{"url_path":"/sec/alzn/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 ****MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-07-22","source_url":"https://www.sec.gov/Archives/edgar/data/1677077/0001214659-26-008832-index.html","accession_number":"0001214659-26-008832","cik":"0001677077","ticker":"ALZN","issuer_name":"Alzamend Neuro, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1677077/0001214659-26-008832-index.html","primary_entity_key":"0001677077","primary_entity_name":"Alzamend Neuro, Inc."},"word_count":4799,"has_tables":true,"body_markdown":"**ITEM 7.****MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**\n\n \n\n*You should read the following discussion and\nanalysis of our financial condition and results of our operations together with our financial statements and the notes thereto appearing\nelsewhere in this Annual Report. This discussion contains forward-looking statements reflecting our current expectations, whose actual\noutcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from those stated in or implied\nby these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors”\nand “Special Note Regarding Forward-Looking Statements,” and elsewhere in this Annual Report.*\n\n \n\n**Overview**\n\n \n\nWe were incorporated on February\n26, 2016, as Alzamend Neuro, Inc. under the laws of the State of Delaware. We were formed to acquire and commercialize patented intellectual\nproperty and know-how to prevent, treat and potentially cure the crippling and deadly Alzheimer’s. With our two product candidates,\nwe aim to bring treatment or cures not only for Alzheimer’s, but also, bipolar disorder (“BD”), major depressive disorder\n(“MDD”) and post-traumatic stress disorder (“PTSD”). Existing Alzheimer’s treatments only temporarily relieve\nsymptoms but do not, to our knowledge, slow or halt the underlying worsening of the disease. We have developed a novel approach to combat\nAlzheimer’s through immunotherapy.\n\n \n\n**Critical Accounting Policies and Estimates**\n\n \n\n**Stock-Based Compensation. **We\nmaintain a stock-based compensation plan as a long-term incentive for employees, non-employee directors and consultants. The plan allows\nfor the issuance of incentive stock options, non-qualified stock options, restricted stock units, and other forms of equity awards.\n\n \n\nWe recognize stock-based compensation\nexpense for stock options on a straight-line basis over the requisite service period and account for forfeitures as they occur. Our stock-based\ncompensation costs are based upon the grant date fair value of options estimated using the Black-Scholes option pricing model. To the\nextent any stock option grants are made subject to the achievement of a performance-based milestone, management evaluates when the achievement\nof any such performance-based milestone is probable based on the relative satisfaction of the performance conditions as of the reporting\ndate.\n\n \n\nThe Black-Scholes option pricing\nmodel utilizes inputs which are highly subjective assumptions and generally require significant judgment. These assumptions include:\n\n \n\n·**Risk-Free Interest Rate.** The risk-free interest rate is based on the U.S. Treasury\nzero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.\n\n \n\n·**Expected Volatility.** Because we do not have a sufficient trading history for our common\nstock (“Common Stock”), the expected volatility was estimated based on the average volatility for comparable publicly traded\nlife sciences companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based\non the similar size, stage in life cycle or area of specialty. We will continue to apply this process until a sufficient amount of historical\ninformation regarding the volatility of our own stock price becomes available.\n\n \n\n·**Expected Term.** The expected term represents the period that the stock-based awards\nare expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the\nend of the contractual term), as we do not have sufficient historical data to use any other method to estimate expected term.\n\n \n\n·**Expected Dividend Yield.** We have never paid dividends on our Common Stock and have\nno plans to pay dividends on our Common Stock. Therefore, we used an expected dividend yield of zero.\n\n \n\nCertain of these assumptions involve inherent uncertainties and the\napplication of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions\nor estimates, our stock-based compensation could be materially different.\n\n \n\n**Income Taxes.**We\nrecognize deferred income taxes for the future tax consequences attributed to differences between the financial statement carrying amounts\nof existing assets and liabilities and their respective tax bases, operating loss and tax credit carryforwards. Deferred tax assets are\nreduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred\ntax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those\ntemporary differences are expected to be recovered or settled.\n\n \n\nIn accordance with Internal\nRevenue Code §382 (“IRC §382”), the future deductibility of our net operating losses (“NOLs”) may be\nsubject to an annual limitation in the event of a change in control as defined by applicable regulations. We have yet to complete a formal\nstudy to confirm NOLs are not limited in utilization per IRC §382 and may reduce applicable deferred tax assets upon completion of\nsuch a study, in future periods.\n\n \n\n - 46 - \n\n \n\n \n\nThe impact of an uncertain\nincome tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon\naudit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of\nbeing sustained. We had no uncertain tax positions as of April 30, 2026.\n\n \n\n**Preferred Stock Classification.**\nWe analyze the terms of our preferred stock using Accounting Standards Codification (“ASC”) 480, *Distinguishing Liabilities\nfrom Equity*, to determine whether our preferred stock should be classified as a liability or equity, and if classified as equity,\npermanent or temporary. Common criteria we consider are redemption provisions, conversion options, cumulative of mandatory fixed dividends,\ndiscretionary dividends based on earning, voting rights and collateral requirements.\n\n \n\n**Plan of Operations**\n\n \n\nWe intend to develop and commercialize\ntherapeutics that are better than existing treatments and have the potential to significantly improve the lives of individuals afflicted\nby Alzheimer’s, BD, MDD and PTSD. To achieve these goals, we are pursuing the following key business strategies:\n\n \n\n·Advance clinical development of AL001 for Alzheimer’s, BD, MDD and PTSD treatment;\n\n \n\n·Advance clinical development of ALZN002 for Alzheimer’s treatment;\n\n \n\n·Expand our pipeline of pharmaceuticals to include additional indications for AL001 and delivery methods;\n\n \n\n·Focus on translational and functional endpoints to efficiently develop product candidates; and\n\n \n\n·Optimize the value of AL001 and ALZN002 in major markets.\n\n \n\nOur pipeline consists of two\nnovel therapeutic drug candidates:\n\n \n\n·AL001 - A patented ionic cocrystal technology delivering a therapeutic combination of lithium, salicylate\nand proline through three royalty-bearing exclusive worldwide licenses from the University of South Florida Research Foundation, Inc.,\nas licensor (the “Licensor”); and\n\n \n\n·ALZN002 - A patented method using a mutant peptide sensitized cell as a cell-based therapeutic vaccine\nthat seeks to restore the ability of a patient’s immunological system to combat Alzheimer’s through a royalty-bearing exclusive\nworldwide license from the Licensor.\n\n \n\nOur most advanced product\ncandidate (lead product) licensed and in clinical development in humans is AL001, an ionic cocrystal of lithium for the treatment of Alzheimer’s,\nBD, MDD and PTSD. Based on our preclinical data involving mice models, AL001 treatment prevented cognitive deficits, depression and irritability\nand is superior in improving associative learning and memory and irritability compared with lithium carbonate treatments, supporting the\npotential of this lithium formulation for the treatment of Alzheimer’s, BD, MDD and PTSD in humans. Lithium has been marketed for\nmore than 35 years and human toxicology regarding lithium use has been well characterized, potentially mitigating the regulatory burden\nfor safety data.\n\n \n\nOn May 5, 2022, we initiated\na multiple-dose, steady-state, double-blind, ascending dose safety, tolerability, pharmacokinetic clinical trial of AL001 in patients\nwith mild to moderate Alzheimer’s and healthy subjects. We completed the Phase IIA clinical trial in March 2023 and announced positive\ntopline data in June 2023. \n\n \n\nWe announced that we successfully\nidentified a maximum tolerated dose (“MTD”) for development of AL001 from a multiple-ascending dose study as assessed by an\nindependent safety review committee. This dose, providing lithium at a lithium carbonate equivalent dose of 240 mg 3-times daily (“TID”),\nis designed to be unlikely to require lithium therapeutic drug monitoring (“TDM”). Also, this MTD is risk-mitigated for the\npurpose of treating fragile populations, such as Alzheimer’s patients.\n\n \n\nBased on the results from\nour Phase IIA MAD study, we plan to initiate five clinical trials to determine relative increased lithium levels in the brain compared\nto a marketed lithium salt for healthy subject and patients diagnosed with mild to moderate Alzheimer’s, BD, MDD and PTSD, based\non published mouse studies that predict that lithium can be given at lower doses for equivalent therapeutic benefit when treating with\nAL001. For example, the goal is to replace the amount of lithium needed for maintenance treatment of BD with a clinically relevant, lower\nAL001 lithium carbonate equivalent lithium dose. Such lithium dose mitigation could redefine the landscape of neuropsychiatric, neurodegenerative,\nand neurological treatment practices.\n\n \n\nIn August 2024, we announced\na partnership with MGH and Harvard Medical School to conduct five Phase II imaging clinical trials. The purpose of these trials is to\nassess the comparative increase in lithium levels within the brain and its structures as opposed to a commonly marketed lithium salt among\nhealthy subjects and patients afflicted with Alzheimer’s, BD, MDD and PTSD. \n\n \n\n - 47 - \n\n \n\n \n\nIn November 2024, we announced\na full data set from a nonclinical study comparing brain and plasma lithium exposures between AL001 and lithium carbonate in Alzheimer’s\ntransgenic mice. This study was a precursor to the five clinical trials and showed that AL001 exhibited consistently higher lithium concentrations\nin brain tissues, particularly at lower doses, compared to lithium carbonate.\n\n \n\nFor these clinical trials,\nwe partnered with Tesla Dynamic Coils BV to create a head coil to enable whole-brain imaging of lithium with remarkable resolution, allowing\nprecise quantification within brain structures. The coil will be used to help identify the disease-specific target doses of AL001 that\nimprove the balance of safety and efficacy compared to lithium carbonate. The coil will also be used to scan the entire brain, helping\nus clearly identify the different structures and important areas necessary for understanding how lithium works and moves within the brain.\nWe announced completion of the head coil in February 2025.\n\n \n\nIn May 2025, we announced\nthe initiation, enrollment and dosing of the first patient for the healthy human patients. This clinical trial has the following objectives:\n\n \n\n·To assess lithium brain/plasma pharmacokinetics (“PK”) of the AL001 oral capsule relative\nto a marketed lithium carbonate capsule in healthy adult subjects for the purpose of determining potential clinically safe and effective\nAL001 dosing in future studies;\n\n \n\n·To characterize AL001 lithium and salicylate steady-state plasma PK, and lithium relative to a marketed\nlithium carbonate capsule;\n\n \n\n·To characterize differences in brain and brain structure(s) PK behaviors such as absorption and persistence\nbetween AL001 capsule and a marketed lithium carbonate capsule; and\n\n \n\n·To characterize safety and tolerability of the tested formulations under the conditions of this study\n(38% below the pre-determined MTD for AL001, at a half-dose of a usual lithium starting dose of lithium carbonate for treatment of BD,\nequivalent to 150 mg lithium carbonate TID).\n\n \n\nIn November 2025, we announced\nthe completion of the clinical portion of this study and reported pharmacokinetics topline data in March 2026, with the following results:\n(1) Bioequivalence Confirmed: AL001 delivered 101% of total lithium blood exposure and 97% of peak lithium levels vs. standard lithium\ncarbonate; (2) Superior Brain Penetration: AL001 showed numerically higher lithium concentrations in all measured brain regions, including\nwhole brain; and (3) Faster Brain Uptake: AL001 reached peak brain concentration in 6.7 hours vs. 8.4 hours for standard lithium carbonate.\nIn April 2026, we announced pharmacodynamic  topline data of the healthy human subjects with the following results:\n\n \n\n·Potentially Distinct Brain Profile:** **Across multiple brain regions, AL001 and lithium\ncarbonate appeared to trend in opposite directions in brain chemistry measures, suggesting that AL001 may interact with the brain in a\ndistinct manner and generate a lower neurochemical footprint than lithium carbonate;\n\n \n\n·Expected Trends for Myo-Inositol Reduction: Both AL001 and lithium carbonate showed a trend toward reducing\nmyo-inositol, potentially supporting the hypothesis that AL001 retains lithium's core mechanism of action; and\n\n** **\n\n·Potentially Preserved Glutamate Balance: Lithium carbonate showed large effects across all brain\nregions whereas AL001 showed minimal glutamate effect in most brain regions, which may suggest better long-term tolerability.\n\n \n\nFull pharmacokinetics and\npharmacodynamic results are expected in August 2026.\n\n \n\nIn March 2026, we announced\nthe initiation of the Phase II Clinical Trial of AL001 “Lithium in Brain” Study in Patients with BD and expect to report topline\ndata in the fourth quarter of 2026. The clinical trials for treatment of patients with MDD and PTSD are expected to commence in the fourth\nquarter of 2026, followed by Alzheimer’s in the first quarter of 2027. These projected timelines reflect our commitment to advancing\nour clinical development programs across multiple neuropsychiatric and neurodegenerative indications.\n\n \n\nOn September 28, 2022, we\nsubmitted an Investigational New Drug (“IND”) application to the U.S. Food and Drug Administration (the “FDA”)\nfor ALZN002 and received a “study may proceed” letter on October 31, 2022. The product candidate is an immunotherapy vaccine\ndesigned to treat mild to moderate dementia of the Alzheimer’s type. ALZN002 is a proprietary “active” immunotherapy\nproduct, which means it is produced by each patient’s immune system. It consists of autologous DCs that are activated white blood\ncells taken from each individual patient so that they can be engineered outside of the body to attack Alzheimer’s-related amyloid-beta\nproteins. These DCs are pulsed with a novel amyloid-beta peptide (E22W) designed to bolster the ability of the patient’s immune\nsystem to combat Alzheimer’s, with the goal being to foster tolerance to treatment for safety purposes while stimulating the immune\nsystem to reduce the brain’s beta-amyloid protein burden, resulting in reduced Alzheimer’s signs and symptoms. Compared to\npassive immunization treatment approaches that use foreign blood products (such as monoclonal antibodies), active immunization with ALZN002\nis anticipated to offer a more robust and long-lasting effect on the clearance of amyloid. This could provide a safer approach due to\nits reliance on autologous immune components, using each individual patient’s own white blood cells rather than foreign cells and/or\nblood products.\n\n \n\n - 48 - \n\n \n\n \n\nOn April 3, 2023, we announced\nthe initiation of a Phase I/IIA clinical trial for ALZN002 to treat mild to moderate dementia of the Alzheimer’s type. The purpose\nof this trial is to assess the safety, tolerability, and efficacy of multiple ascending doses of ALZN002 compared with that of a placebo\nin 20-30 subjects with mild to moderate morbidity. The primary goal of this clinical trial is to determine an appropriate dose of ALZN002\nfor treatment of patients with Alzheimer’s in a larger Phase IIB efficacy and safety clinical trial. On February 13, 2024, we received\nnotice from Biorasi, LLC (“Biorasi”), the company formerly engaged as our contract research organization (“CRO”),\nterminating our contract with Biorasi. We are currently pursuing the engagement of a replacement CRO. Due to the scientific and operational\ncomplexities of the ALZN002 trial, along with the limited number of CROs with the expertise and capacity to complete the trial, we have\nexperienced a delay in engaging a new CRO. We do not expect to restart this trial in first quarter of 2027.\n\n  \n\nThe continuation of our current\nplan of operations with respect to completing our IND applications and conducting the series of human clinical trials for each of our\ntherapeutics requires us to raise additional capital to fund our operations.\n\n \n\nBecause our working capital\nrequirements depend upon numerous factors, including the progress of our preclinical and clinical testing, timing and cost of obtaining\nregulatory approvals, changes in levels of resources that we devote to the development of manufacturing and marketing capabilities, competitive\nand technological advances, status of competitors, and our ability to establish collaborative arrangements with other organizations, we\nwill require additional financing to fund future operations.\n\n \n\n**Results of Operations**\n\n \n\n**Results of Operations for the Year Ended April 30, 2026 Compared\nto the Year Ended April 30, 2025**\n\n \n\nThe following table summarizes\nthe results of our operations for the years ended April 30, 2026 and 2025:\n\n \n\n  \nFor the Years Ended April 30, \n\n  \n2026  \n2025  \n$ Change  \n% Change \n\nOPERATING EXPENSES \n    \n    \n    \n   \n\nResearch and development \n$3,629,785  \n$1,414,928  \n$2,214,857  \n 157%\n\nGeneral and administrative \n 5,137,056  \n 3,081,896  \n 2,055,160  \n 67%\n\nTotal operating expenses \n 8,766,841  \n 4,496,824  \n 4,270,017  \n 95%\n\nLoss from operations \n (8,766,841) \n (4,496,824) \n (4,270,017) \n 95%\n\n  \n    \n    \n    \n   \n\nOTHER INCOME (EXPENSE), NET \n    \n    \n    \n   \n\nInterest income \n 1,078  \n -  \n 1,078  \n * \n\nInterest expense \n (6,619) \n (18,029) \n 11,410  \n -63%\n\nTotal other expense, net \n (5,541) \n (18,029) \n 12,488  \n -69%\n\n  \n    \n    \n    \n   \n\nNET LOSS \n (8,772,382) \n (4,514,853) \n (4,257,529) \n 94%\n\nDividend on preferred shares \n -  \n (117,022) \n 117,022  \n * \n\nDeemed dividend on warrant modification issued with preferred shares \n -  \n (473,209) \n 473,209  \n * \n\nNET LOSS AVAILABLE TO COMMON SHARES \n$(8,772,382) \n$(5,105,084) \n$(3,667,298) \n 72%\n\n  \n    \n    \n    \n   \n\nBasic and diluted net loss per common share \n$(2.63) \n$(11.32) \n$8.69  \n * \n\n  \n    \n    \n    \n   \n\nBasic and diluted weighted average common shares outstanding \n 3,337,143  \n 450,799  \n    \n * \n\n \n\n*Not meaningful\n\n \n\n**Revenue**\n\n \n\nWe currently have only two\nproduct candidates, AL001 and ALZN002. These products are in the clinical stage of development and will require extensive clinical study,\nreview and evaluation, regulatory review and approval, significant marketing efforts and substantial investment before either or both\nof them, and any respective successors, will provide us with any revenue. We did not generate any revenues during the years ended April\n30, 2026 and 2025, and we do not anticipate that we will generate revenue for the foreseeable future.\n\n \n\n - 49 - \n\n \n\n \n\n**Research and Development Expenses**\n\n \n\nResearch and development expenses\nfor the years ended April 30, 2026 and 2025 were $3.6 million and $1.4 million, respectively. As reflected in the table below, research\nand development expenses primarily consisted of professional fees, clinical trial fees, stock-based compensation expense, as well as other\nresearch and development expenses:\n\n \n\n  \nFor the Years Ended April 30, \n\n  \n2026  \n2025  \n$ Change  \n% Change \n\nProfessional fees \n$625,250  \n$655,659  \n$(30,409) \n -5%\n\nStock-based compensation expense \n 46,611  \n -  \n 46,611  \n * \n\nClinical trial fees \n 2,934,775  \n 716,318  \n 2,218,457  \n 310%\n\nOther research and development expenses \n 23,149  \n 42,951  \n (19,802) \n -46%\n\nTotal research and development expenses \n$3,629,785  \n$1,414,928  \n$2,214,857  \n 157%\n\n \n\n*Not meaningful\n\n \n\n**Professional Fees**\n\n \n\nDuring the years ended April\n30, 2026 and 2025, we incurred professional fees of $625,000 and $656,000, respectively, which were primarily comprised of professional\nfees attributed to various types of scientific services, including FDA consulting services. The decrease relates to lower professional\nfees incurred during the year ended April 30, 2026, compared to professional fees incurred for the preparation for clinical trials for\nAL001 and ALZN002 during the year ended April 30, 2025.\n\n \n\n**Stock-Based Compensation Expense**\n\n \n\nDuring the year ended April\n30, 2026, we incurred $47,000 in research and development stock-based compensation expense related to stock option grants to consultants.\nNo such expense was incurred during the fiscal year ended April 30, 2025. The increase in research and development stock-based compensation\nexpense for the year ended April 30, 2026, was a result of the expense recorded as a result of the vesting of newly granted stock options.\n\n \n\n**Clinical Trial Fees**\n\n \n\nDuring the years ended April\n30, 2026 and 2025, we incurred clinical trial fees of $2.9 million and $716,000, respectively. Clinical trial fees for the year ended\nApril 30, 2026 were for our Phase IIB clinical trial for AL001 for healthy subjects. Clinical trial fees for the year ended April 30,\n2025 were for our Phase IIA clinical trial for AL001.\n\n  \n\n**Other Research and Development Expenses**\n\n \n\nDuring the years ended April\n30, 2026 and 2025, we incurred other fees of $23,000 and $43,000, respectively, which were primarily comprised of scientific materials\nrequired for our clinical trials.\n\n \n\n**General and Administrative Expenses**\n\n \n\nGeneral and administrative\nexpenses for the years ended April 30, 2026 and 2025 were $5.1 million and $3.1 million, respectively. As reflected in the table below,\ngeneral and administrative expenses primarily consisted of the following expense categories: salary and benefits; professional fees; insurance;\nstock-based compensation expense; marketing fees; and Board fees. For the years ended April 30, 2026 and 2025, the remaining general and\nadministrative expenses of $469,000 and $347,000, respectively, primarily consisted of payments for franchise taxes, depreciation, transfer\nagent fees, travel, and other office expenses, none of which is significant individually.\n\n \n\n  \nFor the Years Ended April 30, \n\n  \n2026  \n2025  \n$ Change  \n% Change \n\nSalary and benefits \n$988,076  \n$1,010,487  \n$(22,411) \n -2%\n\nProfessional fees \n 2,176,864  \n 617,650  \n 1,559,214  \n 252%\n\nInsurance \n 236,279  \n 259,382  \n (23,103) \n -9%\n\nStock-based compensation expense \n 660,916  \n 325,108  \n 335,808  \n 103%\n\nMarketing fees \n 425,000  \n 347,295  \n 77,705  \n 22%\n\nBoard of director fees \n 181,250  \n 175,000  \n 6,250  \n 4%\n\nOther general and administrative expenses \n 468,671  \n 346,974  \n 121,697  \n 35%\n\nTotal general and administrative expenses \n$5,137,056  \n$3,081,896  \n$2,055,160  \n 67%\n\n \n\n - 50 - \n\n \n\n \n\n**Salary and Benefits**\n\n \n\nDuring the years ended April\n30, 2026 and 2025, we incurred $988,000 and $1.0 million, respectively, in employee-related expenses. As of April 30, 2026, we had four\nfull-time and two part-time employees. The decrease in salary and benefits expense was a result of the reduction of one part-time employee\nduring the year ended April 30, 2026.\n\n \n\n**Professional Fees **\n\n \n\nDuring the years ended April\n30, 2026 and 2025, we incurred professional fees of $2.2 million and $618,000, respectively. During the year ended April 30, 2026, we\nincurred $1.9 million in legal fees, $190,000 in audit and tax fees, $95,000 in investor relations and $7,000 in other professional fees.\nDuring the year ended April 30, 2025, we incurred $243,000 in legal fees, $221,000 in audit and tax fees, $149,000 in investor relations\nand $5,000 in other professional fees. The increase in legal fees was a result of increased activity in our lawsuit against Biorasi for\nterminating their agreement. The trial in that lawsuit has commenced and is expected to be completed by the end of August 2026.\n\n \n\n**Insurance Expense**\n\n \n\nDuring the years ended April\n30, 2026 and 2025, we incurred insurance expense of $236,000 and $259,000, respectively, which was primarily directors’ and officers’\ninsurance. The decrease in insurance expense was due to lower negotiated pricing with the same amount of coverage.\n\n** **\n\n**Stock-based Compensation Expense**\n\n \n\nDuring the years ended April\n30, 2026 and 2025, we incurred stock-based compensation expense of $661,000 and $325,000, respectively, related to stock option grants\nto employees, directors and consultants. The increase in general and administrative stock-based compensation expense for the year ended\nApril 30, 2026, was a result of the vesting of newly granted stock options.\n\n** **\n\n**Marketing Fees **\n\n** **\n\nDuring the years ended April\n30, 2026 and 2025, we incurred marketing fees of $425,000 and $347,000, respectively, which was primarily expenses related to the marketing\nand branding of our company.\n\n \n\n**Current and Deferred Income Taxes**\n\n \n\nAs of April 30, 2026 and 2025,\nwe had deferred tax assets totaling $15.4 million and $15.3 million, respectively. The ultimate realization of deferred tax assets is\ndependent upon the existence, or generation, of taxable income in the periods when those temporary differences and net operating loss\ncarryovers are deductible. Management considers the scheduled reversal of deferred tax liabilities, taxes paid in carryover years, projected\nfuture taxable income, available tax planning strategies, and other factors in making this assessment. Based on available evidence, management\nbelieves it is more likely than not that some or all of the deferred tax assets will not be realized. Accordingly, we have established\na 100% valuation allowance. As a result of the full valuation allowance, we did not record an income tax benefit for the years ended April\n30, 2026 and 2025.\n\n \n\n**Liquidity and Capital Resources**\n\n \n\n The accompanying financial\nstatements have been prepared assuming that the Company will continue as a going concern. The Company has incurred recurring net losses\nand operations have not provided sufficient cash flows. We believe that we will continue to incur operating and net losses each quarter\nuntil at least the time we begin significant deliveries of our products. We believe our current cash on hand is insufficient to fund our\nplanned operations through one year after the date the financial statements are issued. These factors create substantial doubt about our\nability to continue as a going concern for at least one year after the date that our audited financial statements are issued.\n\n \n\nOur inability to continue as\na going concern could have a negative impact on our company, including our ability to obtain needed financing.\nWe intend to finance our future development activities and our working capital needs largely through the sale of equity securities with\nsome additional funding from other sources, including debt financing, until such time as funds provided by operations are sufficient to\nfund working capital requirements. Our financial statements do not include any adjustments relating to the recoverability and classification\nof recorded assets, or the amounts and classifications of liabilities that might be necessary should we be unable to continue as a going\nconcern. As of April 30, 2026, we had cash of $711,000 and an accumulated deficit of $67.3 million. We have incurred recurring losses\nand reported a loss for the year ended April 30, 2026 totaling $8.8 million. In the past, we have financed our operations principally\nthrough sales of equity securities and debt instruments.\n\n \n\nWe will need to obtain substantial\nadditional funding in the future for our clinical development activities and continuing operations. If we are unable to raise capital\nwhen needed or on favorable terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization\nefforts. Our future capital requirements will depend on many factors, including:\n\n \n\n·successful enrollment in and completion of clinical trials;\n\n \n\n - 51 - \n\n \n\n \n\n·our ability to establish agreements with third-party manufacturers for clinical supply for our clinical\ntrials and, if our product candidates are approved, commercial manufacturing;\n\n \n\n·our ability to maintain our current research and development programs and establish new research and development\nprograms;\n\n \n\n·addition and retention of key research and development personnel;\n\n \n\n·our efforts to enhance operational, financial, and information management systems, and hire additional\npersonnel, including personnel to support development of our product candidates;\n\n \n\n·negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter\nand performing our obligations in such collaborations;\n\n \n\n·the timing and amount of milestone and other payments we may receive under our collaboration arrangements;\n\n \n\n·our eventual commercialization plans for our product candidates;\n\n \n\n·the costs involved in prosecuting, defending, and enforcing patent claims and other intellectual property\nclaims; and\n\n \n\n·the costs and timing of regulatory approvals.\n\n \n\nA change in the outcome of\nany of these or other variables with respect to the development of any of our product candidates could significantly change the costs\nand timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we\nmay need additional funds to meet operational needs and capital requirements associated with such operating plans.\n\n \n\n**At-the-Market Offering**\n\n** **\n\nSee Note 9 – Equity\nTransactions in the notes to the financial statements for a description of our fundraising activities.\n\n** **\n\n**Cash Flows**\n\n \n\nThe following table summarizes our cash flows for\nthe years ended April 30, 2026 and 2025:\n\n \n\n  \nFor the Years Ended April 30, \n\n  \n2026  \n2025 \n\nNet cash provided by (used in): \n    \n   \n\nOperating activities \n$(8,067,813) \n$(6,568,186)\n\nInvesting activities \n -  \n (300,000)\n\nFinancing activities \n 4,829,844  \n 10,440,796 \n\nNet (decrease) increase in cash and cash equivalents \n$(3,237,969) \n$3,572,610 \n\n \n\n**Operating Activities**\n\n \n\nDuring the year ended April\n30, 2026, net cash used in operating activities was $8.1 million. This consisted primarily of a net loss of $8.8 million and a decrease\nin our net operating assets and liabilities of $114,000, partially offset by stock-based compensation of $708,000 and depreciation of\n$110,000. The decrease in our net operating assets and liabilities was primarily due to an increase in accounts payable and accrued liabilities\nand an increase in prepaid expenses.\n\n \n\nDuring the year ended April\n30, 2025, net cash used in operating activities was $6.6 million. This consisted primarily of a net loss of $4.5 million and a decrease\nin our net operating assets and liabilities of $2.4 million, partially offset by stock-based compensation of $325,000. The decrease in\nour net operating assets and liabilities was primarily due to an increase in prepaid expenses and a decrease in accounts payable.\n\n \n\n**Investing Activities**\n\n \n\nDuring the year ended April\n30, 2026, there were no investing activities. During the year ended April 30, 2025, net cash used in investing activities was $300,000\nfor the purchase of equipment and machinery used in our AL001 Phase II clinical trials.\n\n  \n\n - 52 - \n\n \n\n \n\n**Financing Activities**\n\n \n\nDuring the year ended April\n30, 2026, net cash provided by financing activities was $4.1 million from the sale of convertible preferred stock and $800,000 from proceeds\nfrom an “at-the-market” offering (“ATM Offering”).\n\n \n\nDuring the year ended April\n30, 2025, net cash provided by financing activities was $7.7 million from the sale of convertible preferred stock and $2.7 million from\nproceeds from the ATM Offering.\n\n \n\nSee Note 9 – Equity\nTransactions in the notes to the financial statements for a description of our financing activities.\n\n \n\n**Contractual Obligations**\n\n \n\nSee the “Intellectual Property and Licensing\nAgreements” sub-section under Item 1. Business of this Annual Report.\n\n** **\n\n**Recent Accounting Standards**\n\n \n\nFor information about recent\naccounting pronouncements that may impact our financial statements, please refer to Note 3 of Notes to Financial Statements under the\nheading “Recent Accounting Standards.”"}