Alzamend Neuro(ALZN) - 2026 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Alzamend Neuro's unaudited Q1 2025 financial statements, including balance sheets, operations, equity, cash flows, and notes Condensed Balance Sheets Balance Sheet Summary | Metric | July 31, 2025 (Unaudited) ($) | April 30, 2025 (Audited) ($) | | :-------------------------------- | :------------------------ | :----------------------- | | Cash | $5,620,872 | $3,948,658 | | Total Current Assets | $5,928,830 | $4,177,377 | | Total Assets | $6,326,751 | $4,602,983 | | Accounts payable and accrued liabilities | $983,311 | $634,761 | | Total Liabilities, All Current | $983,311 | $634,761 | | Total Stockholders' Equity | $5,343,440 | $3,968,222 | | Total Liabilities and Stockholders' Equity | $6,326,751 | $4,602,983 | Condensed Statements of Operations Statements of Operations Summary | Metric | For the Three Months Ended July 31, 2025 ($) | For the Three Months Ended July 31, 2024 ($) | | :--------------------------------- | :------------------------------------- | :------------------------------------- | | Research and development | $1,740,867 | $206,571 | | General and administrative | $959,334 | $755,834 | | Total operating expenses | $2,700,201 | $962,405 | | Loss from operations | $(2,700,201) | $(962,405) | | Interest expense | $(2,483) | $(12,006) | | NET LOSS | $(2,702,684) | $(974,411) | | Basic and diluted net loss per common share | $(1.28) | $(11.42) | | Basic and diluted weighted average common shares outstanding | 2,106,036 | 85,314 | Condensed Statements of Stockholders' Equity Stockholders' Equity Summary | Item | April 30, 2025 | July 31, 2025 | | :------------------------------------------ | :------------- | :------------ | | Common Stock Shares Outstanding | 778,733 | 3,139,861 | | Common Stock Amount | $78 | $314 | | Additional Paid-In Capital | $62,503,405 | $66,581,071 | | Accumulated Deficit | $(58,535,261) | $(61,237,945) | | Total Stockholders' Equity | $3,968,222 | $5,343,440 | | Issuance of preferred stock for cash, net | - | $4,035,000 | | Conversion of preferred stock to common stock | - | $0 (2,361,128 shares) | | Stock-based compensation | - | $42,902 | | Net loss | - | $(2,702,684) | - The company issued preferred stock for cash, net of issuance costs, totaling $4,035,000 during the three months ended July 31, 2025[15] - Conversion of preferred stock to common stock resulted in 2,361,128 new common shares during the three months ended July 31, 2025[15] Condensed Statements of Cash Flows Cash Flow Summary | Cash Flow Activity | For the Three Months Ended July 31, 2025 ($) | For the Three Months Ended July 31, 2024 ($) | | :----------------------------------- | :------------------------------------- | :------------------------------------- | | Net cash used in operating activities | $(2,362,786) | $(1,055,742) | | Net cash used in investing activities | $- | $(90,000) | | Net cash provided by financing activities | $4,035,000 | $1,963,644 | | Net increase in cash | $1,672,214 | $817,902 | | Cash at end of period | $5,620,872 | $1,193,950 | - Non-cash financing activities for the three months ended July 31, 2025, included the conversion of Series B convertible preferred stock ($564,755) and Series C convertible preferred stock ($5,757,176)[21] Notes to Condensed Financial Statements 1. DESCRIPTION OF BUSINESS - Alzamend Neuro, Inc. is a clinical-stage biopharmaceutical company focused on developing novel products for Alzheimer's disease, bipolar disorder (BD), major depressive disorder (MDD), and post-traumatic stress disorder (PTSD)[24] - The company's pipeline includes two therapeutic drug candidates: AL001 (an ionic cocrystal technology for lithium delivery) and ALZN002 (a cell-based therapeutic vaccine for Alzheimer's)[24] - The company has not generated any product revenue to date and expects to incur net losses for the foreseeable future, financing operations primarily through debt and equity issuances[25] - The company effected two reverse stock splits: a one-for-ten split on July 16, 2024, and a one-for-nine split on May 12, 2025, to adjust its issued and outstanding common stock[26][27] 2. LIQUIDITY AND GOING CONCERN - As of July 31, 2025, the company had $5.6 million in cash, $4.9 million in working capital, an accumulated deficit of $61.2 million, and a net loss of $2.7 million for the three months ended July 31, 2025[28] - These factors create substantial doubt about the company's ability to continue as a going concern, necessitating additional funding through public equity, private equity, and debt financings[29] 3. SIGNIFICANT ACCOUNTING POLICIES - The financial statements are prepared in accordance with U.S. GAAP and SEC rules for smaller reporting companies, with key estimates including stock-based compensation, warrant valuation, and deferred income taxes[30][31] - Research and development costs are expensed as incurred, including scientific consulting fees, clinical trial fees, lab supplies, and upfront/milestone payments for licensed product candidates[37][38] - Stock-based compensation expense is recognized on a straight-line basis using the Black-Scholes option pricing model, with highly subjective assumptions[39][41] - Warrants are accounted for as equity instruments and valued using the Black-Scholes model (Level 3 fair value measurement)[42][43][44] - The company operates as a single operating and reportable segment, focusing on biopharmaceutical development for neurological and psychiatric disorders[48] Anti-dilutive Securities Summary | Instrument | For the Three Months Ended July 31, 2025 | For the Three Months Ended July 31, 2024 | | :-------------------- | :------------------------------------- | :------------------------------------- | | Stock options | 12,854 | 12,998 | | Restricted stock units | - | 18 | | Warrants | 137,051 | 48,764 | | Total Anti-dilutive Securities | 149,905 | 61,780 | 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid Expenses and Other Current Assets Breakdown | Category | July 31, 2025 ($) | April 30, 2025 ($) | | :-------------------------- | :------------ | :------------- | | Prepaid clinical trial expenses | $92,370 | $178,922 | | Prepaid insurance | $202,375 | $42,584 | | Other prepaid expenses | $13,213 | $7,213 | | Total prepaid expenses and other current assets | $307,958 | $228,719 | - Prepaid clinical trial expenses at July 31, 2025, represent the unamortized portion to be amortized over the next six months[51] - Prepaid insurance at July 31, 2025, primarily consists of the unamortized portion of a $220,000 directors' and officers' insurance policy purchased on June 14, 2025[52] 5. STOCK-BASED COMPENSATION - The company has two stock incentive plans: the 2016 Stock Incentive Plan (9,259 shares, later increased by 5,556 shares) and the 2021 Stock Incentive Plan (7,407 shares)[53][54][55] - Stock options are granted at fair value and valued using the Black-Scholes model, with assumptions based on historical volatility of similar companies due to lack of own trading history[57] Stock Option Activity Summary | Stock Option Activity | Balance at April 30, 2025 | Balance at July 31, 2025 | | :------------------------------------ | :------------------------ | :----------------------- | | Number of Shares Outstanding | 9,406 | 9,406 | | Weighted Average Exercise Price | $1,802.18 | $1,802.18 | | Weighted Average Remaining Contractual Life (years) | 4.80 | 4.55 | | Options Exercisable at Period End | 8,624 | 8,624 | | Weighted Average Exercise Price (Exercisable) | $1,820.61 | $1,820.61 | - Performance-contingent stock options granted in November 2019 (3,148 awards) and November 2022 (1,481 awards) have specific market or clinical trial milestones for vesting. As of July 31, 2025, the achievement of certain performance conditions for these awards is not considered probable, and no compensation cost has been recognized[59][61][62] Stock-Based Compensation Expense | Expense Category | For the Three Months Ended July 31, 2025 ($) | For the Three Months Ended July 31, 2024 ($) | | :------------------------ | :------------------------------------- | :------------------------------------- | | General and administrative | $42,902 | $81,277 | - As of July 31, 2025, total unamortized stock-based compensation expense was $47,000, to be recognized over approximately 0.4 years[63] 6. WARRANTS - There was no warrant activity for the three months ended July 31, 2025[64] Warrant Activity Summary | Exercise Price Range | Number Outstanding | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price (Outstanding) | Number Exercisable | Weighted Average Exercise Price (Exercisable) | | :------------------- | :----------------- | :-------------------------------------------------- | :------------------------------------------ | :----------------- | :------------------------------------------ | | $8.29 - $8,437.50 | 137,051 | 4.4 | $103.56 | 137,051 | $103.56 | 7. COMMITMENTS AND CONTINGENCIES - The company has exclusive worldwide license agreements with the University of South Florida Research Foundation for AL001 and ALZN002 technologies[66][68] - AL001 License Agreements require 4.5% royalty on net sales and minimum royalties starting at $40,000 on the first anniversary of commercial sale[67] - ALZN002 License Agreement requires 4% royalty on net sales and minimum royalties starting at $20,000 on the first anniversary of commercial sale[69] - Additional AL001 Licenses for neurodegenerative and psychiatric diseases require 3% royalty on net sales and minimum royalties starting at $40,000[70][71] Original AL001 Licenses Milestone Payments: | Payment | Due Date | | :------------ | :------------------------------------------------ | | $1,250,000 | Upon first patient treated in a Phase III clinical trial | | $10,000,000 | Upon FDA NDA approval | ALZN002 License Milestone Payments: | Payment | Due Date | | :------------ | :------------------------------------------------ | | $50,000 | Upon first dosing of patient in first Phase I clinical trial | | $500,000 | Upon completion of first Phase IIB clinical trial | | $1,000,000 | Upon first patient treated in a Phase III clinical trial | | $10,000,000 | Upon first commercial sale | Additional AL001 Licenses Milestone Payments: | Payment | Due Date | | :------------ | :------------------------------------------------ | | $2,000,000 | Upon first patient treated in a Phase III clinical trial | | $16,000,000 | First commercial sale | - License agreements have indefinite terms and may be terminated if the company fails to meet specified milestones[147] 8. EQUITY TRANSACTIONS - The company is authorized to issue 10,000,000 shares of Preferred Stock, with 6,000 designated as Series B Convertible Preferred Stock and 1,000 as Series C Convertible Preferred Stock[76] - Series A Convertible Preferred Stock was eliminated on July 9, 2025[77] - Series B Convertible Preferred Stock has a stated value of $1,000 per share, no dividends, and is convertible into common stock at a $90.00 conversion price (subject to adjustment)[81] - During the three months ended July 31, 2025, 564.75528 shares of Series B Preferred Stock were converted into 243,429 shares of Common Stock[83] - Series C Convertible Preferred Stock has a stated value of $10,000 per share, accrues 15% annual dividends, and is convertible into common stock based on a variable conversion price (minimum $0.90, maximum $135.00, or 80% of lowest closing price)[89] - During the three months ended July 31, 2025, 575.7176 shares of Series C Preferred Stock were converted into 2,117,699 shares of Common Stock[90] - The company completed the sale of all Series C Convertible Preferred Stock under the Orchid SPEA by June 13, 2025, raising approximately $4.0 million[85][86][87][88] 9. SUBSEQUENT EVENTS - Management has evaluated subsequent events through the date the financial statements were issued and determined there are no events warranting disclosure or recognition[91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis of Alzamend Neuro's Q1 2025 financial condition, results, accounting policies, and liquidity Overview - Alzamend Neuro, Inc. was incorporated on February 26, 2016, to acquire and commercialize patented intellectual property for Alzheimer's disease, bipolar disorder (BD), major depressive disorder (MDD), and post-traumatic stress disorder (PTSD)[98] - The company's two product candidates are AL001 (an ionic cocrystal of lithium) and ALZN002 (a cell-based therapeutic vaccine), with a novel immunotherapy approach to combat Alzheimer's[98] Critical Accounting Policies and Estimates - Stock-based compensation is a critical accounting policy, with costs estimated using the Black-Scholes option pricing model, which relies on subjective assumptions like risk-free interest rate, expected volatility, expected term, and expected dividend yield[99][100][101][102] - Preferred stock classification is determined using ASC 480, considering redemption provisions, conversion options, dividends, voting rights, and collateral requirements[103] Plan of Operations - The company aims to develop and commercialize therapeutics and vaccines for Alzheimer's, BD, MDD, and PTSD, focusing on advancing clinical development of AL001 and ALZN002, expanding its pipeline, and optimizing product value[104][108] - AL001, an ionic cocrystal of lithium, completed a Phase IIA clinical trial in March 2023 with positive topline data announced in June 2023, identifying a maximum tolerated dose (MTD) designed to avoid therapeutic drug monitoring[105][106] - Preclinical studies showed AL001 resulted in lower plasma lithium levels and consistently higher lithium concentrations in brain tissues compared to lithium carbonate, suggesting an enhanced safety profile and potential for lower doses[111][112][113] - The company initiated five 'Lithium in Brain' Phase II clinical trials for AL001 in May 2025, in collaboration with Massachusetts General Hospital, to compare lithium levels in the brain for healthy subjects and patients with Alzheimer's, BD, MDD, and PTSD[110][114] - ALZN002, an immunotherapy vaccine for Alzheimer's, received a 'study may proceed' letter for its IND application in October 2022, and a Phase I/IIA clinical trial was initiated in April 2023 to assess safety, tolerability, and efficacy[115][116] - The ALZN002 clinical trial faced a setback with the termination of the CRO contract in February 2024, and the company is currently seeking a replacement CRO[116] - The continuation of current operations and clinical trials requires raising additional capital, as working capital requirements depend on various factors including clinical progress and regulatory approvals[117][118] Results of Operations Results of Operations Summary | Metric | For the Three Months Ended July 31, 2025 ($) | For the Three Months Ended July 31, 2024 ($) | $ Change ($) | % Change | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------- | :------- | | Research and development | $1,740,867 | $206,571 | $1,534,296 | 743% | | General and administrative | $959,334 | $755,834 | $203,500 | 27% | | Total operating expenses | $2,700,201 | $962,405 | $1,737,796 | 181% | | Loss from operations | $(2,700,201) | $(962,405) | $(1,737,796) | 181% | | Interest expense | $(2,483) | $(12,006) | $9,523 | -79% | | NET LOSS | $(2,702,684) | $(974,411) | $(1,728,273) | 177% | | Basic and diluted net loss per common share | $(1.28) | $(11.42) | $10.14 | * | | Weighted average common shares outstanding | 2,106,036 | 85,314 | | * | - The company did not generate any revenue during the three months ended July 31, 2025 and 2024, and does not anticipate revenue in the foreseeable future[120] - Research and development expenses increased by 743% to $1.7 million in Q1 2025, primarily due to $1.7 million in clinical trial fees for the Phase IIA brain imaging study with Massachusetts General Hospital[121][123] - General and administrative expenses increased by 27% to $959,000 in Q1 2025, mainly driven by higher professional fees (legal, audit, tax preparation) and marketing fees, partially offset by lower investor relations fees and stock-based compensation[125][126][128][130] - The increase in legal fees was a significant factor, resulting from actions related to the termination of the ALZN002 clinical trial[128] Liquidity and Capital Resources - The company's recurring net losses and insufficient cash flows from operations raise substantial doubt about its ability to continue as a going concern for at least one year[131][132] - As of July 31, 2025, the company had $5.6 million in cash, $4.9 million in working capital, and an accumulated deficit of $61.2 million[132] - Future operations and clinical development activities will require substantial additional funding, primarily through equity sales and potentially debt financing[132][133] Cash Flow Summary | Cash Flow Activity | For the Three Months Ended July 31, 2025 ($) | For the Three Months Ended July 31, 2024 ($) | | :----------------------------------- | :------------------------------------- | :------------------------------------- | | Net cash used in operating activities | $(2,362,786) | $(1,055,742) | | Net cash used in investing activities | $- | $(90,000) | | Net cash provided by financing activities | $4,035,000 | $1,963,644 | | Net increase in cash and cash equivalents | $1,672,214 | $817,902 | - Net cash used in operating activities was $2.4 million for Q1 2025, primarily due to a net loss of $2.7 million, partially offset by non-cash charges and changes in operating assets/liabilities[137] - Net cash provided by financing activities was $4.0 million for Q1 2025, entirely from the sale of Series C Convertible Preferred Stock[139] Contractual Obligations - The company has exclusive license agreements for AL001 and ALZN002, requiring royalty payments on net sales (4.5% royalty for AL001, 4% royalty for ALZN002, 3% royalty for additional AL001 indications) and minimum annual royalties after commercial sale[140][142][143][144][145][146] Original AL001 Licenses Milestone Payments: | Payment | Due Date | | :------------ | :------------------------------------------------ | | $1,250,000 | Upon first patient treated in a Phase III clinical trial | | $10,000,000 | Upon FDA NDA approval | ALZN002 License Milestone Payments: | Payment | Due Date | | :------------ | :------------------------------------------------ | | $50,000 | Upon first dosing of patient in first Phase I clinical trial | | $500,000 | Upon completion of first Phase IIB clinical trial | | $1,000,000 | Upon first patient treated in a Phase III clinical trial | | $10,000,000 | Upon first commercial sale | Additional AL001 Licenses Milestone Payments: | Payment | Due Date | | :------------ | :------------------------------------------------ | | $2,000,000 | Upon first patient treated in a Phase III clinical trial | | $16,000,000 | First commercial sale | - License agreements have indefinite terms and may be terminated if the company fails to meet specified milestones[147] Recent Accounting Standards - There are no recent accounting standards to disclose[152] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable to Alzamend Neuro, Inc. because it is a smaller reporting company - This section is not applicable as the company is a smaller reporting company[153] Item 4. Controls and Procedures Management found disclosure controls ineffective as of July 31, 2025, due to accounting resource gaps; remediation is planned - The principal executive officer and principal financial officer concluded that the company's internal control over financial reporting was not effective as of July 31, 2025[155] - A material weakness was identified: insufficient resources in the accounting department, restricting the ability to perform sufficient reviews of manual journal entries, account reconciliations, financial statement preparation, and non-routine transactions[156] - Planned remediation measures include formalizing internal control documentation and strengthening supervisory reviews by management, with a future need to increase accounting department staff[157][158] - Despite the control deficiency, management believes the condensed financial statements fairly present the company's financial condition, results of operations, and cash flows[159] PART II. OTHER INFORMATION Item 1. Legal Proceedings Alzamend Neuro is not party to legal proceedings expected to materially affect its business or financials - The company is not currently a party to or aware of any legal proceedings that are believed to have a material adverse effect on its business, financial condition, or results of operations[162] Item 1A. Risk Factors Refer to the 2025 Annual Report on Form 10-K for current risk factors that may materially affect the business - The risks described in Part I, Item 1A, 'Risk Factors,' in the company's 2025 Annual Report on Form 10-K remain current in all material respects and could materially and adversely affect the business[163] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities and use of proceeds to report[164] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[165] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[166] Item 5. Other Information No Rule 10b5-1 trading arrangements were adopted, modified, or terminated by D&Os in Q1 2025 - None of the company's directors and officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the fiscal quarter ended July 31, 2025[167] Item 6. Exhibits Lists all Form 10-Q exhibits, including certificates, bylaws, and SEC-required certifications - The exhibits include Certificate of Incorporation, Amended and Restated Bylaws, and certifications from the Chief Executive Officer and Chief Financial Officer[168][169] Signatures Alzamend Neuro's CEO and CFO signed the report on September 10, 2025 - The report is signed by Stephan Jackman, Chief Executive Officer, and David J. Katzoff, Chief Financial Officer, on September 10, 2025[174]