Financial Position and Capital Requirements - As of April 30, 2023, the company had $5.1 million in cash and cash equivalents, which is expected to fund operations for approximately six months without additional funding [142]. - The company anticipates substantial increases in expenses over the next few years due to the capital-intensive nature of biotechnology product development, including costs for clinical trials and commercialization [141]. - The company has expressed substantial doubt about its ability to continue as a going concern due to insufficient capital to fund operations, as indicated by the auditors' going concern opinion [145]. - The company must raise substantial additional capital to complete the development and commercialization of its product candidates, which may involve significant dilution for existing shareholders [144]. - The company does not expect to generate revenue for several years, and profitability is not anticipated until several years after generating material revenue [147]. Product Development and Regulatory Approval - The company has initiated clinical trials for two product candidates, AL001 and ALZN002, but has not yet completed pivotal trials or obtained marketing approvals, indicating a lack of near-term revenue [146]. - The company plans to submit AL001 and ALZN002 for regulatory approval, which is essential for initiating commercial distribution [159]. - Successful development, FDA approval, and commercialization of AL001 or ALZN002 are critical for the company's near-term prospects and revenue generation [159]. - The company faces significant risks related to the regulatory approval process, which requires substantial resources and may lead to abandonment of product candidates if safety and efficacy are not demonstrated [178]. - The FDA has only approved two new drugs for Alzheimer's since 2003, highlighting a high failure rate for drug candidates in clinical trials [183]. - Clinical trials for AL001 and ALZN002 are expected to be expensive and time-consuming, potentially taking several years to complete [184]. - The company plans to seek breakthrough therapy designation for both AL001 and ALZN002, which may not guarantee faster development or FDA approval [187]. - Regulatory approvals may come with conditions that require costly post-marketing surveillance and compliance with extensive requirements [191]. - The reimbursement approval process is time-consuming and may significantly impact the commercial viability of AL001 and ALZN002 [172]. Competition and Market Risks - The company faces substantial competition from major pharmaceutical and biotechnology companies, which may have greater resources and expertise in drug development and commercialization [210]. - If competitors develop safer or more effective products, the company's market opportunity could be significantly reduced or eliminated [212]. - Market acceptance of AL001 and ALZN002 is uncertain and depends on factors such as safety, efficacy, pricing, and reimbursement from third-party payers [162]. - Cost containment trends in the healthcare industry could lead to lower product revenue and profitability due to pricing pressures from third-party payers [173]. Intellectual Property and Legal Risks - The company may need to litigate to protect its intellectual property rights, which could be costly and distract management from core business operations [217]. - The company relies on a combination of patents and trade secrets to protect its intellectual property, but there is a risk of inadequate protection leading to competitive disadvantages [226]. - Obtaining and enforcing patents in the biopharmaceutical industry is costly, time-consuming, and uncertain, with recent patent law changes potentially diminishing patent value [231]. - The company may encounter significant problems in protecting and defending intellectual property rights in foreign jurisdictions, particularly in developing countries [235]. - The company is subject to various healthcare fraud and abuse laws, including the Anti-Kickback Statute, which could materially affect its operations upon successful commercialization of its products in the U.S. [202]. Management and Operational Challenges - The company relies heavily on senior management, and the loss of key personnel could delay the development and commercialization of its product candidates, AL001 and ALZN002 [208]. - The company has identified material weaknesses in its internal control over financial reporting, which could lead to misstatements in financial statements if not remediated effectively [266]. - The company is in the process of enhancing its internal control over financial reporting, which is expected to be time-consuming and costly [272]. - The company may face challenges in hiring qualified personnel due to intense competition in the biopharmaceutical field [273]. - The company's information technology systems are vulnerable to disruptions, which could adversely affect business operations and financial condition [274]. Stock and Market Performance - The company's common stock is listed on the Nasdaq Capital Market, with trading prices fluctuating between $0.425 and $1.19 per share during the year ended April 30, 2023 [251]. - Beneficial ownership of the shares of common stock by directors and executive officers represents approximately 49.5% of the outstanding shares, allowing them to influence management and significant corporate transactions [242]. - The market price of the company's common stock may decline due to substantial sales by directors, executive officers, or significant stockholders [254]. - The volatility of the stock market and the pharmaceutical industry may significantly affect the market price of the company's common stock, regardless of its operating performance [253]. Financial Obligations and Future Payments - A payment of $2,000,000 is due 36 months from the completion of the first Phase II clinical trial, with an additional $16,000,000 due upon the first patient treated in a Phase III clinical trial [369]. - The company is required to pay royalty payments of 4% on net sales for ALZN002 and 4.5% for AL001, along with various milestone payments totaling up to $10 million upon FDA approval for AL001 [151].

Drug Development and Clinical Trials - Alzamend Neuro aims to develop treatments for Alzheimer's, bipolar disorder, major depressive disorder, and post-traumatic stress disorder through patented intellectual property and immunotherapy approaches[93]. - The company submitted an Investigational New Drug (IND) application for AL001 to the FDA on June 30, 2021, and received a "Study May Proceed" letter for a Phase I study on July 28, 2021[103]. - Phase I clinical trial data for AL001 indicated that a 150 mg dosage is bioequivalent to the marketed 300 mg lithium carbonate product, suggesting potential for better outcomes with reduced dosing[105]. - Alzamend Neuro plans to initiate Phase II clinical trials for AL001 for Alzheimer's treatment and anticipates filing INDs for bipolar disorder, major depressive disorder, and PTSD upon completion of the current Phase IIA study[111]. - The company has an additional preclinical candidate, ALZN002, which has transitioned to an extensive preclinical study program, with a focus on developing a cell-based therapeutic vaccine for Alzheimer's[112]. - An IND application for ALZN002 was submitted to the FDA on September 29, 2022, to conduct a Phase I/IIA clinical trial assessing safety and efficacy in subjects with mild to moderate Alzheimer's[114]. - The Phase IIA study for AL001 will evaluate safety and tolerability under multiple-dose conditions, targeting a maximum tolerated dose for further studies[109]. - The company expects to dose the first patient in a Phase I/IIA clinical trial for ALZN002 in the first quarter of 2023, following FDA approval[115]. Financial Performance - The company reported a net loss of $5,425,574 for the three months ended January 31, 2023, compared to a net loss of $2,572,865 for the same period in 2022, representing an increase of 111%[118]. - Research and development expenses increased by 231% to $2,888,847 for the three months ended January 31, 2023, up from $873,653 in the same period of 2022[118]. - General and administrative expenses rose by 51% to $2,534,665 for the three months ended January 31, 2023, compared to $1,682,913 for the same period in 2022[118]. - The company did not generate any revenue during the three months ended January 31, 2023, and does not anticipate generating revenue in the foreseeable future[119]. - Total operating expenses for the three months ended January 31, 2023, were $5,423,512, an increase of 112% from $2,556,566 in the same period of 2022[118]. - Clinical trial fees surged by 623% to $2,050,000 for the three months ended January 31, 2023, compared to $283,497 in the same period of 2022[127]. - The company incurred professional fees of $861,000 for the three months ended January 31, 2023, an increase of 80% from $480,000 in the same period of 2022[128]. - The company reported a net loss of $11.6 million for the nine months ended January 31, 2023, compared to a net loss of $8.5 million for the same period in 2022[149]. - Cash used in operating activities was $6.7 million for the nine months ended January 31, 2023, compared to $5.1 million in the same period of 2022[156]. - As of January 31, 2023, the company had cash of $7.4 million and an accumulated deficit of $40.8 million[149]. Expenses and Costs - Stock-based compensation expense for the nine months ended January 31, 2023, was $3.1 million, an increase of 12% from $2.8 million in the same period of 2022[138]. - Total general and administrative expenses increased by 18% to $5.8 million for the nine months ended January 31, 2023, compared to $4.9 million in the prior year[144]. - Research and development expenses rose by 64% to $5.8 million for the nine months ended January 31, 2023, up from $3.5 million in the same period of 2022[144]. - Clinical trial fees increased significantly by 161% to $2.6 million for the nine months ended January 31, 2023, compared to $1.0 million in the prior year[146]. - Marketing fees surged to $495,000 for the nine months ended January 31, 2023, from just $7,000 in the same period of 2022, marking a 6,823% increase[141]. - Professional fees increased by 59% to $3.0 million for the nine months ended January 31, 2023, compared to $1.9 million in the prior year[145]. Capital and Funding - The company raised $4 million by selling 2,666,667 shares of common stock at $1.50 per share to Ault Lending, LLC, following the achievement of a milestone in the Phase I clinical trial for AL001[108]. - The company expects to continue incurring losses and will need to raise additional capital to fund its operations and development activities[153]. Milestones and Obligations - The company has successfully completed several milestones including the pre-IND meeting and IND application filing for AL001 and ALZN002, with milestone payments totaling $10,000,000 upon FDA approval[163]. - Initial license fees of $20,000 have been paid for two additional AL001 licenses, which require a 3% royalty on net sales of products developed from the licensed technology[166]. - The company is obligated to make milestone payments for the additional AL001 licenses, including $1,000,000 upon first patient treated in a Phase III clinical trial and $8,000,000 upon first commercial sale[167]. - The company completed the first clinical trial for ALZN002, with milestone payments of $500,000 due upon completion[164]. - The company has a total of $1,250,000 due 12 months from the completion of the first Phase II clinical trial for ALZN002[163]. - The company has completed the first Phase I clinical trial for ALZN002, with milestone payments of $175,000 due upon completion[164]. - The company has a total of $10,000,000 in milestone payments due upon FDA BLA approval for ALZN002[164]. Regulatory and Accounting Considerations - The company is a smaller reporting company, and certain market risk disclosures are not applicable[169]. - Recent accounting standards may impact the company's financial statements, as noted in the financial statements[168].

Drug Development and Clinical Trials - Alzamend Neuro aims to develop treatments for Alzheimer's, bipolar disorder, major depressive disorder, and post-traumatic stress disorder through patented intellectual property and immunotherapy approaches[93]. - The company submitted an Investigational New Drug (IND) application for AL001 to the FDA on June 30, 2021, and received a "Study May Proceed" letter for a Phase I study on July 28, 2021[101]. - Phase I clinical trial data for AL001 indicated that a 150 mg dosage is bioavailable compared to the marketed 300 mg lithium carbonate product, with safety profiles being benign[103]. - AL001 has the potential to provide benefits from lithium at up to 50% of the currently approved lithium carbonate dosage, potentially treating over 40 million Americans suffering from Alzheimer's and other neurodegenerative diseases[104]. - The company plans to file INDs for bipolar disorder, major depressive disorder, and PTSD upon completion of the current Phase IIA study for AL001[110]. - Alzamend Neuro has an additional preclinical candidate, ALZN002, which aims to restore the immunological system's ability to combat Alzheimer's and has shown positive anti-inflammatory responses[112]. - An IND application for ALZN002 was submitted to the FDA on September 29, 2022, to conduct a Phase I/IIA clinical trial assessing safety, tolerability, and efficacy in subjects with mild to moderate Alzheimer's[113]. - The Phase IIA study for AL001 will evaluate safety and tolerability under multiple-dose conditions, targeting a maximum tolerated dose for further studies[107]. - The company received a "study may proceed" letter from the FDA for a phase I/IIA clinical trial of ALZN002, expecting to dose the first patient in Q1 2023[114]. Financial Performance - Total operating expenses for the three months ended October 31, 2022, were $3.1 million, a decrease of 13% from $3.6 million in the same period of 2021[117]. - Research and development expenses for the three months ended October 31, 2022, were $1.5 million, down 12% from $1.8 million in the same period of 2021[124]. - General and administrative expenses for the three months ended October 31, 2022, were $1.6 million, a decrease of 14% from $1.8 million in the same period of 2021[119]. - The net loss for the three months ended October 31, 2022, was $3.1 million, a 14% improvement from a net loss of $3.6 million in the same period of 2021[117]. - The company did not generate any revenue during the three months ended October 31, 2022, and does not anticipate generating revenue for the foreseeable future[118]. - Basic and diluted net loss per common share for the three months ended October 31, 2022, was $(0.03), an improvement from $(0.04) in the same period of 2021[117]. - Total operating expenses for the six months ended October 31, 2022, were $6.1 million, an increase of 4% from $5.9 million in the same period of 2021[131]. - The company reported a net loss of $6.2 million for the six months ended October 31, 2022, compared to a net loss of $5.9 million in the same period of 2021[146]. - Cash as of October 31, 2022, was $9.2 million, with an accumulated deficit of $35.3 million[146]. - Net cash used in operating activities was $4.9 million for the six months ended October 31, 2022, compared to $3.3 million in 2021[151]. Expenses and Financing - The company incurred professional fees of $1.5 million for the three months ended October 31, 2022, primarily related to clinical trial monitoring and IND preparation[126]. - The company expects to require additional financing to fund future operations due to various factors including clinical testing progress and regulatory approvals[115]. - Stock-based compensation expense for the six months ended October 31, 2022, was $1.6 million, a decrease of 10% from $1.8 million in the same period of 2021[136]. - Salaries and benefits increased by 29% to $443,000 for the six months ended October 31, 2022, compared to $343,000 in 2021[137]. - Professional fees decreased by 29% to $377,000 for the six months ended October 31, 2022, down from $532,000 in 2021[138]. - Research and development expenses rose by 9% to $2.9 million for the six months ended October 31, 2022, compared to $2.7 million in 2021[140]. - The company expects to continue incurring losses and will need to raise additional capital to fund operations and development activities[149]. Milestones and Payments - The company has successfully completed the pre-IND meeting, IND application filing, and the Phase I clinical trial milestones for AL001 and ALZN002[158]. - The company is required to pay milestone payments totaling $1,000,000 upon the first patient treated in a Phase III clinical trial, which is due 36 months from the completion of the first Phase II clinical trial[161]. - The company has paid initial license fees of $20,000 for two additional royalty-bearing exclusive worldwide licenses for AL001, which includes a 3% royalty on net sales of products developed from the licensed technology[160]. - A milestone payment of $8,000,000 is due for the first commercial sale, which is 8 years from the effective date of the agreement[161]. - The company has a payment structure that includes $500,000 due 24 months from the completion of the first Phase I clinical trial[161]. - The company has a payment of $175,000 due 12 months from the first patient dosed in Phase I[161]. - The company has a payment of $50,000 due upon IND application filing, which has been completed[161]. - The company has a payment of $150,000 due 12 months from IND filing date upon the first dosing of a patient in a clinical trial[161]. - The company has a payment of $400,000 due 12 months from the first patient dosing upon completion of the first clinical trial[161]. Regulatory and Reporting - The company is classified as a smaller reporting company, which impacts the applicability of certain market risk disclosures[164].

Clinical Development and Regulatory Approval - Company is in early clinical-stage development with no near-term revenue and may never achieve profitability [138] - Two product candidates, AL001 and AL002, require extensive clinical evaluation and regulatory approval before generating revenue [139] - Company plans to submit AL001 and AL002 for regulatory approval, which is critical for future revenue generation [153] - The success of product candidates depends on timely completion of clinical trials and regulatory compliance [154] - The regulatory approval process for AL001 and AL002 is uncertain and requires significant resources, with no guarantee of success [167] - Clinical trials for AL001 and AL002 are expected to be expensive and time-consuming, potentially taking several years to complete [176] - The company plans to seek breakthrough therapy designation for both AL001 and AL002, which may provide additional guidance from the FDA [179] - If breakthrough therapy designation is not received, it could increase the FDA's review time and adversely impact the development timeline [178] - Regulatory approvals for AL001 and AL002 may come with conditions that could limit marketing and require costly surveillance [183] - The anticipated development of a Risk Evaluation and Mitigation Strategy (REMS) for AL001 or AL002 could delay the approval process and impact commercialization [193] - Regulatory authorities may impose additional requirements or halt clinical trials due to safety concerns, affecting market acceptance [162] Financial Risks and Profitability - Company has a limited operating history since incorporation in February 2016, making future profitability uncertain [140] - Future financing may not be available on favorable terms, potentially diluting stockholders and imposing financial restrictions [141][142] - AL001 and AL002 may not achieve market acceptance, significantly limiting revenue generation potential [155] - Obtaining reimbursement from third-party payers is essential for commercial viability, and the process is time-consuming and expensive [164] - There is a high rate of failure for drug candidates in clinical trials, which could impair the company's business plan and reputation [173] - The company may face significant setbacks in clinical trials, impacting revenue generation and financing [173] - The company expects to face substantial competition, which may impact pricing and market acceptance of AL001 and AL002 [158] - The company may face substantial costs and management distractions from potential securities class action litigation due to stock price volatility [295] Competition and Market Dynamics - The company faces substantial competition from major pharmaceutical and biotechnology companies, which may have greater resources and expertise in research and development [205] - If competitors develop safer or more effective products, the company's commercial opportunity could be significantly reduced or eliminated [206] Intellectual Property and Legal Risks - The company expects to rely on a combination of patents and trade secret protection to safeguard its intellectual property related to AL001 and AL002 [222] - The strength of the company's patents may be uncertain, and challenges to their validity could threaten the commercialization of its product candidates [224] - The company may face third-party claims alleging patent infringement, which could result in substantial expenses and hinder product development [219] - The company may need to litigate to enforce its intellectual property rights, which could be costly and distract management from core business operations [212] - Obtaining and enforcing patents in the biopharmaceutical industry is costly and uncertain, with recent patent law changes potentially diminishing patent value [228] - The company may encounter significant problems in protecting intellectual property rights in foreign jurisdictions, particularly in developing countries [231] - Filing and defending patents globally is prohibitively expensive, which may allow competitors to use technologies in jurisdictions without patent protection [230] - Noncompliance with patent agency requirements could result in abandonment or lapse of patents, adversely affecting market entry [229] Management and Operational Risks - The company is highly dependent on senior management, particularly key individuals such as the CEO and CFO, and their loss could materially affect the development of product candidates AL001 and AL002 [201] - The company is subject to various claims and legal actions that could harm its business and financial condition [274] - The company anticipates significant additional professional fees and internal costs to build its accounting and financial infrastructure [283] - The company expects to incur increased costs due to compliance with the Sarbanes-Oxley Act and other regulations as a public company [290] - The company has identified material weaknesses in its internal control over financial reporting, which could lead to misstatements in financial reports [263] - The company is implementing measures to improve internal controls, including adding accounting personnel and strengthening supervisory reviews [264] - The company may experience difficulties in hiring qualified personnel due to intense competition in the biopharmaceutical field [272] - The company's information technology systems are vulnerable to disruptions, which could adversely affect business operations [273] Stock and Corporate Governance - The company is currently not in compliance with Nasdaq listing requirements, specifically the minimum bid price requirement, and must regain compliance by December 19, 2022 [247] - Beneficial ownership of the shares by directors and executive officers represents approximately 48.2% of the outstanding shares, allowing them to influence management and corporate transactions [240] - The company operates under the limitations of director liability and indemnification provisions, which may discourage stockholder lawsuits against directors [291] - The company is classified as an "emerging growth company," allowing it to rely on exemptions from certain disclosure requirements [288] - The company is governed by Section 203 of the Delaware General Corporation Law, which may delay or prevent a change in control [280] - The concentration of stock ownership among a few shareholders may limit the influence of other stockholders on corporate matters [257] Compliance and Regulatory Risks - The company must comply with health care "fraud and abuse" laws, which could materially affect its operations if violated [196] - Any adverse medical events related to AL001 or AL002 must be reported to the FDA, and failure to do so could result in sanctions [185] - The company must comply with various anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, which poses compliance risks [276] - The company may face significant penalties if it fails to comply with ongoing FDA and regulatory obligations post-approval [182] - Legislative or regulatory reforms could increase the difficulty and cost of obtaining regulatory clearance for future product candidates [187] - The company is subject to potential penalties if it fails to comply with state fraud and abuse laws, which could adversely affect its financial condition [200]

Clinical Development - Alzamend Neuro submitted an Investigational New Drug (IND) application for AL001 to the FDA on June 30, 2021, and received a "Study May Proceed" letter for a Phase I study on July 28, 2021[115]. - The Phase I clinical trial for AL001 demonstrated positive topline data, with participants receiving a single dose equivalent to 150mg lithium carbonate, potentially allowing for treatment of over 40 million Americans suffering from Alzheimer's[121][122]. - Alzamend Neuro's preclinical candidate AL002 has transitioned to an extensive program of preclinical study, with positive toxicology results and a proposed combined Phase 1/2 study agreed upon by the FDA[119][120]. - The company plans to initiate the clinical trial of AL002 as soon as possible after IND approval, now expected in the second quarter of 2022[120]. - The company aims to pursue investigational new drug applications for bipolar disorder, depression, and post-traumatic stress disorder indications[124]. - Alzamend Neuro's novel approach to combat Alzheimer's involves immunotherapy, aiming to prevent, treat, and potentially cure the disease[106]. Financial Performance - Research and development expenses for the three months ended January 31, 2022, were $873,653, a 273% increase from $234,262 in the same period of 2021[137]. - General and administrative expenses for the three months ended January 31, 2022, totaled $1,682,913, reflecting a 91% increase from $881,397 in the prior year[129]. - The net loss for the three months ended January 31, 2022, was $2,572,865, representing a 130% increase compared to a net loss of $1,118,884 for the same period in 2021[128]. - The company did not generate any revenue during the three months ended January 31, 2022, and does not anticipate generating revenue in the foreseeable future[128]. - Stock compensation expense for the three months ended January 31, 2022, was $1,024,693, an 85% increase from $553,314 in the same period of 2021[130]. - Professional fees for the three months ended January 31, 2022, amounted to $145,780, a 28% decrease from $202,970 in the prior year[130]. - Total operating expenses for the nine months ended January 31, 2022, were $8,446,739, a significant increase from $3,731,912 in the same period of 2021[144]. - The company reported a net loss of $8.5 million for the nine months ended January 31, 2022, compared to a net loss of $3.8 million for the same period in 2021[159]. - Cash and cash equivalents as of January 31, 2022, were $11.8 million, with an accumulated deficit of $25.3 million[159]. - Net cash used in operating activities was $5.1 million for the nine months ended January 31, 2022, compared to $1.5 million in the same period of 2021[165]. Capital and Funding - The company raised $12.9 million from its IPO, which closed on June 17, 2021[161]. - The company expects to continue incurring losses and will need to raise additional capital until it can generate sufficient revenues[161]. - Alzamend Neuro's current operations require additional capital to fund ongoing preclinical and clinical testing, regulatory approvals, and development of manufacturing capabilities[125]. Licensing and Milestones - The company has entered into a Standard Exclusive License Agreement for AL002, which includes a 4% royalty on net sales of products developed from the licensed technology[173]. - Milestone payments for the AL001 License include $10 million due upon FDA approval, with various other payments totaling $1.25 million and $500,000 at different stages of clinical trials[174]. - For the AL002 License, milestone payments include $1 million due upon the first patient treated in a Phase III clinical trial and $10 million upon FDA BLA approval[175]. - Additional AL001 Licenses require milestone payments totaling $8 million due upon the first commercial sale, with other payments at various clinical trial stages[178]. Operational Considerations - The company is currently maintaining pre-COVID-19 operational levels despite potential adverse impacts from recent events like the Omicron variant[172]. - The company is closely monitoring the impact of government responses to COVID-19 on its operations[172]. - The company has no off-balance sheet arrangements that materially affect its financial condition or operations[179]. - Recent accounting standards may impact the company's financial statements, as detailed in Note 3 of the Notes to Unaudited Condensed Financial Statements[180]. - The company has not identified any market risks that are applicable due to its status as a smaller reporting company[181]. Stock and Compensation - Stock-based compensation is recognized on a straight-line basis over the requisite service period, with costs based on the grant date fair value estimated using the Black-Scholes model[108]. - The fair market value of Alzamend Neuro's common stock is determined based on the closing price on the date of grant following the IPO in June 2021[114]. - Stock compensation expense for general and administrative purposes was $2.8 million for the nine months ended January 31, 2022, up 67% from $1.7 million in 2021[148]. - Professional fees increased to $678,000 for the nine months ended January 31, 2022, a 24% rise from $547,000 in the same period of 2021[149].

Financial Performance - Research and development expenses for the three months ended October 31, 2021, were $1,750,050, a 268% increase from $474,913 in the same period of 2020[127] - General and administrative expenses for the three months ended October 31, 2021, were $1,833,884, a 123% increase from $823,033 in the same period of 2020[127] - Total operating expenses for the three months ended October 31, 2021, were $3,583,934, compared to $1,297,946 for the same period in 2020, reflecting a significant increase[127] - The net loss for the three months ended October 31, 2021, was $3,599,929, compared to a net loss of $1,354,097 for the same period in 2020, representing a 166% increase[127] - The basic and diluted net loss per common share for the three months ended October 31, 2021, was $(0.04), compared to $(0.02) for the same period in 2020[127] - Total operating expenses for the six months ended October 31, 2021, were $5.9 million, a significant increase from $2.6 million in the same period of 2020[146] - General and administrative expenses for the six months ended October 31, 2021, were $3.2 million, a 76% increase from $1.8 million in the prior year[148] - The company recorded a net loss of $5.9 million for the six months ended October 31, 2021, compared to a net loss of $2.7 million in the same period of 2020, representing a 122% increase in losses[146] - The company reported a net loss of $5.9 million for the six months ended October 31, 2021, compared to a net loss of $2.7 million for the same period in 2020[161] - The company expects to continue incurring losses for the foreseeable future and needs to raise additional capital until it can generate sufficient revenues[164] Revenue Generation - The company did not generate any revenues during the three months ended October 31, 2021, and does not anticipate generating revenue for the foreseeable future[129] - The company did not generate any revenue during the six months ended October 31, 2021, and does not anticipate generating revenue in the foreseeable future[147] Research and Development - The company submitted an Investigational New Drug (IND) application for AL001 to the FDA on June 30, 2021, and received a "Study May Proceed" letter on July 28, 2021[119] - The Phase I relative bioavailability study for AL001 began in September 2021, with topline data expected in mid to late December 2021[121] - The company has an additional preclinical candidate, AL002, which has transitioned to an extensive program of preclinical study and evaluation[122] - The FDA has agreed to a combined Phase 1/2 study for AL002, with the IND filing now expected in the second quarter of 2022[124] - Research and development expenses for the six months ended October 31, 2021, totaled $2.7 million, a 240% increase from $784,000 in the same period of 2020[155] - The company incurred interest expense of $30,000 for the six months ended October 31, 2021, related to a convertible promissory note[160] - The company experienced delays in drug development and manufacturing activities due to COVID-19, impacting clinical protocol development[173] - The Phase I relative bioavailability study for AL001 commenced on September 10, 2021, to determine safe dosing for future studies[163] Expenses - Stock compensation expense for the three months ended October 31, 2021, was $1.2 million, a 114% increase from $547,000 in the same period of 2020[132] - Professional fees for the three months ended October 31, 2021, were $232,000, up 40% from $166,000 in the prior year[133] - Research and development stock compensation expense for the three months ended October 31, 2021, was $111,000, a 410% increase from $22,000 in the same period of 2020[142] - Total general and administrative expenses for the six months ended October 31, 2021, included $1.8 million in stock compensation expense, a 58% increase from $1.1 million in the same period of 2020[149] - Professional fees increased by 197% to $2.1 million in the six months ended October 31, 2021, compared to $710,000 in 2020, primarily due to costs associated with the Phase I relative bioavailability study for AL001[157] Cash and Financing - As of October 31, 2021, the company had cash of $13.6 million and an accumulated deficit of $22.8 million[161] - Net cash provided by financing activities was $14.9 million for the six months ended October 31, 2021, primarily from the IPO proceeds of approximately $12.9 million[171] Licensing and Royalties - The company has accrued $65,000 in license fees related to the IND application submitted on June 30, 2021, and $190,000 for the first dosing of patients in the Phase I study for AL001[158] - The company has milestone payments totaling $9,600,000 related to the AL001 license agreements, with specific due dates tied to clinical trial events[181] - A royalty payment of 3% is required for License 18110, while License 1811 requires a 1.5% royalty on net sales of products developed from the licensed technology[181] Accounting and Reporting - The company does not have any off-balance sheet arrangements that materially affect its financial condition or operations[182] - Recent accounting standards may impact the company's financial statements, as detailed in Note 3 of the Notes to Unaudited Condensed Financial Statements[183] - The company is classified as a smaller reporting company, which exempts it from certain market risk disclosures[185]

Financial Performance - The net loss for the three months ended July 31, 2021, was $2,319,867, compared to a net loss of $1,316,752 for the same period in 2020, reflecting an increase of $1,003,115[128]. - Basic and diluted net loss per common share was $(0.03) for the three months ended July 31, 2021, compared to $(0.02) in the prior year[128]. - The company reported a net loss of $2.3 million for the three months ended July 31, 2021, compared to a net loss of $1.3 million for the same period in 2020[151]. - During the three months ended July 31, 2021, net cash used in operating activities was $1.2 million, compared to $205,000 for the same period in 2020[156]. - The company expects to continue incurring losses and needs to raise additional capital until it can generate sufficient revenues[155]. Expenses - Research and development expenses increased by 197% to $916,408 for the three months ended July 31, 2021, compared to $308,846 for the same period in 2020[128]. - General and administrative expenses rose by 38% to $1,389,831 for the three months ended July 31, 2021, up from $1,009,461 in the prior year[128]. - The total operating expenses for the three months ended July 31, 2021, were $2,306,239, an increase of $987,932 compared to $1,318,307 in 2020[128]. - Stock compensation expense for the three months ended July 31, 2021, was $597,705, a slight increase of 5% from $569,620 in the same period of 2020[132]. - Professional fees increased by 69% to $300,122 for the three months ended July 31, 2021, compared to $177,793 in the prior year[132]. - Professional fees for the three months ended July 31, 2021, were $705,000, representing a 174% increase from $257,000 in the same period of 2020[144]. - The company incurred $114,000 in regulatory filing services, $79,000 in audit fees, and $29,000 in legal fees during the three months ended July 31, 2021[138]. - The company accrued $65,000 in license fees during the three months ended July 31, 2021, related to its IND application submitted on June 30, 2021[146]. Revenue Generation - The company did not generate any revenue during the three months ended July 31, 2021, and does not anticipate generating revenue for the foreseeable future[130]. Capital and Funding - The company raised approximately $14.4 million from its IPO, which closed on June 17, 2021[154]. - As of July 31, 2021, the company had cash of $15.6 million and an accumulated deficit of $19.2 million[151]. Drug Development and Regulatory Milestones - The company submitted an IND application for AL001 to the FDA on June 30, 2021, and received a study may proceed letter for a Phase I study on July 28, 2021[122]. - AL002 has transitioned from early-stage development to an extensive preclinical study program, with a comprehensive report received on July 23, 2021[123]. - The company has met the Pre-IND meeting and IND application filing milestones for AL001, with potential termination of the license agreement if future milestones are not met[171]. - Milestone payments for AL001 include $50,000 upon IND application filing and $10,000,000 upon FDA approval, with various other payments totaling $1,250,000 for Phase II and III clinical trials[167][168]. - The company experienced delays in drug development and manufacturing activities due to COVID-19, impacting clinical protocol development[164]. Licensing Agreements - The company has entered into a Standard Exclusive License Agreement for AL002 with a royalty-bearing exclusive worldwide license, requiring a 4% royalty on net sales and an initial license fee of $100,000[166]. - The company is required to pay a 3% royalty on net sales for License 18110 and a 1.5% royalty for License 1811, with initial license fees totaling $200,000 due in 2018[170]. Operational Status - The company expects to return to normal operations for the remainder of the calendar year following temporary office closures due to health recommendations[165]. - There are no off-balance sheet arrangements that materially affect the company's financial condition or operations[172].

Company Stage and Revenue Generation - The company is at a preclinical stage with no products approved for commercial sale and has not generated any revenue to date[132]. - The company has two product candidates, AL001 and AL002, which require extensive clinical evaluation and regulatory approval before generating revenue[133]. - The company does not anticipate generating revenue for a few years at the earliest and may not achieve profitability for several years after generating material revenue[133]. Financial Obligations and Costs - The company has paid initial license fees of $200,000 for both AL001 and AL002, with additional royalty payments of 4% and 4.5% on net sales respectively[139]. - Minimum royalties for AL001 are set at $25,000 in 2023, $45,000 in 2024, and $70,000 in 2025, while for AL002 they are $20,000 in 2022, $40,000 in 2023, and $50,000 in 2024[139]. - The company has met certain milestone payments for AL001, including $50,000 for the Pre-IND meeting and $65,000 for the IND application filing[140]. Regulatory Approval and Compliance - The company plans to submit AL001 and AL002 for regulatory approval, which is critical for financing and strategic collaborations[149]. - Regulatory approval for AL001 and AL002 is uncertain and requires significant resources, with potential delays impacting commercialization[166]. - Compliance with FDA regulations and potential changes in laws could impose additional costs and lengthen review times for AL001 and AL002[183]. Clinical Trials and Development Risks - The success of AL001 and AL002 is dependent on timely completion of clinical trials and regulatory approval, as well as market acceptance[150]. - Clinical trials for AL001 and AL002 are expected to be expensive and time-consuming, with potential for delays or cancellations[173]. - There is a high rate of failure for drug candidates in clinical trials, which could significantly impact the company's operations and reputation[171]. Market Competition and Challenges - The company expects substantial competition in the market, which may hinder its ability to successfully develop and commercialize its products[197]. - The company faces significant competition from major pharmaceutical and biotechnology firms, including Celgene, Merck, and Novartis, for its product candidates AL001 and AL002[198]. - Competitors may develop safer, more effective, or less expensive products, potentially reducing the company's market opportunity[199]. Intellectual Property and Legal Risks - The company relies on a combination of patents and trade secrets to protect its intellectual property, which is critical for its product candidates[212]. - There is uncertainty regarding the patentability of the company's product candidates, which could impact its ability to commercialize AL001 and AL002[213]. - The company may face costly litigation to enforce its intellectual property rights, which could distract management and harm its business[203]. Management and Operational Risks - The company is highly dependent on key personnel, and the loss of any senior management or scientific staff could adversely affect product development and commercialization efforts[196]. - The company may experience difficulties in hiring qualified personnel due to intense competition in the biopharmaceutical field[262]. - The company has identified a material weakness in internal control over financial reporting, which could adversely affect investor confidence and the value of common stock[252]. Financial Reporting and Compliance - The company anticipates significant additional costs related to building its accounting and financial infrastructure, which may include professional fees and internal costs[274]. - Failure to comply with Section 404 of the Sarbanes-Oxley Act could result in the inability to produce timely and accurate financial statements, potentially harming the business and investor confidence[276]. - The company expects to incur increased legal, accounting, and compliance costs as a result of operating as a public company, which may impact its financial performance[280]. SEC Investigation and Legal Exposure - The company is currently under investigation by the SEC, the consequences of which remain unknown[223]. - The SEC is conducting an investigation into Ault Global Holdings, Inc. regarding potential violations of the Securities Act and the Exchange Act, with no established timeline for the investigation's conclusion[224]. - The company faces potential product liability exposure related to AL001 and AL002, which could result in substantial liabilities and impact commercialization efforts[227]. Stockholder and Market Considerations - Beneficial ownership of the shares of common stock by directors and executive officers represents approximately 45.76% of the outstanding shares, allowing these stockholders to influence management decisions[229]. - The market price of the company's common stock may be volatile due to various factors, including regulatory approvals and product sales performance[237]. - The concentration of voting power may delay or prevent changes in control of the company, potentially affecting stockholder interests[234].