457,000, respectively, which was primarily directors’ and officers’ insurance.
Previous report — wording carried elsewhere
During the nine months ended January 31, 2024 and 2023, we incurred $606,000 and $676,000, respectively, in employee-related expenses. As of January 31, 2024, we had four full-time and three part-time employees.