UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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| (Address of Principal Executive Offices) | (Zip Code) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading Symbol | Name of each exchange on which registered: | ||
Indicate by checkmark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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| Large Accelerated Filer ☐ | Accelerated Filer ☐ | ||
| Smaller Reporting Company | Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:
ALPHA COGNITION INC.
FORM 10-Q
For the Quarter Ended June 30, 2026
INDEX
i
PART I
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
ALPHA COGNITION INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Current deferred income | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Deferred income | ||||||||
| Option liability | ||||||||
| Warrant liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity | ||||||||
| Common stock, par value, shares authorized, | ||||||||
| Class B preferred stock, par value, shares authorized, | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
1
ALPHA COGNITION INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
| For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue | ||||||||||||||||
| Product, net | $ | $ | $ | $ | ||||||||||||
| Licensing | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of Revenues | ||||||||||||||||
| Cost of product sales, excluding amortization of intangible assets | ||||||||||||||||
| Cost of licensing revenue | ||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||
| Total cost of revenues | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Interest income, net | ||||||||||||||||
| Grant income | ||||||||||||||||
| Loss on change in fair value of warrant liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on foreign currency contracts | ( | ) | ( | ) | ||||||||||||
| Other income (expenses) | ( | ) | ( | ) | ||||||||||||
| Total other income (expenses) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss and comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Weighted average shares outstanding, basic | ||||||||||||||||
| Net loss per share, basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Adjusted net loss, diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average outstanding stock, diluted | ||||||||||||||||
| Net loss per share, diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
2
ALPHA COGNITION INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
For the three months ended June 30, 2026:
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid-In | Comprehensive | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Total | |||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Reclassification of CAD options | - | - | ||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
For the three months ended June 30, 2025:
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid-In | Comprehensive | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Total | |||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Warrants exercised | - | |||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
3
ALPHA COGNITION INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
For the six months ended June 30, 2026
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||
| Common Shares | Preferred Shares | Paid-In | Comprehensive | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Total | |||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Options exercised | - | ( | ) | |||||||||||||||||||||||||||||
| Reclassification of CAD options | - | - | ||||||||||||||||||||||||||||||
| Share-based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
For the six months ended June 30, 2025
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||
| Common Shares | Preferred Shares | Paid-In | Comprehensive | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Total | |||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Warrants exercised | - | |||||||||||||||||||||||||||||||
| Share-based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
4
ALPHA COGNITION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| Cash flows used in operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Accrued expenditures for government grant | ||||||||
| Change in fair value of warrant liabilities | ||||||||
| Change in fair value of bonus rights liability | ( | ) | ||||||
| Change in fair value for foreign currency contracts | ||||||||
| Loss on disposal of equipment | ||||||||
| Stock-based compensation – equity-classified options | ||||||||
| Stock-based compensation – liability-classified CAD options | ( | ) | ||||||
| Changes in non-cash operating working capital items: | ||||||||
| Accounts receivable, net | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Deferred income | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows used in investing activities | ||||||||
| Acquisition of equipment | ( | ) | ( | ) | ||||
| Acquisition of intangible asset | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows provided by financing activities | ||||||||
| Proceeds from exercises of options | ||||||||
| Proceeds from exercises of warrants | ||||||||
| Repayment of promissory notes | ( | ) | ||||||
| Proceeds received from restricted government grant | ||||||||
| Amounts paid from restricted government grant funds | ( | ) | ||||||
| Net cash provided by financing activities | ( | ) | ||||||
| Change in cash, cash equivalents, and restricted cash during the period | ( | ) | ( | ) | ||||
| Cash, cash equivalents, and restricted cash beginning of period | ||||||||
| Cash, cash equivalents, and restricted cash end of period | $ | $ | ||||||
| For the Six Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| Supplemental Disclosure | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental non-cash disclosures | ||||||||
| Reallocation of fair value of share options upon exercise | $ | $ | ||||||
| Reclassification of CAD option liability to equity | $ | $ | ||||||
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – NATURE OF OPERATIONS
Alpha Cognition Inc. (“ACI” or the “Company”) is a commercial stage, biopharmaceutical company dedicated to developing treatments for patients suffering from neurodegenerative diseases, such as Alzheimer’s Disease, for which there are limited or no treatment options. The Company focuses on the commercial manufacturing and commercial sales of its ZUNVEYL oral tablet formulation, which was launched on March 19, 2025. The Company’s commercial program for ZUNVEYL is primarily focused on its long-term care commercial team that can focus on providing key points of differentiation, exploiting key issues with existing AChEI treatments, and franchising potential additional indications and new products.
On November 12, 2024, the Company’s common stock commenced trading on the NASDAQ stock exchange under the symbol “ACOG”. The Company’s common stock traded on the Canadian Securities Exchange (“CSE”) under the symbol “ACOG” from May 1, 2023 to December 17, 2024 on which date they were voluntarily delisted.
NOTE 2 – REVISIONS TO PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL INFORMATION
As previously reported in the Company’s Annual Report on Form 10-K, during the preparation of its consolidated financial statements for the year ended December 31, 2025, the Company identified an error in its previously reported consolidated financial statements for the year ended December 31, 2024 and for each of the quarters ended March 31, June 30, and September 30, 2025. Specifically, certain options denominated in Canadian dollars (the “CAD Options”) were previously classified as equity awards. Upon further evaluation of the terms of the CAD Options and the applicable accounting guidance, the Company determined that because the exercise price of the CAD Options is denominated in a currency that is different than the one in which a substantial portion of the Company’s shares are traded, the CAD Options were considered to be indexed to a factor other than a market, performance, or service condition. Accordingly, the CAD Options should have been accounted for as liability-classified awards measured at fair value beginning with the Company’s US initial public offering in November 2024, with subsequent changes in fair value recognized in earnings each reporting period.
In accordance with Staff Accounting Bulletin (“SAB”) 99, Materiality, and SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements, the Company evaluated the materiality of the error from qualitative and quantitative perspectives, and concluded that the error was immaterial to each of the 2025 interim financial statements.
However, the Company has corrected the error in the current year comparative condensed consolidated financial statements by adjusting the information, as applicable, as of and for the quarter and six months ended June 30, 2025. A summary of the corrections to the affected financial statement line items in these condensed consolidated financial statements is presented below.
Condensed Consolidated Statement of Operations and Comprehensive Loss
| Three Months Ended June 30, 2025 | ||||||||||||
| As Reported | Adjustment | As Revised | ||||||||||
| Operating expenses | ||||||||||||
| Research and development | $ | $ | $ | |||||||||
| General and administrative expenses | ||||||||||||
| Total operating expenses | ||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ||||||
| Total other income (expenses) | ( | ) | ( | |||||||||
| Net loss and comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net loss per share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Six Months Ended June 30, 2025 | ||||||||||||
| As Reported | Adjustment | As Revised | ||||||||||
| Operating expenses | ||||||||||||
| Research and development | $ | $ | $ | |||||||||
| General and administrative expenses | ||||||||||||
| Total operating expenses | ||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ||||||
| Total other income (expenses) | ( | ) | ( | |||||||||
| Net loss and comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net loss per share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
6
Condensed Consolidated Statement of Stockholders’ Equity
For the three months ended June 30, 2025:
| Additional Paid in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||
| As Reported | Adjustment | As Revised | As Reported | Adjustment | As Revised | As Reported | Adjustment | As Revised | ||||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
| Stock-based compensation | $ | $ | ( | ) | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||
| Net loss | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Balance, June 30, 2025 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||
For the six months ended June 30, 2025
| Additional Paid in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||
| As Reported | Adjustment | As Revised | As Reported | Adjustment | As Revised | As Reported | Adjustment | As Revised | ||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||
| Stock-based compensation | $ | $ | ( | ) | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||
| Net loss | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Balance, June 30, 2025 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||
Condensed Consolidated Statement of Cash Flows
| Six Months Ended June 30, 2025 | ||||||||||||
| As Reported | Adjustment | As Revised | ||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Cash flow used in operating activities: | ||||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Stock-based compensation | $ | $ | $ | |||||||||
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation – The accompanying interim condensed consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and are consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended December 31, 2025.
The interim condensed consolidated financial statements are unaudited and have been prepared on the same basis as the audited annual financial statements and, in management’s opinion, include all adjustments consisting of only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of June 30, 2026 and its results of operations, changes in equity, and cash flows for the three and six months ended June 30, 2026 and 2025. The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results to be expected for the full fiscal year or any other period.
Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. The information included in this Form 10-Q should be read in conjunction with the financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
7
Liquidity - The Company does not have sufficient operating revenue to finance its existing obligations and has relied on external financing, such as debt and equity raises, to generate capital to maintain its capacity to meet working capital requirements. During August 2025, the Company entered into an At the Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”) as sales agent. Under the terms of the ATM Agreement, the Company is entitled to sell, at its sole discretion and from time to time as it may choose, common stock in the capital of the Company (“Stock”) through Wainwright, with such sales having an aggregate gross sales value of up to $75.0 million. Through June 30, 2026, the Company has not issued any Common Stock under the ATM Agreement. The ATM Agreement expires on August 29, 2028.
The Company believes its current cash balances provide sufficient funding to meet the Company’s working capital requirements for the next 12 months from the date of issuance of these condensed consolidated financial statements. The Company expects to continue to rely on debt and the issuance of shares, and possibly other non-dilutive financing options to finance its ongoing operations and plans for continued commercialization of ZUNVEYL. However, there is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company.
Use of Estimates and Assumptions – The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and disclosure of contingent liabilities as of the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. The Company’s most significant estimates relate to the fair value of its warrant liabilities, CAD Options liability, and stock option grants, and its estimates of the standalone selling prices of certain performance obligations. On an ongoing basis, management evaluates its estimates, to ensure that those estimates effectively reflect changes in the Company’s business and new information as it becomes available. Management bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to forecasted amounts and future events. Actual results could differ materially from these estimates under different assumptions or conditions.
Liability-Based Awards – Bonus right awards that include cash settlement features are accounted for as liability-based awards in accordance with ASC 718, Compensation – Share Based Compensation. The fair value of the bonus right awards is estimated using a Black-Scholes option-pricing model and is revalued on each reporting date based on the probability of the expected awards to vest. Changes in the estimated fair value of the bonus right awards are recognized within selling, general and administrative expense in the consolidated statements of operations and comprehensive loss. Key assumptions in the calculation of the fair value of the bonus right awards include expected volatility, the risk-free interest rate, expected life, and fair value per award.
At December 31, 2025, the Company had
On April 30, 2026, the Company modified all
8
Fair Value Measurements – Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value.
Level 1 – Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.
Level 2 – Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings.
Level 3 – Financial instruments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the instrument.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. To the extent that a fair value measurement is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.
The Company’s recurring fair value measurements include those related to warrant liabilities (see Note 7), bonus right liabilities, and, until their modification in April 2026, CAD Option liabilities (see Note 7). These liabilities are or were considered to be Level 3 measurements due to the use of significant unobservable inputs, including expected volatility and expected term. These inputs are inherently uncertain and require significant judgment; accordingly, changes in these assumptions could have a material impact on the fair value measurement. In general, increases (decreases) in the expected volatility assumptions would result in higher (lower) fair value measurements, and increases (decreases) in the expected term assumptions would generally result in higher (lower) fair values.
The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued liabilities, and deferred income are considered to be representative of their respective fair values because of the short-term nature of these accounts.
New Accounting Pronouncements
In November 2024, the FASB issued Accounting Standards Update No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”), which requires disaggregation of certain costs in a separate note to the financial statements, such as the amounts of employee compensation, depreciation and intangible asset amortization, included in each relevant expense caption in annual and interim consolidated financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027 on a retrospective or prospective basis, with early adoption permitted. The Company is evaluating the effect that ASU 2024-03 will have on its financial statement disclosures.
The Company considers the applicability and potential impact of all recently issued accounting pronouncements; those not specifically identified in this disclosure are either not applicable to the Company or not expected to have a material effect on our financial condition or results of operations.
9
NOTE 4 – INVENTORY
Inventory consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
NOTE 5 – OTHER BALANCE SHEET COMPONENTS
Prepaid expenses and other current assets consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Prepaid insurance and other expenses | $ | $ | ||||||
| Prepaid FDA user fees | ||||||||
| Prepaid legal expenses | ||||||||
| Deferred ATM offering costs | ||||||||
| Manufacturing deposit | ||||||||
| Others | ||||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
The manufacturing deposit relates to production of raw materials for the end of the 2026 fiscal year.
Accounts payable and accrued expenses consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued gross-to-net discounts | ||||||||
| Accrued inventory costs | ||||||||
| Accrued clinical research costs | ||||||||
| Accrued payroll and bonuses | ||||||||
| Other accrued liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
10
NOTE 6 – INTANGIBLE ASSETS
The Company’s intangible assets consist entirely of licenses of intellectual property. Details related to the amounts of these licenses were as follows:
| June 30, 2026 | December 31, 2025 | |||||||
| Gross amount | $ | $ | ||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
Amortization expense for the three months ended June 30, 2026 and 2025 was $
Amortization expense for the six months ended June 30, 2026 and 2025 was $
The following table outlines the estimated future annual amortization expense related to intangible assets as of June 30, 2026:
| Year Ending December 31, | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
Galantos Royalty Settlement Agreement
As described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, the Company had previously entered into the Memogain Technology License Agreement (“License Agreement”) with Neurodyn Life Sciences, Inc. (“NLS”) for the exclusive right and license to further develop and exploit the Memogain Technology (“ALPHA-1062 Technology”). The License Agreement expires in 2044 – the date the last patent obtained related to the ALPHA-1062 Technology expires. Under the License Agreement, the Company assumed NLS’s obligations to pay royalties to Galantos Pharma GmbH (“Galantos”).
Total cumulative payments to Galantos were subject to a maximum amount of EUR
On April 10, 2026, the Company and Galantos entered into a Settlement Agreement and Mutual Release (the “Royalty Settlement Agreement”) under which the Company agreed to make a one-time payment of EUR
At the time of the Royalty Settlement Agreement, accrued but unpaid royalties due to Galantos from sales that had occurred prior to the execution date totaled EUR
11
Progranulin License Termination
In November 2020, the Company entered into a license agreement with NLS that granted the Company worldwide exclusive rights to develop and commercialize the Progranulin technology. As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, the Company decided to discontinue development of the Progranulin technology during 2024. On June 16, 2026, the Company entered into a Progranulin License Termination, Assignment and Royalty Agreement with NLS pursuant to which the parties formally terminated the November 2020 license agreement. Under the termination agreement, the Company returned all rights to the Progranulin technology to NLS and assigned its obligations under the related Scientist Royalty Agreement to NLS. In exchange, the Company received contingent rights to future royalties and other payments if NLS successfully commercializes, sublicenses, or sells the Progranulin technology.
NOTE 7 – STOCKHOLDERS’ EQUITY
Summary of Outstanding Warrants
The following table summarizes warrant activity during the six months ended June 30, 2026:
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Balance, January 1, 2026 | $ | |||||||
| Issued | ||||||||
| Exercised | ||||||||
| Expired | ||||||||
| Balance, June 30, 2026 | $ | |||||||
A summary of all warrants outstanding and exercisable as of June 30, 2026 is as follows:
| Warrants | Shares Exercisable | Exercise Price | Expiry Date | |||||||
| Equity-classified warrants: | ||||||||||
| Private placements | $ | |||||||||
| Prefunded warrants | $ | |||||||||
| Liability-classified warrants: | ||||||||||
| CAD Warrants | $ | ) | ||||||||
| CAD Warrants | $ | ) | ||||||||
| Initial Debenture Warrants | $ | |||||||||
| Additional Debenture Warrants | $ | |||||||||
| IPO Agent Warrants | $ | |||||||||
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CAD Warrants Liability
On August 31, 2023, the Company’s functional currency changed to the USD from the CAD; as such, the Company recorded a derivative liability on the warrants outstanding with CAD exercises prices (the “CAD Warrants”). This derivative liability is being remeasured to fair value at each reporting period and on the settlement date.
As of June 30, 2026 and December 31, 2025, the fair value of the CAD Warrants derivative liability was $
The following weighted average assumptions were used in the Black-Scholes option-pricing model to measure the fair value of the CAD Warrants:
| June 30, 2026 | December 31, 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Dividend yield | ||||||||
| Expected life (in years) | ||||||||
| Volatility | % | % | ||||||
| Weighted average fair value per warrant | $ | $ | ||||||
Debentures Warrants Liability
In September 2024, the Company entered into agreements with various third party lenders for the issuance of convertible debentures (“Debentures”) and warrants to purchase
The fundamental transaction clause in the underlying warrant agreements stipulates that the expected volatility is determined as the greater of 100% and the 30-day volatility, as calculated from the HVT function on Bloomberg. Because the volatility input is predetermined and fixed in the warrant agreements as “an expected volatility equal to the greater of 100% and the 30-day volatility from the “HVT” function on Bloomberg”, the Initial and Additional Debenture Warrants are not considered to be indexed to the Company’s stock and, as a result, fail the “fixed-for-fixed” condition (i.e., both the exercise price and the number of shares to be issued are not “fixed” at issuance ). Instead, the Initial and Additional Debenture Warrants are classified as liabilities that are remeasured to fair value each reporting period.
At June 30, 2026 and December 31, 2025, the fair value of the Initial and Additional Debenture Warrants liabilities totaled $
The following weighted average assumptions were used in a binomial lattice model to remeasure the fair value of the Initial and Additional Debenture Warrants:
| June 30, 2026 | December 31, 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Dividend yield | ||||||||
| Expected life (in years) | ||||||||
| Volatility | % | % | ||||||
| Weighted average fair value per warrant | $ | $ | ||||||
13
IPO Agent Warrants
Upon completion of its November 2024 initial public offering, the Company issued warrants exercisable into
The terms of the IPO Agent Warrants include a fundamental transaction clause that stipulates that the expected volatility is determined as the greater of 100% and the 30-day volatility, as calculated from the HVT function on Bloomberg. Because the volatility input is predetermined and fixed in the warrant agreements as “an expected volatility equal to the greater of 100% and the 30-day volatility from the “HVT” function on Bloomberg”, the IPO Agent Warrants are not considered to be indexed to the Company’s stock and, as a result, fail the “fixed-for-fixed” condition (i.e., both the exercise price and the number of shares to be issued are not “fixed” at issuance ). Instead, the IPO Agent Warrants are classified as liabilities that are remeasured to fair value each reporting period.
At June 30, 2026 and December 31, 2025, the estimated fair value of outstanding IPO Agent Warrants was $
The following weighted average assumptions were used in the Black-Scholes option-pricing model for the revaluations of the IPO Agent Warrants:
| June 30, 2026 | December 31, 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Dividend yield | ||||||||
| Expected life (in years) | ||||||||
| Volatility | % | % | ||||||
| Weighted average fair value per warrant | $ | $ | ||||||
Stock Options
Performance Stock Units
On January 9, 2026, the Company granted performance stock units (“PSUs”) to its Chief Executive Officer. The PSUs represent a right to receive shares of the Company’s common stock upon vesting, subject to the satisfaction of both a service condition and a stock price-based market condition over a two-year “Performance Period” that began on the grant date.
The PSUs vest, if at all, at the end of the Performance Period, contingent upon the participant’s continued service through the last day of the Performance Period and the achievement of specified stock price thresholds of between $
The Company estimated the grant-date fair value of the PSUs to be $
| Risk-free interest rate | % | |||
| Dividend yield | ||||
| Expected term (in years) | ||||
| Volatility | % |
The grant date fair value of the PSUs is being recognized as stock-based compensation expense on a straight-line basis over the two-year Performance Period, regardless of when, or if, the market condition is satisfied.
14
Equity-Classified Awards with Service-Based Vesting
The following table summarizes activity for equity-classified common stock options with service-based vesting conditions:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value(1) | |||||||||||||
| Balance, December 31, 2025 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| CAD Options reclassified to equity | ||||||||||||||||
| Exercised | ||||||||||||||||
| Cancelled | ( | ) | ||||||||||||||
| Balance, June 30, 2026 | $ | $ | ||||||||||||||
| Options exercisable, June 30, 2026 | $ | $ | ||||||||||||||
| (1) |
The following weighted average assumptions were used in the Black-Scholes option-pricing model for the valuation of equity-classified Common Stock options issued during the six months ended June 30, 2026 and the year ended December 31, 2025:
| June 30, 2026 | December 31, 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected life (in years) | ||||||||
| Volatility | % | % | ||||||
| Weighted average grant-date fair value per option | $ | $ | ||||||
Restricted Stock Units
During the six months ended June 30, 2026, the Company granted
Liability-Classified CAD Options
On April 30, 2026, the Company modified all
At December 31, 2025, the fair value of the CAD Options liability was $
15
Following the modification, the CAD Options liability was reclassified to equity. In subsequent reporting periods, since the CAD Options are now equity-classified, the Company will no longer remeasure these awards at fair value. Instead, the unrecognized compensation cost of $
The following weighted average assumptions were used in the Black-Scholes option-pricing model to remeasure the fair value of liability-classified CAD Options during the period from January 1, 2026 to April 30, 2026 and the year ended December 31, 2025:
| April 30, 2026 | December 31, 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected life (in years) | ||||||||
| Volatility | % | % | ||||||
| Weighted average fair value per option | $ | $ | ||||||
The following table presents the changes in the CAD Options liability for the six months ended June 30, 2026:
| Fair value of CAD Option liability at December 31, 2025 | $ | |||
| Stock-based compensation expense for the period January 1, 2026 to April 30, 2026 | ( | ) | ||
| Reclassification to equity following April 30, 2026 modification | ( | ) | ||
| Fair value of CAD Option liability at June 30, 2026 | $ |
ACI Canada Legacy Performance Options
The following table summarizes ACI Canada legacy performance option activity:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value(1) | |||||||||||||
| Balance, December 31, 2025 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ) | |||||||||||||||
| Cancelled | ) | |||||||||||||||
| Balance, June 30, 2026 | $ | $ | ||||||||||||||
| Options exercisable, June 30, 2026 | $ | $ | ||||||||||||||
| (1) | The aggregate intrinsic values were calculated as the difference between the exercise price of the options and the closing price of the Company’s common share. The calculation excludes options with an exercise price higher than the closing price of the Company’s shares on the reporting date. |
NOTE 8 – FOREIGN CURRENCY CONTRACTS
The Company has an obligation to make periodic royalty payments from its sale of products incorporating technology that has been licensed from NLS. Because these payments will be made in EUR the Company is exposed to cash flow variability resulting from changes in USD/EUR exchange rates. Therefore, during September 2025, the Company entered into several foreign currency forward and foreign currency collar contracts that are intended to hedge its exposure to changes in the USD/EUR exchange rates on or about the dates certain of the Company’s forecasted royalty payments will be made.
The foreign currency forward and collar contracts are derivative instruments that must be accounted for at fair value. Each reporting period, the change in the fair value of each contract is recognized as a gain or loss classified as a component of Other income (expense) within the Company’s consolidated statements of operations.
At June 30, 2026 a foreign currency forward contract to purchase EUR
At June 30, 2026 foreign currency collar contracts with a notional amount of EUR
The fair value measurements of the foreign currency collar contracts are classified within Level 2 of the fair value hierarchy. The fair value of the collars is estimated using a foreign currency option valuation model based on Black-Scholes principles. Significant inputs to the model include spot foreign currency exchange rates, interest rates, foreign currency forward points and implied foreign currency volatilities, which are derived principally from observable market data obtained from third-party market-data sources.
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NOTE 9 – NET LOSS PER SHARE
Net loss per common share has been computed on the basis of the weighted-average number of common stock outstanding during the three and six months ended June 30, 2026 and 2025. Diluted loss per share is computed similarly to basic loss per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. We apply the treasury stock method in the calculation of diluted loss per share.
In periods that liability-classified warrants and options are in the money, the Company determines whether such instruments are dilutive by calculating the effect on loss per share after considering both (a) the adjustment to the numerator that would result from reversing the impact of the change in fair value recorded to net loss during the period and (b) the adjustment to the denominator that would result from the incremental shares outstanding, using the treasury stock method, in an assumed exercise of these instruments at the beginning of the year.
The following table reconciles net loss and the weighted average shares outstanding for the basic calculation to the net loss and the weighted average shares outstanding for the diluted calculation for the periods indicated:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Numerator, diluted: | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Adjustment for gain in fair value of CAD option liabilities | ( | ) | ||||||||||||||
| Adjusted numerator, diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator, diluted: | ||||||||||||||||
| Weighted average common stock outstanding | ||||||||||||||||
| Dilutive effect of CAD options | ||||||||||||||||
| Weighted average dilutive common stock | ||||||||||||||||
| Net loss per share, diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The following potentially dilutive common shares related to outstanding securities for the three and six months ended June 30, 2026 and 2025 were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Warrants | ||||||||||||||||
| Common Stock options | ||||||||||||||||
| ACI Canada legacy performance options | ||||||||||||||||
| Total anti-dilutive features | ||||||||||||||||
NOTE 10 – SEGMENT INFORMATION
Operating segments are defined as components of the Company for which separate discrete information is available for evaluation by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance.
The CEO manages and allocates resources to the operations of the Company on an entity-wide basis. The Company’s measure of segment performance is operating loss. Managing and allocating resources on an entity-wide basis enables the CEO to assess the overall level of resources available and how to best deploy these resources across functions that are in line with the Company’s long-term company-wide strategic goals. Consistent with this decision-making process, the CEO uses financial information for purposes of evaluating performance, forecasting future period financial results, allocating resources, and setting incentive targets. Operating expenses are used to monitor budget versus actual results. The CEO does not review assets in evaluating the results of the Company, and therefore, such information is not presented.
17
The following table summarizes the segment’s financial information including the Company’s significant segment expenses for the periods indicated:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Revenue | ||||||||||||||||
| Product, net | $ | $ | $ | $ | ||||||||||||
| Licensing | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Cost of product sales, excluding amortization of intangible assets | ||||||||||||||||
| Cost of licensing revenue | ||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||
| Total cost of revenues | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development: | ||||||||||||||||
| Clinical studies | ||||||||||||||||
| Consulting fees | ||||||||||||||||
| Employee costs | ||||||||||||||||
| Grant expenses | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||
| Other | ||||||||||||||||
| Total research and development | ||||||||||||||||
| Selling, general and administrative expenses: | ||||||||||||||||
| Commercial manufacturing | ||||||||||||||||
| Commercial operations | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Employee costs | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total selling, general and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Revenues from customers are attributed to individual countries based on the location of the Company’s customer, which is generally determined by the customer’s bill-to address.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| United States | $ | $ | $ | $ | ||||||||||||
| China | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
All of the Company’s long-lived, tangible assets are located in the United States.
NOTE 11 – SUBSEQUENT EVENTS
The Company evaluated subsequent events, through the date these unaudited condensed consolidated financial statements were issued, for events that should be recorded or disclosed in the financial statements as of June 30, 2026. The Company concluded that no other events have occurred that would require recognition or disclosure.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and the accompanying notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025, as previously filed with the Commission. This discussion and analysis contains forward-looking statements and forward-looking information that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements and information as a result of many factors. See section heading “Special Note Regarding Forward-Looking Statements.”
Overview
The Company is a commercial stage biopharmaceutical company dedicated to developing treatments for patients suffering from neurodegenerative diseases, such as Alzheimer’s disease (“AD”), for which there are limited or no treatment options. The Company focuses on the commercial manufacturing and commercial sales of ZUNVEYL oral tablet formulation. The Company’s commercial program for ZUNVEYL is primarily focused on its long-term care commercial team that can focus on providing key points of differentiation, exploiting key issues with existing AChEI treatments, and franchising potential additional indications and new products.
The Company launched ZUNVEYL on March 19, 2025, and targets the largest volume nursing homes specializing in Alzheimer’s disease, leveraging an account-based sales team with demonstrated success in LTC, positioning ZUNVEYL with Medicare payors, and developing strategic and clinical partnerships with consultant pharmacists and long-term care pharmacies. Alpha Cognition has set the Wholesale Acquisition Cost (WAC) for its therapeutic product at $869.36 per month. This pricing reflects the company’s commitment to balancing patient access with the value of innovative healthcare solutions. By establishing a competitive WAC price, Alpha Cognition aims to enhance affordability and ensure patients can benefit from our advanced treatment options. Patients’ out-of-pocket cost for treatment with ZUNVEYL will depend on their length of treatment and their insurance. The Company has three additional pre-clinical development programs: (1) ZUNVEYL in combination with memantine for the treatment of moderate-to-severe Alzheimer’s disease,(2) ALPHA-1062 sublingual oral tablet (“ALPHA-1062IN”) formulation for treatment of mild-moderate Alzheimer’s disease and for the treatment of cognitive impairment with mild traumatic brain injury (mTBI; otherwise known as concussion) and (3) ALPHA-0602, ALPHA-0702 & ALPHA-0802, also referred to as ‘Progranulin’ and ‘Progranulin GEM’s’, for the treatment of neurodegenerative diseases including amyotrophic lateral sclerosis, otherwise known as ALS or Lou Gehrig’s disease and spinal muscular atrophy (SMA).
ZUNVEYL, is a patented new innovative product being positioned as a next generation acetylcholinesterase inhibitor for the treatment of Alzheimer’s disease, with expected minimal gastrointestinal side effects. ZUNVEYL’s active metabolite is differentiated from donepezil and rivastigmine in that it binds neuronal nicotinic receptors, most notably the alpha-7 subtype, which is known to have a positive effect on cognition. ZUNVEYL is in pre-clinical development in combination with memantine to treat moderate to severe Alzheimer’s disease, in pre-clinical development with sublingual formulation for patients suffering from dysphagia, and is in pre-clinical development for cognitive impairment with mTBI.
The Company is the parent company of Alpha Cognition Canada Inc. (“Alpha Canada” or “ACI Canada”) which is the parent company of Alpha Cognition USA Inc. (“ACI USA”). As of May 1, 2023, the Company’s Common Stock commenced trading on the CSE under the symbol “ACOG”, previously the Company’s stock were traded on the TSX-V until April 28, 2023, when the Company had them delisted. As of November 12, 2024, the Company’s Common Stock commenced trading on The Nasdaq Capital Market under the symbol “ACOG”. The Company’s stock was voluntarily delisted from the CSE on December 17, 2024.
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Operations
As of June 30, 2026, the Company had an accumulated deficit of $112,374,533 which has been primarily financed by equity. The Company had $41,384,287 in cash and cash equivalents and $6,412,718 in current liabilities (of which $44,464 is payable from the Company’s available restricted cash balance) as of June 30, 2026. The Company’s continuing operations, as intended, are highly dependent upon its ability to obtain additional funding and eventually generate positive cash flows. Management is of the opinion that it does have sufficient working capital to fully meet the Company’s liabilities and commitments as outlined and planned in the following discussion. Management is of the opinion it will need to raise additional capital to cover upcoming planned Research and Development (“R&D”), continued commercialization of ZUNVEYL and operating costs. Possible sources of such capital may come from our “at the market” facility and future private placements, and public offerings of the Company’s Common Stock and funds received from the exercise of warrants and stock options. Additionally, the Company will also consider funding that may arise through partnership activities, including royalties, and debt. There is a risk that additional financing will not be available on a timely basis, on terms acceptable, or at all to the Company.
The Company is also contemplating raising capital by pursuing both dilutive and non-dilutive strategic sources of capital to fully execute its commercialization and operating plans for ZUNVEYL from the FDA. Any additional capital is expected to further support our planned costs for commercial activities.
Components of our Results of Operations
Revenue
The Company generates revenue from product sales and licensing arrangements.
Product Sales, Net
Product revenue consists primarily of sales of the Company’s commercial product to wholesalers and pharmacies. Revenue is recognized at a point in time when control of the product transfers to the customer.
Product revenue is recorded net of variable consideration, including expected prompt pay discounts, chargebacks, product returns, recalls, rebates, and consideration payable to customers. Consideration payable to customers includes fees paid to distributors, which are generally calculated as a percentage of product sales and are recognized as a reduction of revenue when the related services are not distinct from the Company’s promise to transfer the product. These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on gross sales for a reporting period. The amount of variable consideration can vary from period to period due to fluctuations in these deductions.
Licensing Revenue
Licensing revenue consists of revenue from our License, Collaboration and Distribution Agreement with CMS International Development and Management Limited, or CMSI (the “CMSI License Agreement”), including upfront payments, potential milestone and royalty payments, as well as revenue from the sale of active pharmaceutical ingredient (“API”), finished goods, and reimbursable costs.
Our revenue to date has been generated primarily from the upfront payment received from CMSI under the CMSI License Agreement. In addition to the upfront payment, we may also be entitled to development, regulatory, and sales milestone payments, as well as royalties on net sales, upon achieving predefined objectives. We recognize license revenue when the related performance obligations are satisfied. If achievement of a milestone is considered probable and it is probable that a significant revenue reversal will not occur, the associated milestone amount is included in the transaction price.
20
License revenue also includes revenue from the sale of API and finished goods to CMSI, which are generally priced at cost plus a margin, as well as certain reimbursable pass-through costs. These amounts are recognized on a gross basis and are generally recognized upon shipment or delivery, depending on the applicable shipping terms.
We expect that license revenue under the CMSI License Agreement, and from any potential future licensing arrangements, will fluctuate based on the timing and amount of upfront, milestone, and royalty payments, as well as the level of API sales and reimbursable activities.
Cost of Product Sales
Cost of product sales consists primarily of costs related to the manufacturing of ZUNVEYL, logistics costs, inventory impairment expense, royalty payments under license or purchase agreements, and amortization of the Alpha-1062 intellectual property intangible asset.
Cost of Licensing Revenue
Cost of licensing revenue consists primarily of costs incurred to support the Company’s licensing arrangements, including the cost of API and finished goods sold to CMSI, as well as other costs associated with fulfilling obligations under the CMSI License Agreement, including reimbursable pass-through costs.
Research and Development
Research and development expenses represent costs incurred to conduct research, such as the discovery and development of our product candidates. We recognize all research and development costs as they are incurred unless there is an alternative future use in other research and development projects or otherwise.
Research and development expenses consists primarily of the following:
| ● | costs related to production of clinical supplies and non-clinical materials, including fees paid to contract manufacturers. |
| ● | employee-related expenses, which include salaries, benefits, and stock-based compensation. |
| ● | other expenses including travel and consulting services. |
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of personnel costs, other outside professional services including legal, human resources, audit and accounting services, consulting and pre-commercialization expenses, including selling and marketing costs as well as attendance to various conferences. Personnel costs consist of salaries, benefits, and stock-based compensation. We expect to continue to incur expenses to support our continued operations as a public company, including expenses related to existing and future compliance with rules and regulations of the stock exchanges on which our securities are now traded, insurance expenses, investor relations, audit fees, professional services and general overhead and administrative costs.
21
Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
| For the Three Months Ended June 30, | Dollar | Percentage | ||||||||||||||
| 2026 | 2025 | Change | Change | |||||||||||||
| Revenue | ||||||||||||||||
| Product sales, net | $ | 6,041,506 | $ | 1,576,411 | $ | 4,465,095 | 283 | % | ||||||||
| Licensing revenue | 51,468 | 81,276 | (29,808 | ) | (37 | ) | ||||||||||
| Total revenue | 6,092,974 | 1,657,687 | 4,435,287 | 268 | ||||||||||||
| Cost of Revenues | ||||||||||||||||
| Cost of product sales, excluding amortization of intangible assets | 277,466 | 105,354 | 172,112 | 163 | ||||||||||||
| Cost of licensing revenue | 39,362 | 93,118 | (53,756 | ) | (58 | ) | ||||||||||
| Amortization of intangible assets | 74,229 | 5,386 | 68,843 | 1,278 | ||||||||||||
| Total cost of revenues | 391,057 | 203,858 | 187,199 | 92 | ||||||||||||
| Gross Profit | 5,701,917 | 1,453,829 | 4,248,088 | 292 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Research and development | 2,008,870 | 406,140 | 1,602,730 | 395 | ||||||||||||
| Selling, general and administrative expenses | 11,449,054 | 9,494,966 | 1,954,088 | 21 | ||||||||||||
| Total operating expenses | 13,457,924 | 9,901,106 | 3,556,818 | 36 | ||||||||||||
| Loss from operations | (7,756,007 | ) | (8,447,277 | ) | 691,270 | (8 | ) | |||||||||
| Other income (expense) | ||||||||||||||||
| Interest income, net | 380,735 | 425,670 | (44,935 | ) | (11 | ) | ||||||||||
| Loss on change in fair value of warrant liabilities | (1,414,267 | ) | (5,172,091 | ) | 3,757,824 | (73 | ) | |||||||||
| Loss on foreign currency contracts | (42,251 | ) | - | (42,251 | ) | 100 | ||||||||||
| Other income (expenses) | 42,050 | (5,530 | ) | 47,580 | (860 | ) | ||||||||||
| Total other income (expense) | (1,033,733 | ) | (4,751,951 | ) | 3,718,218 | (78 | ) | |||||||||
| Net loss and comprehensive loss | $ | (8,789,740 | ) | $ | (13,199,228 | ) | $ | 4,409,488 | (33 | ) | ||||||
Comparison of the Six Months Ended June 30, 2026 and 2025
| For the Six Months Ended June 30, | Dollar | Percentage | ||||||||||||||
| 2026 | 2025 | Change | Change | |||||||||||||
| Revenue | ||||||||||||||||
| Product sales, net | $ | 9,545,327 | $ | 1,923,340 | $ | 7,621,987 | 396 | % | ||||||||
| Licensing revenue | 81,445 | 2,663,001 | (2,581,556 | ) | (97 | ) | ||||||||||
| Total revenue | 9,626,772 | 4,586,341 | 5,040,431 | 110 | ||||||||||||
| Cost of Revenues | ||||||||||||||||
| Cost of product sales, excluding amortization of intangible asset | 526,319 | 131,895 | 394,424 | 299 | ||||||||||||
| Cost of licensing revenue | 62,285 | 903,118 | (840,833 | ) | (93 | ) | ||||||||||
| Amortization of intangible assets | 79,616 | 10,773 | 68,843 | 639 | ||||||||||||
| Total cost of revenues | 668,220 | 1,045,786 | (377,566 | ) | (36 | ) | ||||||||||
| Gross Profit | 8,958,552 | 3,540,555 | 5,417,997 | 153 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Research and development | 3,105,175 | 806,556 | 2,298,619 | 285 | ||||||||||||
| Selling, general and administrative expenses | 21,705,611 | 14,586,238 | 7,119,373 | 49 | ||||||||||||
| Total operating expenses | 24,810,786 | 15,392,794 | 9,417,992 | 61 | ||||||||||||
| Loss from operations | (15,852,234 | ) | (11,852,239 | ) | (3,999,995 | ) | 34 | |||||||||
| Other income (expense) | ||||||||||||||||
| Interest income, net | 886,791 | 887,539 | (748 | ) | 0 | |||||||||||
| Grant income | - | 71,095 | (71,095 | ) | (100 | ) | ||||||||||
| Loss on change in fair value of warrant liabilities | (290,195 | ) | (4,024,209 | ) | 3,734,014 | (93 | ) | |||||||||
| Loss on foreign currency contracts | (42,251 | ) | - | (42,251 | ) | 100 | ||||||||||
| Other income (expenses) | 30,131 | (6,487 | ) | 36,618 | (564 | |||||||||||
| Total other income (expense) | 584,476 | (3,072,062 | ) | 3,656,538 | (119 | ) | ||||||||||
| Net loss and comprehensive loss | $ | (15,267,758 | ) | $ | (14,924,301 | ) | $ | (343,457 | ) | 2 | ||||||
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Revenue
Comparison of Revenue for the Three Months Ended June 30, 2026 and 2025
Revenue increased by $4,435,287, or 283%, from $1,657,687 for the three months ended June 30, 2025 to $6,092,974 for the three months ended June 30, 2026.
The increase was primarily attributable to higher prescription volume resulting from increased utilization of ZUNVEYL. During the three months ended June 30, 2026, the increase in volume was 251% when compared to the three months ended June 30, 2025.
Product revenue was also positively impacted from the increase in WAC from its $749.00 launch price per bottle to $869.36 per bottle. The increase in WAC per bottle resulted in an increase of 14% in gross product sales.
These increases were partially offset by higher GTN deductions, including government and commercial rebates, chargebacks, and distribution-related fees. GTN deductions represented 24.4% of gross product sales during the three months ended June 30, 2026 compared with 21.1% during the comparable prior period.
Product revenue is presented net of estimated GTN deductions. GTN deductions increased from $418,902 during the three months ended June 30, 2025 to $1,931,799 during the current period.
The change in GTN deductions was primarily attributable to:
| ● | increased distribution service fees resulting from higher commercial sales activity |
| ● | increased Medicare Part D Manufacturer Discount Program obligations resulting from increased utilization among Medicare beneficiaries; |
| ● | increased government rebates resulting from higher prescription volumes and expanded payer utilization; and |
| ● | increased chargebacks associated with growth in contracted accounts and government program participation; |
Changes in the ratio of GTN deductions to gross sales were primarily attributable to changes in payer mix, channel mix and utilization of patient support programs.
The Company expects that revenue from commercial sales of ZUNVEYL will continue to grow over the year as the Company expands its sales force and implements its sales strategy.
Licensing revenue recognized during the three months ended June 30, 2025 and 2026 related to services performed by the Company to provide certain regulatory, technical, and clinical assistance to CMSI.
Comparison of Revenue for the Six Months Ended June 30, 2026 and 2025
Revenue increased by $5,040,431, or 110%, from $4,586,341 for the six months ended June 30, 2025 to $9,626,772 for the six months ended June 30, 2026.
The increase was primarily attributable to higher prescription volume resulting from increased utilization of ZUNVEYL. During the six months ended June 30, 2026, the increase in volume was 367% when compared to the six months ended June 30, 2025.
Product revenue was also positively impacted from the increase in WAC from its $749.00 launch price per bottle to $869.36 per bottle. The increase in WAC per bottle resulted in an increase of 12% in gross product sales.
These increases were partially offset by higher GTN deductions, including government and commercial rebates, chargebacks, and distribution-related fees. GTN deductions represented 24.6% of gross product sales during the six months ended June 30, 2026 compared with 20.5% during the comparable prior period.
Product revenue is presented net of estimated GTN deductions. GTN deductions increased from $494,432 during the six months ended June 30, 2025 to $3,121,666 during the current period.
The change in GTN deductions was primarily attributable to:
| ● | increased distribution service fees resulting from higher commercial sales activity |
| ● | increased Medicare Part D Manufacturer Discount Program obligations resulting from increased utilization among Medicare beneficiaries; |
| ● | increased government rebates resulting from higher prescription volumes and expanded payer utilization; and |
| ● | increased chargebacks associated with growth in contracted accounts and government program participation; |
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Changes in the ratio of GTN deductions to gross sales were primarily attributable to changes in payer mix, channel mix and utilization of patient support programs.”
The Company expects that revenue from commercial sales of ZUNVEYL will continue to grow over the year as the Company expands its sales force and implements its sales strategy.
Licensing revenue was $2,663,001 during the six months ended June 30, 2025 compared to $81,445 during the six months ended June 30, 2026. The decrease of $2,581,556 was primarily due to the recognition of $2,396,600 during the six months ended June 30, 2025 related to the one-time transfer of intellectual property to CMSI.
Cost of Product Sales and Cost of Licensing Revenue
Comparison of Cost of Sales and Cost of Licensing Revenue for the Three Months Ended June 30, 2026 and 2025
Cost of product sales increased by $172,112, or 163%, from $105,354 for the three months ended June 30, 2025 to $277,466 for the three months ended June 30, 2026. The increase was primarily attributable to higher commercial sales volume of ZUNVEYL. The Company expects that cost of product sales will continue to increase over the year in relation to expected increased sales of ZUNVEYL as the Company expands its sales of ZUNVEYL
Cost of licensing revenue decreased by $53,756, or 58%, from $93,118 for the three months ended June 30, 2025 to $39,362 for the three months ended June 30, 2026. The decrease is from a reduction of royalty payments and pass-through costs, such as consulting fees and active pharmaceutical ingredients, that were allocated to activities supporting the CMSI agreement. The Company expects that cost of licensing revenue will continue to decrease over the year until the requirements of the CMSI agreement have been fulfilled.
Comparison of Cost of Sales and Cost of Licensing Revenue for the Six Months Ended June 30, 2026 and 2025
Cost of product sales increased by $394,424, or 299%, from $131,895 for the six months ended June 30, 2025 to $526,319 for the six months ended June 30, 2026. The increase was primarily attributable to higher commercial sales volume of ZUNVEYL. The Company expects that cost of product sales will continue to increase over the year in relation to expected increased sales of ZUNVEYL as the Company expands its sales of ZUNVEYL
Cost of licensing revenue decreased by $840,833, or 93%, from $903,118 for the six months ended June 30, 2025 to $62,285 for the six months ended June 30, 2026. The decrease is from a reduction of royalty payments and pass-through costs, such as consulting fees and active pharmaceutical ingredients, that were allocated to activities supporting the CMSI agreement. The Company expects that cost of licensing revenue will continue to decrease over the year until the requirements of the CMSI agreement have been fulfilled.
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Research and Development Expenses
Comparison of Research and Development for the Three Months Ended June 30, 2026 and 2025
Research and development expenses increased by $1,602,730, or 395%, from $406,140 for the three months ended June 30, 2025, to $2,008,870 for the three months ended June 30, 2026. The net change is due to increase in time allocated in employee and management costs for the development of the dissolvable tablet and clinical studies.
Comparison of Research and Development for the Six Months Ended June 30, 2026 and 2025
Research and development expenses increased by $2,298,619, or 285%, from $806,556 for the six months ended June 30, 2025, to $3,105,175 for the six months ended June 30, 2026. The net change is due to increase in time allocated in employee and management costs for the development of the dissolvable tablet and clinical studies.
Selling, General and Administrative Expenses
Comparison of Selling, General and Administrative Expenses for the Three Months Ended June 30, 2026 and 2025
Selling, general and administrative expenses increased by $1,954,088 or 21%, from $9,494,966 for the three months ended June 30, 2025, to $11,449,054, for the three months ended June 30, 2026. In support of the Company’s expansion in commercial operations and launch of ZUNVEYL, there has been an increase of $2.5 million in employee costs due to the increase in sales representatives and administrative support; an increase of $1.4 million in marketing and commercial operations due to increased sales activity and implementation of the speaker bureau program; an increase in regulatory costs of approximately $337,000 for the FDA user fees; an increase of $345,000 in other general and administrative expenses due to increased sales activity; and a decrease of $2.7 million in stock-based compensation due to change of liability classified options to equity classified and graded vesting nature of equity awards issued during the 2025 fiscal year.
Comparison of Selling, General and Administrative Expenses for the Six Months Ended June 30, 2026 and 2025
Selling, general and administrative expenses increased by $7,119,373 or 49%, from $14,586,238 for the six months ended June 30, 2025, to $21,705,611, for the six months ended June 30, 2026. In support of the Company’s expansion in commercial operations and launch of ZUNVEYL, there has been an increase of $5.8 million in employee costs due to the increase in sales representatives and administrative support; an increase of $2.3 million in marketing, sales and commercial operations due to increased sales activity and implementation of the speaker bureau program; an increase in regulatory costs of approximately $690,000 for the FDA user fees; an increase of $920,000 in other general and administrative expenses due to increased sales activity; and a decrease of $3.0 million in stock-based compensation due to change of liability classified options to equity classified and graded vesting nature of equity awards issued during the 2025 fiscal year.
Interest Income
Interest income consists of interest earned on the Company’s cash and cash equivalents.
Interest income had a net change of $44,935 or 11% from interest income of $425,670 for the three months ended June 30, 2025, to interest income, net of $380,735 for the three ended June 30, 2026. Interest income had a net change of $748 or 1% from interest income of $886,791 for the six months ended June 30, 2026, to interest income, net of $887,539 for the six months ended June 30, 2025.
Change in Fair Value of Warrant Liabilities
During the three months ended June 30, 2026, the change in the fair value of the Company’s warrant liabilities resulted in a loss of $1,414,267 compared to a loss of $5,172,091 during the three months ended June 30, 2025. For both periods, the change in fair value primarily resulted from changes in the Company’s stock price during the respective quarter.
During the six months ended June 30, 2026, the change in the fair value of the Company’s warrant liabilities resulted in a loss of $290,195 compared to a loss of $4,024,209 during the six months ended June 30, 2025. For both periods, the change in fair value primarily resulted from changes in the Company’s stock price during the respective period.
The Company uses various valuation models to estimate the fair value of its warrant liabilities. These models require the input of subjective assumptions including the expected term of the warrants and the expected volatility of the Company’s stock price during this term. Changes in the input assumptions can materially affect the fair value estimate and the Company’s net loss and liabilities.
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Liquidity and Capital Resources
Sources of Liquidity
The Company does not have sufficient operating revenue to finance its existing obligations and has relied on external financing, such as debt and equity raises, since incorporation, to generate capital to maintain its capacity to meet working capital requirements. The Company has successfully raised funds that exceed the Company’s working capital requirements for the next 12 months from the date of issuance of the consolidated financial statements contained in this report. The Company expects to continue to rely on debt and the issuance of stock, and possibly other non-dilutive financing options to finance its ongoing operations and plans for commercialization of ZUNVEYL. However, there is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company.
Future Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we continue the commercialization of ZUNVEYL, following the start of sales in the first quarter of 2025, and potentially seek to discover and develop additional product candidates, conduct our ongoing and planned clinical trials and preclinical studies, continue our R&D activities, utilize third parties to manufacture ZUNVEYL, hire additional personnel, expand and protect our intellectual property, and incur additional costs associated with being a public company.
Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses, and prepaid expenses. The timing and amount of our funding requirements will depend on many factors, including:
| ● | the costs associated with the production, distribution and sales of ZUNVEYL, including any future expansion of production capabilities, expansion of distribution networks, expansion of our sales force and increased expenses on advertising or related sale costs; |
| ● | the costs associated with our licensing arrangements for ZUNVEYL, including increased costs from such arrangements and increasing the number and types of licensing arrangements; |
| ● | the initiation, type, number, scope, progress, expansions, results, costs and timing of clinical trials and preclinical studies of ZUNVEYL and any future product candidates we may choose to pursue, including the costs of modification to clinical development plans based on feedback that we may receive from regulatory authorities and any third-party products used as combination agents in our clinical trials; |
| ● | the costs, timing and outcome of regulatory meetings and reviews of ZUNVEYL or any future product candidates, including requirements of regulatory authorities in any additional jurisdictions in which we may seek approval for ZUNVEYL and any future product candidates; |
| ● | the costs of obtaining, maintaining, enforcing and protecting our patents and other intellectual property and proprietary rights; |
| ● | our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal control over financial reporting; |
| ● | the costs associated with hiring additional personnel and consultants as our business grows, including additional executive officers and clinical development, regulatory, CMC quality and commercial personnel; |
| ● | the costs and timing of establishing or securing sales and marketing capabilities of any future product candidate approval; |
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| ● | our ability to achieve sufficient market acceptance, coverage, and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products; |
| ● | our ability and strategic decision to develop future product candidates other than ZUNVEYL, and the timing of such development, if any; |
| ● | patients’ willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payors; |
| ● | the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements; and |
| ● | costs associated with any products or technologies that we may in-license or acquire. |
Based upon our current operating plan, we estimate that our existing cash and cash equivalents as of the date of this filing, will be sufficient to fund our projected base ongoing operating expenses, commercialization costs of ZUNVEYL in AD, ongoing CMC costs, pre-clinical formulation and study R&D work, and ongoing operating costs and capital expenditures through at least the next 12 months. We may choose to raise additional capital to continue to further advance our commercialization plans and ongoing operating costs. However, we may have based our estimates on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. In addition, we could utilize our available capital resources sooner than we expected. The Company may also contemplate raising additional capital by pursuing both dilutive and non-dilutive strategic sources of capital to fully execute its commercial, R&D, and operating plans for ZUNVEYL. Any additional capital would further support our R&D and commercial activities related to U.S. sales of ZUNVEYL in AD.
In August 2025, the Company entered into an ATM agreement with H.C. Wainwright & Co., LLC as the sales agent. The Company currently has not utilized the ATM facility.
Until such time we can generate substantial product revenue, we expect to finance our operations through other capital sources, including current or potential future collaborations, licenses, royalties and other similar arrangements. We do not know what the terms of these future financings will be and whether they will be acceptable to the Company or not and, therefore, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent we raise additional capital, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions, engaging in acquisitions, merger or collaboration transactions, selling or licensing our assets, making capital expenditures, redeeming our stock, making certain investments or declaring dividends. If we raise additional funds through collaborations or license agreements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, or even cease operations.
Financing Activities
Recent capital raising activities
On October 2, 2025, the Company completed a public offering of Common Stock by issuing 4,651,516 shares of Common Stock at a public offering price of $6.25 per share and 948,484 pre-funded warrants exercisable into Common Stock with an exercise price of $0.001 per share for total gross proceeds of approximately $35 million. In connection with this offering, the Company incurred underwriting fees of approximately $2.11 million.
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On October 17, 2025, the underwriter of the Company’s public offering exercised its over-allotment option in full to purchase an additional 840,000 of Common Stock at the public offering price of $6.25 per share for additional gross proceeds of approximately $5.25 million and underwriting fees of $341,250.
The following table includes our cash flow data for the periods indicated:
Cash Flows
The following table provides information regarding our cash flows for the six months ended June 30, 2026, and 2025:
| For the Six Months Ended June 30, | Dollar | Percentage | ||||||||||||||
| 2026 | 2025 | Change | Change | |||||||||||||
| Consolidated Statement of Cash Flows Data | ||||||||||||||||
| Cash used in operating activities | $ | (18,656,708 | ) | $ | (8,183,776 | ) | $ | (10,472,932 | ) | 128 | % | |||||
| Cash used in investing activities | $ | (6,006,594 | ) | $ | (71,585 | ) | $ | (5,935,009 | ) | 8,291 | % | |||||
| Cash provided by/(used in) financing activities | $ | 800 | $ | (845,111 | ) | $ | 845,911 | (100 | )% | |||||||
Cash used in operating activities
Cash used in operating activities increased by $10,472,932 to $18,656,708 for the six months ended June 30, 2026, from $8,183,776 for the comparative period. The increase is related to higher employee costs of approximately $6.1 million, commercial, marketing and other general and administrative costs increased by approximately $2.3 million and $2.0 million increase in research and development for the clinical studies.
Cash used in investing activities
Cash used in investing activities increased by $5,935,009 to $6,006,594 for the six months ended June 30, 2026 from $71,585 compared to the comparative period. During the six months ended June 30, 2025 and 2026, investing activities consisted of acquiring computer equipment and software. During the six months ended June 30, 2026, the Company paid $5,906,702 for the acquisition of an intangible asset in connection with the Galantos Pharma royalty settlement.
Cash provided by/(used in) financing activities
Cash used in financing activities for the six months ended June 30, 2026, increased by $845,911 compared to the comparative period. During the six months ended June 30, 2025, financing activities primarily consisted of principal repayment of the promissory note of $911,463, proceeds of $25,823 from the exercise of warrants, and receiving $174,675 in government grant proceeds offset by $134,146 of related grant expenses. During the six months ended June 30, 2026, financing activities was proceeds of $800 from the exercise of performance legacy options.
Contractual Obligations and Other Commitments
In the normal course of business, we enter into agreements with contract service providers to assist in the performance of R&D and clinical and commercial manufacturing activities. We currently have three license agreements, the CMSI License Agreement, ALPHA-1062 technology and ALPHA-602 technology, which are outlined below. We expect to enter into additional clinical development, contract research, clinical and commercial manufacturing, supplier, and collaborative research agreements in the future, which may require upfront payments and long-term commitments of capital resources.
See “Note 16 – Commitments and Contingencies” from the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025 for a discussion of our contractual obligations and long-term commitments.
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Contingencies
The Company did not have any contingencies as of June 30, 2026, or the date of this report.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the consolidated financial statements and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We consider an accounting estimate to be critical if (i) it requires significant judgment and the use of assumptions about matters that are inherently uncertain, and (ii) changes in those assumptions could have a material impact on our consolidated financial statements.
The following are the accounting estimates that we believe are most critical to understanding our financial condition and results of operations.
Revenue Recognition, Including Variable Consideration
We generate revenue from product sales and licensing arrangements. Revenue is recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration we expect to receive. For product sales, revenue is recorded net of variable consideration, including estimated rebates, chargebacks, discounts, returns and other allowances.
Significant judgment is required in (i) estimating variable consideration, particularly given the early stage of commercialization of ZUNVEYL, (ii) determining standalone selling prices in licensing arrangements, and (iii) assessing performance obligations and allocation of transaction price. These estimates require the use of assumptions related to payer mix, contractual terms, product returns, and market adoption. Given our limited commercialization history, these estimates may be subject to increased variability, and changes in assumptions could materially impact revenue in future periods.
Product revenue is recognized net of estimated variable consideration, which consists primarily of chargebacks, payer rebates, distribution service fees, prompt payment discounts and estimated product returns.
These reserves require significant judgment as they are based on contractual arrangements, historical experience, current channel inventory levels, expected payer mix, anticipated utilization trends and other market conditions. Because commercialization of ZUNVEYL remains in its early stages relative to more mature pharmaceutical products, certain estimates may be subject to greater variability as additional historical experience becomes available.
Chargebacks arise from contractual arrangements with customers that purchase products through wholesalers at negotiated pricing below wholesale acquisition cost. Chargeback reserves are estimated using contractual terms, inventory data and expected utilization.
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Payer rebates include amounts payable under Medicaid, Medicare Part D and other government-sponsored healthcare programs. The Company estimates these liabilities based on applicable statutes, contractual provisions, payer mix and expected claims experience.
Distribution service fees include fees paid to specialty distributors and other channel partners for inventory management, distribution and related services.
Prompt payment discounts are estimated based on customer payment terms and historical payment experience.
Product return reserves are estimated using available information regarding product shelf life, inventory levels in the distribution channel, historical experience and anticipated demand.
Actual amounts may differ from estimates and are adjusted in the period in which such differences become known.
The Company continually evaluates the adequacy of its estimates as additional information becomes available and records adjustments in the period such information becomes known.
Fair Value of Warrant, Option, and Derivative Liabilities
Certain freestanding warrants and stock options are accounted for as liabilities and are remeasured at fair value at each reporting period, with changes recognized in the consolidated statement of operations and comprehensive loss. In addition, previously outstanding convertible instruments included embedded derivatives that required fair value measurement.
Significant judgments required in estimating the fair value of these financial instruments and embedded derivatives include (i) the selected valuation technique, (ii) volatility assumptions, and (iii) expected term. Changes in these assumptions can result in significant non-cash gains or losses in the consolidated statement of operations and comprehensive loss.
Stock-Based Compensation
We measure stock-based compensation based on the fair value of equity awards granted to employees and non-employees. The determination of fair value requires significant estimates, including (i) expected volatility of our common stock, (ii) expected term of awards, (iii) for certain awards, classification between equity and liabilities. Changes in these assumptions could materially impact the amount and timing of compensation expense recognized.
Emerging Growth Company Status and Smaller Reporting Company Status
We are an emerging growth company, as defined in the JOBS Act. The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards. We have elected to avail ourselves of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we can adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either (i) irrevocably elect to opt out of such extended transition period or (ii) no longer qualify as an emerging growth company. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies. We will continue to remain an emerging growth company until the earliest of the following: (1) December 31, 2029; (2) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.235 billion; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
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We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting Common Shares held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act, as of June 30, 2026, the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were not effective as of June 30, 2026 due to the material weakness described below. Notwithstanding the material weakness, and based on additional analyses and other procedures performed by management, our CEO and CFO have concluded that the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with GAAP for each of the periods presented.
Material Weakness in Internal Control over Financial Reporting
As previously disclosed in our Annual Report on Form 10-K, management identified a material weakness in internal control over financial reporting as of December 31, 2025. The material weakness resulted from a lack of adequate procedures to appropriately account for accounting transactions, including warrants and stock option liabilities, certain deferred tax disclosures, and a lack of segregation of duties due to the size of the finance and accounting team.
Changes in Internal Control over Financial Reporting
During the six months ended June 30, 2026, management implemented several measures designed to remediate the previously identified material weakness, including additional management review controls over account reconciliations, variance analyses, and journal entry approvals as part of the month-end close process, as well as engaging external technical accounting specialists to assist management in evaluating and reviewing complex accounting transactions.
Although these new and enhanced controls have been designed and implemented, they have not operated for a sufficient period of time to enable management to evaluate their operating effectiveness and conclude that the previously identified material weakness has been remediated. Management will continue to monitor the effectiveness of these controls, perform additional testing as they operate over time, and implement any further changes that management determines are necessary to fully remediate the material weakness.
Other than the implementation of the remediation activities described above, there were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Management continues to implement remediation activities designed to address the previously identified material weakness.
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PART II
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we are involved in various legal proceedings arising from the normal course of business activities. We are not currently a party to any material legal proceedings. However, from time to time, we may become involved in other litigation or legal proceedings relating to claims arising from the ordinary course of business.
ITEM 1A. RISK FACTORS.
There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 31, 2026.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Unregistered Sales of Equity Securities
None.
Repurchase of Equity Securities
During the six months ended June 30, 2026, the Company did not repurchase any of its equity securities.
Use of Proceeds
On November 13, 2024, the Company completed a public offering of common stock by issuing 8,695,653 common shares at a public offering price of $5.75 per share for gross proceeds of approximately $50 million and net proceeds, after deducting discounts and commissions and estimated offering expenses payable by us, of approximately $46.15 million. The initial public offering was completed pursuant to the Company’s registration statement on Form S-1 (333-280196) which was brought effective by the SEC on November 8, 2024, registering 8,695,653 common shares and pre-funded warrants to purchase up to 8,695,653 common shares to gross aggregated proceeds of $50 million. No pre-funded warrants were sold in the offering. Titan Partners Group acted as the managing underwriter for the offering. In connection with the offering, the Company paid Titan Partners Group an underwriting discount of approximately $3 million and a non-accountable expense allowance of $500,000. We paid an aggregate total of approximately $350,000 in other expenses, including expense reimbursement to Titan Partners Group, legal and accounting fees, transfer agent fees and printing costs.
Consistent with the Company’s described use of proceeds in its registration statement, to date the Company has spent approximately $29.32 million of its net proceeds to begin our efforts toward our commercialization and launch of ZUNVEYL formerly known as ALPHA-1062 in Alzheimer’s disease; approximately $0.29 million for R&D on pipeline product candidates, approximately $4.13 million for continued commercial CMC activities (chemistry, manufacturing, and controls); approximately $0.91 million on repayment of outstanding loan, and approximately $11.50 million for working capital and general corporate purposes. Amounts represent cumulative uses of proceeds from multiple financing transactions As of June 30, 2026, the Company has utilized all proceeds.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURE.
Not applicable.
ITEM 5. OTHER INFORMATION.
(a) None.
(b) None.
(c) During the quarter ended June 30, 2026, none of our directors or officers
ITEM 6. EXHIBITS.
The following exhibits are filed as part of this report:
| * | Filed herewith |
| (1) | Submitted electronically herewith. Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Income (Loss) for the six months ended June 30, 2026 and 2025, (ii) Condensed Consolidated Balance Sheets at June 30, 2026 and December 31, 2025, (iii) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025, and (iv) Notes to Condensed Consolidated Financial Statements. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ALPHA COGNITION INC. (Registrant) | ||
| Dated: August 13, 2026 | By: | /s/ Michael McFadden |
| Michael McFadden, | ||
| Chief Executive Officer | ||
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