UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-42403

Alpha Cognition Inc.

(Exact Name of Registrant as Specified in its Charter)

British Columbia		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1452 Hughes Rd. Ste. 200
Grapevine, Texas		76051
(Address of Principal Executive Offices)		(Zip Code)

(858) 344-4375

(Registrant’s Telephone Number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class:		Trading Symbol		Name of each exchange on which registered:
Common Shares, no par value		ACOG		The Nasdaq Stock Market LLC

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. Yes ☒ No ☐

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). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer ☐	Accelerated Filer ☐	Non-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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: 16,160,787 common shares, without par value, outstanding as of August 14, 2025.

ALPHA COGNITION INC.

FORM 10-Q

For the Quarter Ended June 30, 2025

INDEX

	Page
PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	1
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
ITEM 3. – QUANTIATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37
ITEM 4. CONTROLS AND PROCEDURES	37
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	38
ITEM 1A. RISK FACTORS	38
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	38
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	38
ITEM 4. MINE SAFETY DISCLOSURE	38
ITEM 5. OTHER INFORMATION	38
ITEM 6. EXHIBITS	39
SIGNATURES	40

ALPHA COGNITION INC.

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

PART I

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

ALPHA COGNITION INC.

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	June 30,			December 31,
	2025			2024

ASSETS

Current assets
Cash and cash equivalents	$	39,405,210		$	48,546,210
Restricted cash		58,400			17,872
Accounts receivable, net		1,813,696			-
Inventory		875,852			615,133
Prepaid expenses and other current assets		2,495,049			1,071,963
Total current assets		44,648,207			50,251,178
Other assets		-			45,714
Equipment, net		72,539			27,077
Intangible assets, net		402,196			412,969
Total assets	$	45,122,942		$	50,736,938

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
Accounts payable and accrued liabilities	$	2,807,822		$	2,439,289
Current portion of promissory note - related party		-			911,463
Deferred income		231,836			-
Total current liabilities		3,039,658			3,350,752
Deferred income		154,550			-
Warrant liabilities		9,844,567			5,820,358
Other long-term liabilities		187,851			102,783
Total liabilities		13,226,626			9,273,893

Stockholders’ equity
Common shares, no par value, unlimited shares authorized, 16,023,119 and 16,019,787 shares issued and outstanding as of June 30, 2025, and December 31, 2024, respectively		99,154,053			99,128,230
Class B preferred shares, no par value, unlimited shares authorized, 316,655 shares issued and outstanding as of June 30, 2025, and December 31, 2024		62			62
Additional paid-in capital		21,627,035			18,724,092
Accumulated other comprehensive loss		(104,301	)		(104,301	)
Accumulated deficit		(88,780,533	)		(76,285,038	)
Total stockholders’ equity		31,896,316			41,463,045
Total liabilities and stockholders’ equity	$	45,122,942		$	50,736,938

The accompanying notes to the consolidated financial statements are an integral part of these statements.

ALPHA COGNITION INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2025			2024			2025			2024

Revenue
Product, net	$	1,576,411		$	-		$	1,923,340			-
Licensing		81,276			-			2,663,001			-
Total revenue		1,657,687			-			4,586,341			-

Costs and Expenses
Cost of product sales, excluding amortization of intangible asset		440,979			-			467,520			-
Cost of licensing revenue		93,118			-			903,118			-
Amortization of intangible asset		5,386			19,760			10,773			40,354
Research and development		317,120			967,200			724,631			1,883,916
Selling, general and administrative expenses		6,538,085			1,434,251			11,903,732			4,908,459
Total costs and expenses		7,394,688			2,421,211			14,009,774			6,832,729

Loss before other income (expenses)		(5,737,001	)		(2,421,211	)		(9,423,433	)		(6,832,729	)

Other income (expenses)
Foreign exchange (loss) gain		(5,530	)		(6,862	)		(6,487	)		(21,491	)
Interest income		425,026			2,160			895,702			14,230
Grant income		-			138,561			71,095			272,340
Interest expense		644			(15,216	)		(8,163	)		(23,474	)
Impairment of intangible assets		-			-			-			(39,166	)
Gain (loss) of warrant liabilities		(5,172,091	)		187,056			(4,024,209	)		(432,933	)
Provision for loan losses		-			-			-			(55,000	)
Total other income (expenses)		(4,751,951	)		305,699			(3,072,062	)		(285,494	)

Net loss and comprehensive loss		(10,488,952	)		(2,115,512	)		(12,495,495	)		(7,118,223	)

Net loss per share, basic and diluted	$	(0.65	)		(0.35	)		(0.78	)		(1.21	)

Weighted-average shares used to compute net loss per share, basic and diluted		16,020,702			6,009,373			16,020,015			5,877,006

The accompanying notes to the consolidated financial statements are an integral part of these statements.

ALPHA COGNITION INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)

(UNAUDITED)

For the Three and Six Months Ended June 30, 2025 and 2024

For the three 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, March 31, 2025		16,019,787	$	99,128,230		316,655	$	62	$	20,079,465	$	(104,301	)	$	(78,291,581	)	$	40,811,875
Warrants exercised		3,332		25,823		-		-		-		-			-			25,823
Share-based compensation		-		-		-		-		1,547,570		-			-			1,547,570
Net loss		-		-		-		-		-		-			(10,488,952	)		(10,488,952	)
Balance, June 30, 2025		16,023,119	$	99,154,053		316,655	$	62	$	21,627,035	$	(104,301	)	$	(88,780,533	)	$	31,896,316

For the three months ended June 30, 2024

												Accumulated
									Additional			Other
	Common Shares				Preferred Shares				Paid-In			Comprehensive			Accumulated
	Shares		Amount		Shares		Amount		Capital			Loss			Deficit			Total

Balance, March 31, 2024		5,997,016	$	49,108,265		316,655	$	62	$	18,182,009		$	(104,301	)	$	(66,650,884	)	$	535,151
Options exercised		7,200		91,431		-		-		(89,631	)		-			-			1,800
Warrants exercised		16,000		160,000		-		-		-			-			-			160,000
Share-based compensation		-		-		-		-		375,327			-			-			375,327
Net loss		-		-		-		-		-			-			(2,115,512	)		(2,115,512	)
Balance, June 30, 2024		6,020,216	$	49,359,696		316,655	$	62	$	18,467,705		$	(104,301	)	$	(68,766,396	)	$	(1,043,234	)

ALPHA COGNITION INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)

(UNAUDITED)

For the Three and Six Months Ended June 30, 2025 and 2024

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		16,019,787	$	99,128,230		316,655	$	62	$	18,724,092	$	(104,301	)	$	(76,285,038	)	$	41,463,045
Warrants exercised		3,332		25,823		-		-		-		-			-			25,823
Share-based compensation		-		-		-		-		2,902,943		-			-			2,902,943
Net loss		-		-		-		-		-		-			(12,495,495	)		(12,495,495	)
Balance, June 30, 2025		16,023,119	$	99,154,053		316,655	$	62	$	21,627,035	$	(104,301	)	$	(88,780,533	)	$	31,896,316

For the six months ended June 30, 2024

													Accumulated
										Additional			Other
	Common Shares					Preferred Shares				Paid-In			Comprehensive			Accumulated
	Shares		Amount			Shares		Amount		Capital			Loss			Deficit			Total

Balance, December 31, 2023		4,728,355	$	39,760,287			316,655	$	62	$	17,288,430		$	(104,301	)	$	(61,648,173	)	$	(4,703,695	)
Units issued for cash		678,630		3,732,469			-		-		-			-			-			3,732,469
Shares issued for services		413,445		2,273,949																2,273,949
Share issuance costs		168,886		(987,988	)		-		-		582,245			-			-			(405,743	)
Options exercised		14,900		128,182			-		-		(126,382	)		-			-			1,800
Warrants exercised		16,000		160,000			-		-		-			-			-			160,000
Share-based compensation		-		-			-		-		723,412			-			-			723,412
Reallocation of derivative liability on re-pricing of warrants from CAD to USD exercise price		-		4,292,797			-		-		-			-			-			4,292,797
Net loss		-		-			-		-		-			-			(7,118,223	)		(7,118,223	)
Balance, June 30, 2024		6,020,216	$	49,359,696			316,655	$	62	$	18,467,705		$	(104,301	)	$	(68,766,396	)	$	(1,043,234	)

The accompanying notes to the consolidated financial statements are an integral part of these statements.

ALPHA COGNITION INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	For the Six Months Ended June 30,
	2025			2024

Cash flows provided by (used in) operating activities
Net loss	$	(12,495,495	)	$	(7,118,223	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		18,896			40,828
Accrued expenditures for government grant		63,051			(66,423	)
Accrued interest income, related party		-			2,550
Loss (gain) on warrant liabilities		4,024,209			432,933
Change in fair value of bonus rights liability		85,068			(37,360	)
Provision for loan losses		-			55,000
Impairment of intangible assets		-			39,166
Reallocation of equipment to commercial operations		18,000			-
Share-based compensation		2,902,943			723,412
Shares issued for services		-			2,273,949
Changes in non-cash operating working capital items:
Accounts receivable, net		(1,813,696	)		-
Inventories		(260,719	)		-
Prepaid expenses and other current assets		(1,457,016	)		(67,766	)
Accounts payable and accrued liabilities		368,533			(151,880	)
Deferred income		362,450			-
Net cash provided by (used in) operating activities		(8,183,776	)		(3,873,814	)

Cash flows (used in) investing activities
Acquisition of equipment		(71,585	)		-
Net cash (used in) investing activities		(71,585	)		-

Cash flows provided by (used in) financing activities
Units issued for cash		-			3,732,469
Exercise of options		-			1,800
Exercise of warrants		25,823			160,000
Repayment of promissory notes		(911,463	)		-
Proceeds received from restricted government grant		174,675			290,825
Amounts paid from restricted government grant funds		(134,146	)		(205,917	)
Share issuance costs		-			(405,753	)
Net cash provided by (used in) financing activities		(845,111	)		3,573,424

Change in cash and cash equivalents during the period		(9,100,472	)		(300,390	)
Cash and cash equivalents, beginning of period		48,564,082			1,494,573
Cash and cash equivalents, end of period	$	39,463,610		$	1,194,183

Cash and cash equivalents consists of:
Demand deposits	$	39,405,210		$	1,018,862
Restricted cash		58,400			175,321
	$	39,463,610		$	1,194,183

The accompanying notes to the consolidated financial statements are an integral part of these statements.

ALPHA COGNITION INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	For the Six Months Ended June 30,
	2025		2024

Supplemental Disclosure
Cash paid for interest	$	4,894	$	37,754

Supplemental non-cash disclosures
Reallocation of fair value of share options upon exercise	$	-	$	126,832
Reclassification of derivative liability for warrants re-priced from CAD to USD exercise price	$	-	$	3,942,575
Common shares issued for share issuance costs	$	-	$	928,874
Warrants issued for share issuance costs	$	-	$	582,245
Common shares issued for services	$	-	$	2,273,949

The accompanying notes to the consolidated financial statements are an integral part of these 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 and Cognitive Impairment with Traumatic Brain Injury (“TBI”), for which there are limited or no treatment options. The registered and records office of the Company is 1200 – 750 West Pender Street, Vancouver, BC, V6C 2T8. As of November 12, 2024, the Company’s common shares commenced trading on the NASDAQ stock exchange under the symbol “ACOG”. The Company’s common shares 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. Previously the Company’s shares were traded on the TSX Venture Exchange (“TSX-V”) until April 28, 2023, when the Company had them voluntarily delisted. The Company’s shares also traded on the Over-The-Counter Markets (“OTC”) under the trading symbol “ACOGF” until they were listed on the NASDAQ.

On July 29, 2024, the Company was granted approval by the U.S. Food and Drug Administration (“FDA”) for the commercialization of ZUNVEYL, previously known as ALPHA-1062, for the treatment of mild-to-moderate Alzheimer’s disease.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation – The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America and are consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended December 31, 2024.

As permitted by SEC requirements for interim reporting, certain footnotes or other financial information have been condensed or omitted. In the opinion of management, all normal and recurring adjustments considered necessary for the fair presentation of the financial statements have been included. Revenues, expenses, assets, and liabilities can vary during each quarter of the year, therefore, the results and trends in these interim financial statements may not be representative of those for the full year.

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, 2024

Principles of Consolidation – These unaudited condensed interim consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, Alpha Cognition Canada Inc. (“ACI Canada”) and ACI Canada’s wholly owned subsidiary Alpha Cognition USA Inc. (“ACI USA”).

All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated upon consolidation.

Functional and Reporting Currency – The functional currency of the Company and its subsidiaries is USD, being the currency of the primary economic environment in which each entity operates. The Company’s reporting currency is the USD.

Use of Estimates and Assumptions – The preparation of these unaudited condensed interim 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 unaudited condensed interim consolidated financial statements and the reported amounts of expenses during the reporting period. 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.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company applies the following five-step revenue recognition model in accordance with ASC Topic 606, Revenue from Contracts with Customers, to determine revenue:

identify the contract with a customer;

ii)

identify the performance obligations in the contract;

iii)

determine the transaction price;

iv)

allocate the transaction price to the performance obligations in the contract; and

recognize revenue when (or as) the Company satisfies a performance obligation.

Product Sales, Net

Products are primarily sold to distributors and wholesalers. The Company’s contractual performance obligations are generally limited to the transfer of control of the product to the customer. For Zunveyl tablets provided to distributors, revenue is recognized at the point in time when control of the goods transfers to the distributor. The Company’s contracts typically stipulate F.O.B. (Free on Board) destination terms. Consequently, revenue is recognized when the drugs are delivered to the distributor’s location or any destination designated by the distributor for drop-shipment. This arrangement is not a consignment arrangement, and therefore, the Company recognizes revenue upon the delivery of goods to the distributor. The Company’s payment terms to customers range from 60 to 96 days; payment terms differ by customer and by product.

Items Deducted from Gross Product Sales

Revenue is reduced at the time of recognition for expected chargebacks, product returns, recalls, and consideration payable to customers, collectively referred to as gross-to-net (GTN) adjustments. Chargebacks, product returns, and recalls are based on agreed-upon contractual terms. Consideration payable to customers comprises distributor fees. These service fees for distribution services are calculated as a percentage of monthly product sales based on the Wholesale Acquisition Cost (WAC). These fees are paid to wholesale distributors for services such as access to inventory and sales data to pharmacies, inventory management, accounts receivable administration, and return and chargeback administration. These services are integral activities within the distribution chain with the distributor customer, specifically related to Alpha Cognition’s sales of Zunveyl, and are not considered distinct from the Company’s promise to sell Zunveyl through the distribution channel to end customers. Consequently, these fees are recognized as a reduction of revenue.

Variable consideration will be re-evaluated at least on a quarterly basis, and we will continue to re-evaluate variable consideration on an ongoing basis. The amount of variable consideration can vary from period to period due to fluctuations in chargebacks, product returns, recalls, and consideration payable to customers, or other similar items.

Licensing Revenue

At contract inception, the Company identifies the goods or services promised in the contract and assesses whether each is distinct for the purpose of identifying performance obligations. A promised good or service is distinct if (1) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer; and (2) the Company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. In licensing arrangements, the Company considers factors such as the collaboration partner’s capabilities and the availability of required expertise in the marketplace. The intended benefit of the contract is also considered in determining whether a promised good or service is separately identifiable. If a good or service is not distinct, it is combined with other promised goods or services until a distinct bundle is identified.

Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company evaluates whether such options provide a material right to the customer. If so, they are treated as separate performance obligations.

The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (“SSP”). SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Judgment is required in estimating SSP, and the Company considers market conditions, entity-specific factors, and estimated costs in making this determination.

If the consideration includes a variable amount, the Company estimates the amount to which it expects to be entitled using either the expected value or the most likely amount method, depending on which better predicts the outcome. The estimated amount is included in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue will not occur when the uncertainty is resolved. The Company re-evaluates estimates and constraints at each reporting date and adjusts the transaction price accordingly, recording any changes on a cumulative catch-up basis.

For arrangements that include development or regulatory milestone payments, the Company evaluates whether achieving the milestone is probable and recognizes revenue only if a significant reversal is not expected. Regulatory milestones that are outside the control of either party are generally excluded from the transaction price until achieved.

For licenses of intellectual property that include sales-based royalties or milestones, and when the license is the predominant item to which the royalties relate, the Company recognizes royalty revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied, consistent with the sales-based royalty exception.

Revenue is recognized when the Company satisfies a performance obligation, either at a point in time or over time. The amount of revenue recognized is based on the portion of the transaction price allocated to each performance obligation in accordance with its relative SSP. For obligations satisfied over time, revenue is recognized using an input or output method, depending on which most accurately depicts the transfer of control to the customer.

Accounts Receivable - The majority of our accounts receivable arise from product sales and primarily represent amounts due from our wholesale and other third-party distributors standard payment terms that generally require payment within 30 to 96 days.

We provide reserves against accounts receivable for estimated losses that may result from a customer’s inability to pay. Amounts determined to be uncollectible are charged or written-off against the reserve.

Inventory – The Company values its inventories at the lower of cost or estimated net realizable value. The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. The Company classifies inventory as long-term when consumption or sale of the inventory is expected beyond its normal operating cycle of twelve months. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and it writes down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded within cost of sales. The determination of whether inventory costs will be realizable requires estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required which would be recorded as cost of sales in the consolidated statements of operations.

The Company capitalizes inventory costs associated with the Company’s products after regulatory approval when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized. Inventory acquired prior to receipt of regulatory approval of a product candidate is expensed as research and development expense as incurred. The Company began to capitalize inventory costs upon receipt of regulatory approval in July 2024. Raw materials consist of materials, including active pharmaceutical ingredients, to be consumed in production of inventory related to FDA approved products.

Royalty Cost of Sales – The Company makes royalty payments to third parties under license or purchase agreements associated with the acquisition of intellectual property. These royalty payments are calculated as a percentage of the net product sales and licensing fee in the period the corresponding sales occur. Royalty expenses are recognized as incurred and recorded as a component of cost of sales in the consolidated statements of operations and comprehensive loss.

Share-Based Compensation – The Company accounts for share-based compensation in accordance with ASC 718, Compensation – Share-Based Compensation, which requires compensation cost for the grant-date fair value of share-based awards to be recognized over the requisite service period. The Company accounts for forfeitures when they occur. The fair value of share-based awards, granted or modified, is determined on the grant date (or modification or acquisition dates, if applicable) at fair value, using the Black-Scholes option pricing model. This model is affected by the Company’s share price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to, the Company’s expected share price volatility over the terms of the awards, and actual and projected employee share option exercise behaviors. The Company records share-based compensation expense for service-based share options on an accelerated attributions method over the requisite service period. The Company records share-based compensation expense for performance-based share options on an accelerated attribution method over the requisite service period, and only if performance-based conditions are considered probable to be satisfied.

The fair value of options is determined using the Black-Scholes option pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

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, until settlement. Changes in the estimated fair value of the bonus right awards are recognized within general and administrative expense in the unaudited condensed interim consolidated statement of operations and comprehensive loss over the vesting period. Key assumptions in the calculation of the fair value of the bonus right awards include expected volatility, risk-free interest rate, expected life, and fair value per award.

Convertible Debentures and Conversion Feature Liability – The Company’s debt instruments contain a host liability and an embedded conversion feature. The Company uses the guidance under FASB ASC Topic 815 Derivatives and Hedging (“ASC 815”) to determine if the embedded conversion feature must be bifurcated and separately accounted for as a derivative under ASC 815. It also determines whether any embedded conversion features requiring bifurcation qualify for any scope exceptions contained within ASC 815. Generally, contracts issued or held by a reporting entity that are both (i) indexed to its own shares, and (ii) classified in stockholders’ equity, would not be considered a derivative for the purposes of applying ASC 815. Any embedded conversion features that do not meet the scope exception noted above are classified as derivative liabilities, initially measured at fair value, and remeasured at fair value each reporting period with change in fair value recognized in the consolidated statements of operations and comprehensive loss. Any embedded conversion features that meet the scope exception under ASC 815 are initially recorded at their relative fair value in paid-in-capital and are not remeasured at fair value in future periods.

Any embedded conversion features that do not meet the scope exception under ASC 815 are initially recorded at their fair value and the residual amount of the proceeds received is allocated to the convertible debentures. The host debt instrument is accounted for in accordance with guidance applicable to non-convertible debt under FASB ASC Topic 470 Debt (“ASC 470”) and is accreted to its face value over the term of the debt with accretion expense and periodic interest expense recorded in the consolidated statements of operations and comprehensive loss.

The Company uses the Monte Carlo Simulation method to determine the fair value of the conversion feature liability and warrant liability. This requires the input of subjective assumptions including the following:

Risk-Free Interest Rate – The risk-free interest rate is the continuously compounded, term matching based on the U.S. Treasury zero coupon rate from the valuation date.

Expected Life – The Company’s expected term represents the period that the Company’s convertible debentures are issued and are expected to be outstanding or the remaining contractual life of the conversion period and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term).

Expected Volatility – The Company’s expected volatility was estimated based on the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the awards.

Probability – The probability is based on management’s best estimate of based on the relevant information available.

Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings (loss) and equity.

Derivative liability – The Company recognizes and measures derivative financial instruments in according with ASC 815, Derivatives and Hedging, which requires that all derivative instruments be recognized on the balance sheet at fair value. Derivative instruments are classified as either assets or liabilities.

The Company uses the Black-Scholes option pricing model to determine the fair value of the warrant liability, share-based options, and stand-alone share purchase warrants issued as noted above. This model requires the input of subjective assumptions including the following:

Risk-Free Interest Rate – The risk-free interest rate is based on the U.S. Treasury zero coupon bond issues in effect at the time of grant for periods corresponding with the expected term of option.

Dividend Yield – The Company has never paid dividends on its common shares and has no plans to pay dividends on its common shares. Therefore, the Company used an expected dividend yield of zero.

Expected Life – The Company’s expected term represents the period that the Company’s options granted are expected to be outstanding or the remaining contractual life of the conversion period and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term).

Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings (loss) and equity.

Fair Value Measurements - FASB ASC 820 – Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements. In accordance with ASC 820, we have categorized our financial assets and liabilities based on the priority of the inputs to the valuation technique into a three-level fair value hierarchy as set forth below. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded in the accompanying consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1 – Financial instruments whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market which we have the ability to access at the measurement date.

Level 2 – Financial instruments whose values are based on quoted market prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets.

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.

The Company’s financial instruments consist of cash, restricted cash, accounts receivable, other current assets, accounts payable, promissory note, warrant liabilities, and other long-term liabilities. The fair values of accounts receivable, other current assets, accounts payable, and promissory note approximate their carrying values either due to their current nature or current market rates for similar instruments.

Cash is measured at fair value on a recurring basis using level 1 inputs. Other long-term liabilities consisting of the bonus rights liability and warrant liabilities are measured at fair value on a recurring basis using level 3 inputs. As of June 30, 2025 and December 31, 2024, the fair value of the bonus rights liability was $187,851 and $102,783, respectively. As of June 30, 2025 and December 30, 2024, the fair value of the warrant liabilities was $9,844,567 and $5,820,358, respectively.

New Accounting Pronouncements –

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements in Income Tax Disclosures, which is to enhance the transparency and decision usefulness of income tax disclosures. This amendment requires public companies to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Additionally, under the amendment entities are required to disclose the amount of income taxes paid disaggregated by federal, state and foreign taxes, as well as disaggregated by material individual jurisdictions. Finally, the amendment requires entities to disclose income from continuing operations before income tax expense disaggregated between domestic and foreign and income tax expense from continuing operations disaggregated by federal, state and foreign. The new rules are effective for annual periods beginning after December 15, 2024. We will adopt this standard on a prospective basis as allowed by the standard. The adoption of this standard is not expected to have a material impact on our financial statements.

In November 2024, FASB issued ASU 2024-03, Income Statement (Subtopic 220-40): Reporting Comprehensive Income – Expense Disaggregation Disclosures. This standard requires disclosure in the notes to the financial statements, at each interim and annual reporting period, of specified information about certain costs and expense including purchases of inventory, employee compensation, depreciation and intangible asset amortization included in each relevant expense caption. This standard also requires a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated, as well as disclosure of the total amount of selling expenses, and, in annual reporting periods, an entity’s definition of selling expenses. These new rules are effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. We are currently evaluating the potential impact that this new standard will have on our consolidated financial statements and related disclosures.

NOTE 3 – R&D GRANT

On June 5, 2023, the Company was awarded a $750,000 research and development grant from the Army Medical Research and Material Command for a pre-clinical study on the use of the ALPHA-1062 Intranasal to reduce blast mTBI (mild Traumatic Brain Injury) induced functional deficit and brain abnormalities (“R&D Grant”). The R&D Grant is issued in collaboration with the Seattle Institute of Biomedical and Clinical Research and endorsed by the Department of Defense. Funds received from the R&D grant are restricted and to be used solely as outlined in the grant. The R&D grant funding will expire for use on September 30, 2028.

Per the R&D Grant, budget expenses are expected to include cost to carry out the clinical trials including personnel costs, materials and supplies, animal housing, publications, and travel costs. The Company classifies any cash received from the R&D Grant that has not yet been used to pay ongoing R&D grant expenditures as restricted cash, as the proceeds from the grant are to be designated for the specified grant research.

Activity related to the R&D grant was as follows for the six months ended June 30, 2025, and 2024:

	For the Six Months Ended
	June 30, 2025		June 30, 2024
Cash received	$	174,675	$	290,825
Grant income recognized	$	71,095	$	272,340

As of June 30, 2025, and December 31, 2024, the Company’s balance sheet accounts included the following related to the R&D Grant:

	June 30, 2025		December 31, 2024
Restricted cash	$	58,400	$	17,872
Deferred income (receivable)	$	23,936	$	(79,643	)

NOTE 4 – INVENTORY

Inventory consists of the following:

	June 30, 2025		December 31, 2024
Raw materials	$	-	$	-
Work in progress		-		615,133
Finished goods		875,852		-
Total	$	875,852	$	615,133

As of June 30, 2025, and prior there to, raw materials were acquired to be used in the development process and expensed as incurred as they had no alternative future use.

During the six months ended, June 30, 2025, the Company recognized cost of sales of $67,919, (2024: $nil) in the condensed interim consolidated statement of operations and comprehensive loss.

NOTE 5 – BALANCE SHEET COMPONENTS

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

	June 30,		December 31,
	2025		2024
Other receivables	$	140,272	$	253,426
Prepaid insurance and other expenses		2,292,953		795,141
Prepaid legal expenses		61,824		23,396
Prepaid expenses and other assets	$	2,495,049	$	1,071,963

Accounts payable and accrued liabilities

	June 30,		December 31,
	2025		2024
Accounts payable	$	752,334	$	872,676
Other accrued liabilities		805,761		643,063
Accrued payroll and bonuses		1,249,727		923,550
Accounts payable and accrued liabilities	$	2,807,822	$	2,439,289

NOTE 6 – INTANGIBLE ASSETS

Intangible assets consisted of the following:

June 30, 2025		Gross Amount				Accumulated Amortization				Net Balance				Weighted Average Remaining Useful Life
Licenses		$	1,185,633			$	783,437			$	402,196				18.67

December 31, 2024		Gross Amount				Accumulated Amortization				Net Balance				Weighted Average Remaining Useful Life
Licenses		$	1,185,633			$	772,664			$	412,969				5.17

On January 25, 2025, the Company was granted a new patent titled “Coated Tablets for pH-Dependent Release of Benzgalantamine” from the United States Patent and Trademark Office (USPTO) until 2044. As a result of the granted patent, management reviewed the estimated useful life of the license related to this patent, and determined the remaining useful life should be extended from 5 years to 19 years.

Change in Useful Life of Intangible Asset

The Company completed a review of the estimated useful life of its intangible asset after a patent application, related to the Memogain License, was granted in January 2025. The patent term was extended to February 2044. Management determined that the estimated useful life of the license should be extended for an additional 14 years. Effective January 1, 2025, the Company extended the estimated remaining useful life of the license from 5 years to 19 years.

This change in estimates has been applied prospectively in accordance with ASC 250, Accounting Changes and Error Corrections. As a result of this change, amortization expense decreased by approximately $28,700 for the six months ended June 30, 2025, compared to the prior amortization schedule.

Amortization expense for the six months ended June 30, 2025 and 2024, was $10,773 and $40,354, respectively. During the three months ended June 30, 2025, and 2024, the Company reported an impairment of intangible assets of $nil and $39,166, respectively, from the impairment of one license.

The following table outlines the estimated future annual amortization expense related to intangible assets as of June 30, 2025:

Year Ending December 31,
2025	$	10,774
2026		21,546
2027		21,546
2028		21,546
2029		21,546
Thereafter		305,238
Total	$	402,196

NOTE 7 – PROMISSORY NOTE

In March 2015, the Company issued a promissory note of $1,400,000 to Neurodyn Life Sciences Inc (“NLS”), a related party through a common director, for the acquisition of the ALPHA-1062 Technology.

Effective April 1, 2024, the Company and NLS agreed to another amendment to the promissory note pursuant to which the interest rate was increased from 5.5% to 7% and the maturity date was extended from July 15, 2024, to July 15, 2025. Additionally, $300,000 was to be paid on or by December 31, 2024 (paid), with the remaining principal balance due at maturity with certain events triggering the balance to be repayable on demand. Such events include (1) being in breach of the Memogain License Agreements (Note 13); (2) failure to make payments when due; (3) entering into a technology license or merger and acquisition transaction having a value in excess of USD $40,000,000; and (4) completing a financing, excluding any initial NASDAQ uplisting, having a value in excess of USD $40,000,000. The balance was repaid in full on January 29, 2025.

As of June 30, 2025, and December 31, 2024, the principal balance outstanding on the promissory note was $nil and $911,463, respectively. During the six months ended June 30, 2025, and 2024, the Company recorded interest expense and amortization of the premium, included in accretion expense, of $4,894 and $37,754, respectively.

NOTE 8 – CONVERTIBLE DEBENTURES AND CONVERSION FEATURE LIABILITY

On September 24, 2024, the Company entered into Securities Purchase Agreements (“SPAs”) with various third-party lenders for the issuance of convertible debentures (“Debentures”) and warrants to purchase 430,805 common shares of the Company at an exercise price of $10.55 per share until September 24, 2029 (“Initial Debenture Warrants”) for $4,545,000.

The Debentures bore interest at 10% per annum, computed on the basis of a 360-day year and twelve 30-day months, and are due and payable with accrued interest thereon on September 24, 2026 (“Maturity Date”). Upon the occurrence of a Qualified Offering, being an offering of the Company’s securities for at least $10 million in aggregate gross proceeds in coordination with the simultaneous uplisting of the Company’s common shares onto a United States national securities exchange, the Debentures would automatically convert into the securities, including warrants, on the same terms as are applicable in the Qualified Offering at the lower of (i) the Conversion Price or (ii) the per security offering price in the Qualified Offering.

Upon closing of a Qualified Offering, each Initial Debenture Warrant holder was entitled to receive an additional 50% of warrants (“Additional Debenture Warrant”) with identical terms as the Initial Debenture Warrants.

On November 13, 2024, the convertible notes automatically converted pursuant to their terms into 801,413 Common Shares at a conversion price of $5.75 being the public offering price per share in the public offering. Additionally, the Company issued an additional 215,421 warrants exercisable to acquire 215,421 Common Shares at an exercise price of $7.19 per share and the exercise price of the Company’s existing 430,805 warrants issued in connection with the offering of the convertible notes was repriced from $10.55 per share to $7.19 per share.

NOTE 9 – OTHER LONG-TERM LIABILITIES

The Company adopted a cash bonus policy pursuant to which it may grant bonus rights to certain eligible participants, which include employees, officers, or consultants of the Company, that are payable in cash. These bonus rights are subject to certain vesting provisions and are revalued at each reporting date with the change being included in management fees and salaries on the Company’s consolidated statements of operations and comprehensive loss.

During the year ended December 31, 2022, Officers of the Company were granted the ability to earn up to 370,448 bonus rights entitling them to a cash bonus equal to an amount by which the fair market value of one common share of the Company (calculated as the 30-day Volume Weighted Average Price (“VWAP”) per common share) exceeds $39.50 multiplied by the number of bonus rights vested. The bonus rights will be earned in tranches based on the price of the Company’s common share exceeding certain thresholds.

On April 16, 2024, the Company amended the bonus rights agreements to extend the vesting date from April 15, 2024, through the earlier of April 28, 2027, a change of control, or attainment of the business value threshold with respect to any tranche. Additionally, the grant price was reduced from $39.50 to $29.75. As of June 30, 2025, and December 31, 2024, the Officers had earned 95,071 bonus rights.

As of June 30, 2025, and December 31, 2024, the Company recognized a bonus right liability of $187,851 and $102,783, respectively, to recognize the proportionate unvested bonus rights. Total compensation expense (recovery) for the bonus rights recognized within general and administrative expenses for the six months ended June 30, 2025, and 2024, was $82,598 and $(23,371), respectively. Total compensation expense (recovery) for the bonus rights recognized within research and development expenses for the six months ended June 30, 2025, and 2024, was $2,470 and $(13,989), respectively. As of June 30, 2025, and December 31, 2024, there was $240,706 and $264,043 of unrecognized compensation expense related to the bonus right awards, respectively.

In accordance with ASC 718, Share-Based Payments, the bonus right awards are considered liability-based awards and are revalued at each reporting date. The following weighted average assumptions were used in the Black-Scholes option-pricing model for the valuation of the bonus rights liability as of June 30, 2025, and December 31, 2024:

	June 30, 2025			December 31, 2024
Risk-free interest rate		3.72	%		4.25	%
Expected life (in years)		1.84			2.33
Volatility		140.89	%		166.95	%
Weighted average fair value per bonus right	$	4.33		$	3.30

NOTE 10 – STOCKHOLDERS’ EQUITY

Authorized Share Capital

The Company is authorized to issue the following share capital:

●

Unlimited common voting shares without par value (“Common Share”)

●

Unlimited Class A restricted voting shares without par value (“Restricted Share”)

●

Unlimited Class B Preferred Series A voting shares without par value, convertible on a 1:1 basis into Common Share (“Class B Preferred Share”)

Issued Share Capital

During the six months ended June 30, 2025, the Company issued 3,332 Common Shares for the exercise of 3,332 warrants at a price of $7.75 per share for total proceeds of $25,823. The Company did not issue any Restricted Shares or Class B Preferred Shares.

Warrants

During the six months ended June 30, 2025, the Company did not issue any warrants.

The schedule of activity for the warrants is as follows:

	Number of Warrants			Weighted Average Exercise Price (as converted)		Remaining Contractual Term (Years)
Balance, December 31, 2024		3,635,962		$	7.37		3.30
Exercised		(3,332	)		7.75
Balance, June 30, 2025		3,632,630		$	7.40		2.80

A summary of the warrants outstanding and exercisable as of June 30, 2025, is as follows:

Warrants Outstanding			Exercise Price			Expiry Date
	129,861	$		7.75		August 31, 2026
	35,064	$		7.75		October 16, 2026
	101,000	$		7.75		November 8, 2026
	394,572	$		7.75		December 22, 2026
	720,123	$		7.75		January 19, 2027
	585,609	$		7.23		February 16, 2028
	86,200	$		7.15 (CAD$9.75	)	February 16, 2028
	28,796	$		7.15 (CAD$9.75	)	March 15, 2028
	262,287	$		7.08		March 15, 2028
	430,805	$		7.19		September 24, 2029
	642,892	$		7.18		November 8, 2029
	215,421	$		7.19		November 13, 2029
	3,632,630

Warrants Liabilities

a)	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. This derivative liability is being revalued at each reporting period.

As of June 30, 2025, and December 31, 2024, the Company revalued the derivative liability to $792,893 and $503,129, respectively, and recorded a loss on revaluation of $289,764 for the six months ended June 30, 2025 (six months ended June 30, 2024 – loss of $432,933).

Balance as of December 31, 2024	$	503,129
Revaluation of derivative liability		289,764
Balance as of June 30, 2025	$	792,893

A summary of warrants not issued for services with CAD exercise prices outstanding and exercisable as of June 30, 2025, is as follows:

Warrants Outstanding			Exercise Price		Expiry Date
	86,200	$	7.15 (CAD$9.75	)	February 16, 2028
	15,810	$	7.15 (CAD$9.75	)	March 15, 2028
	102,010

The following weighted average assumptions were used in the Black-Scholes option-pricing model for the re-valuations as of June 30, 2025, and December 31, 2024:

	June 30, 2025			December 31, 2024
Market price of public stock	$	9.33		$	5.89
Risk-free interest rate		3.68	%		4.27	%
Dividend yield		-			-
Expected life (in years)		2.64			3.14
Volatility		157	%		158	%
Weighted average fair value per warrant	$	7.77		$	4.93

b)	On September 24, 2024, the Company entered into SPAs with various third-party lenders for the issuance of the 430,805 Initial Debenture Warrants and 215,421 Additional Debenture Warrants.

The Initial Debenture Warrants were exercisable at a price of $10.55 per share until September 24, 2029. Upon closing of a Qualified Offering, each Initial Debenture Warrant holder received Additional Warrants with identical terms as the Initial Debenture Warrants.

The fundamental transaction clause in the warrant agreement 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. Under ASC 815 (Derivatives and Hedging), an instrument must be classified as equity if it passes the “fixed-for-fixed” indexation test, meaning both the exercise price and the number of shares to be issued must be fixed at issuance. In this case, the volatility input is predetermined and fixed in the agreement “an expected volatility equal to the greater of 100% and the 30 day volatility from the “HVT” function on Bloomberg”, and is therefore not indexed to the Company’s stock. As a result, the Initial and Additional Debenture Warrants fail the “fixed-for-fixed” test and are classified as derivative liabilities in accordance with ASC 815.

As of June 30, 2025, the Company revalued the derivative liabilities to $4,514,619 (December 31, 2024 - $2,646,843) and recorded a loss on revaluation of $1,867,776 and $nil for the six months ended June 30, 2025, and 2024, respectively.

A summary of the Initial and Additional Debenture Warrants issued and outstanding as of June 30, 2025, is as follows:

Warrants Outstanding			Exercise Price	Expiry Date
	430,805	$	7.19	September 24, 2029
	215,421	$	7.19	November 13, 2029
	646,226

The following weighted average assumptions were used in the Black-Scholes option-pricing model for the revaluation for the Initial and Additional Debenture Warrant as of June 30, 2025, and December 31, 2024:

	June 30, 2025			December 31, 2024
Market price of public stock	$	9.33		$	5.89
Risk-free interest rate		3.74	%		4.38	%
Dividend yield		-			-
Expected life (in years)		4.28			4.73
Volatility		97	%		94	%
Weighted average fair value per warrant	$	6.99		$	4.10

c)	Agent Warrants issued in connection with the public offering.

Upon completion of the public offering, the Company issued 608,696 agent warrants and an additional 34,196 agent warrants for the over-allotment. In the warrant agreement it included the 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. Under ASC 815 (Derivatives and Hedging), an instrument must be classified as equity if it passes the “fixed-for-fixed” indexation test, meaning both the exercise price and the number of shares to be issued must be fixed at issuance. In this case, the volatility input is predetermined and fixed in the agreement “an expected volatility equal to the greater of 100% and the 30 day volatility from the “HVT” function on Bloomberg”, and is therefore not indexed to the Company’s stock. As a result, the agent warrants fail the “fixed-for-fixed” test and are classified as derivative liabilities in accordance with ASC 815.

As at June 30, 2025, the Company revalued the derivative liabilities to $4,537,055 (December 31, 2024 - $2,670,386) and recorded a loss on revaluation of $1,866,669 and $nil for the six months ended June 30, 2025, and 2024, respectively.

A summary of the agent warrants issued and outstanding as of June 30, 2025, is as follows:

Warrants Outstanding				Exercise Price			Expiry Date
	642,892		$	7.18			November 9, 2029

The following weighted average assumptions were used in the Black-Scholes option-pricing model for the revaluations as of June 30, 2025, and December 31, 2024:

	June 30, 2025			December 31, 2024
Market price of public stock	$	9.33		$	5.89
Risk-free interest rate		3.74	%		4.38	%
Dividend yield		-			-
Expected life (in years)		4.36			4.86
Volatility		98	%		95	%
Weighted average fair value per warrant	$	7.06		$	4.15

Equity Incentive Plan

The Company’s 2025 Stock and Incentive Plan (the “2025 Incentive Plan”) for its employees, officers, consultants, advisors and non-employee Directors was approved by the stockholders on June 19, 2025. The 2025 Incentive Plan is to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, or other stock-based awards. The total number of Common Shares reserved under the 2025 Incentive Plan is 2,000,000, which does not include the options outstanding in prior existing Share Option Plans. As of June 30, 2025, no awards have been granted from the 2025 Incentive Plan.

Share Options

Common Share Options

The Company’s 2023 Share Option Plan (the “2023 Option Plan”) for its officers, directors, employees and consultants was approved by stockholders on June 27, 2023. Pursuant to the 2023 Option Plan, the Company may grant non-transferable share options totaling in aggregate up to 20% of the Company’s issued and outstanding Common Shares and Restricted Shares, exercisable for a period of up to ten years from the date of grant, and at an exercise price that will not be lower than the greater of the last closing price for the Common Shares as quoted on the CSE: (i) on the trading day prior to the date of grant; and (ii) the date of grant. All options granted pursuant to the 2023 Option Plan will be subject to such vesting requirements as may be imposed by the Board. In the event of a Change of Control, as defined in the 2023 Option Plan, all unvested options will vest immediately. Upon approval of the 2025 Incentive Plan on June 19, 2025, the Company closed the 2023 Option Plan to new grants. The options outstanding under the 2023 Option Plan are not included in the maximum number of share options available for grant pursuant to the 2025 Incentive Plan and are not subject to the terms of the 2025 Incentive Plan; as such, the 2023 Options will continue to be governed by the 2023 Option Plan.

The 2022 Option Plan was previously adopted by the board and approved by stockholders on July 19, 2022, pursuant to which incentive share options were granted to certain directors, officers, employees and consultants (the “2022 Option Plan”). Under the 2022 Option Plan, the Company could grant non-transferable share options totaling in aggregate up to 10% of the Company’s issued and outstanding Common Shares, exercisable for a period of up to ten years from the date of grant, and at an exercise price which is not less than that permitted by the TSX-V. In connection with listing of the Common Shares on the CSE, the Company adopted the 2023 Option Plan and determined that the 2022 Option Plan be closed to new grants. The options outstanding under the 2022 Option Plan, issued prior to the adoption of the 2023 Option Plan (“2022 Options”) are not included in the maximum number of share options available for grant pursuant to the 2023 Option Plan and are not subject to the terms of the 2023 Option Plan; as such, the 2022 Options will continue to be governed by the 2022 Option Plan.

The following weighted average assumptions were used in the Black-Scholes option-pricing model for the valuation of the Common Share options issued:

	June 30, 2025			December 31, 2024
Risk-free interest rate		4.31	%		4.34	%
Expected life (in years)		10			10
Volatility		82	%		82	%
Weighted average fair value per option	$	4.87		$	5.58

The following table summarizes the total amount of share-based compensation expense related to service conditions for Common Share options during the three and six months ended June 30, 2025, and 2024:

	For the Three Months Ended				For the Six Months Ended
	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
Research and development	$	38,756	$	65,694	$	71,835	$	153,541
General and administrative		1,508,814		193,629		2,831,108		453,867
Total share-based compensation	$	1,547,570	$	259,323	$	2,902,943	$	607,408

As of June 30, 2025, there was an unrecognized share-based compensation expense relating to service conditions for common share options of $3,922,040.

Common share option activity is as follows:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value⁽¹⁾
Balance, December 31, 2024		888,529	$	4.58		8.36	$	1,159,843
Granted		1,213,097		5.86
Balance, June 30, 2025		2,101,696		5.39		8.58		8,344,263
Options exercisable, June 30, 2025		901,168	$	4.82		7.35	$	4,072,379

(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 share on the reporting date.

A summary of the Common Share options outstanding at June 30, 2025, is as follows:

Options Outstanding		Options Exercisable		Exercise Price				Expiry Date
	7,300		7,300		5.13	(CAD$7.00	)	September 30, 2025
	82,367		82,367		4.03	(CAD$5.50	)	September 30, 2025
	1,566		1,566	$	10.00			June 1, 2029
	1,566		1,566	$	10.00			July 22, 2030
	104,000		104,000	$	5.13	(CAD$7.00	)	August 3, 2031
	37,600		37,600	$	5.13	(CAD$7.00	)	December 20, 2031
	8,600		8,600	$	5.13	(CAD$7.00	)	February 14, 2032
	18,000		18,000	$	5.13	(CAD$7.00	)	May 31, 2032
	477,600		386,185	$	4.03	(CAD$5.50	)	June 8, 2033
	32,000		5,334	$	11.00	(CAD$15.00	)	October 21, 2034
	84,000		14,002	$	6.01	(CAD$8.20	)	November 26, 2034
	34,000		5,668	$	5.03			December 24, 2034
	10,000		834		6.00			January 14, 2035
	52,500		4,380		5.80			February 12, 2035
	1,005,822		215,678		5.93			February 25, 2035
	8,000		666		5.75			March 4, 2035
	89,200		7,422		5.55			March 20, 2035
	12,000		-		5.08			April 2, 2035
	35,575		-		4.83			April 7, 2035
	2,101,696		901,168

ACI Canada Legacy Performance Options

The Company retained ACI Canada’s share option plan whereby ACI Canada could grant share options to directors, officers, employees and consultants enabling them to acquire common shares. Options granted had a maximum term of ten years and the board of directors determined the vesting requirements. From time to time, the Company granted performance-based share options to management and consultants. These options vest based on the Company’s achievement of certain performance goals and operational metrics, as applicable, subject to continuous employment by each recipient.

The following table summarizes the total amount of share-based compensation expense related to performance conditions for ACI Canada legacy performance options during the three and six months ended June 30, 2025, and 2024:

	For the Three Months Ended				For the Six Months Ended
	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
Research and development	$	-	$	116,004	$	-		116,004
Total share-based compensation	$	-	$	116,004	$	-	$	116,004

As of June 30, 2025, and December 31, 2024, there was no unrecognized share-based compensation expense relating to service condition awards.

The following table summarizes ACI Canada legacy performance option activity for the Company:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value⁽¹⁾
Balance, December 31, 2024		265,642		0.22		3.48		1,506,321
Balance, June 30, 2025		265,642		0.22		2.98		2,420,129
Options exercisable, June 30, 2025		258,362	$	0.22		2.96	$	2,354,027

(1)

A summary of the ACI Canada legacy performance options outstanding at June 30, 2025, is as follows:

Options Outstanding		Options Exercisable		Exercise Price		Expiry Date
	36,000		36,000	$	0.025	February 1, 2026
	27,642		27,642	$	0.25	December 31, 2027
	122,000		121,120	$	0.25	September 1, 2028
	80,000		73,600	$	0.25	June 1, 2029
	265,642		258,362

NOTE 11 – CMS LICENSE AND COLLABORATION AGREEMENT

On January 8, 2025 (the “Effective Date”), the Company entered into a License, Collaboration and Distribution Agreement (the “CMS License Agreement”) with CMS International Development and Management Limited (“CMS”), pursuant to which the Company granted CMS an exclusive, transferable, sub-licensable, and royalty-bearing license to develop, register, manufacture, import, export, and commercialize ZUNVEYL (the “Product”) in the Asia-Pacific region (excluding Japan), Australia, and New Zealand (the “Territory”). ZUNVEYL is a next generation acetylcholinesterase inhibitor approved in the US for the treatment of mild-to-moderate Alzheimer’s disease.

Under the terms of the CMS License Agreement, the Company received a one-time, non-refundable, non-creditable upfront payment of $3.0 million in January 2025 and is eligible to receive up to $11.0 million in development and regulatory milestone payments, as well as up to $30.0 million in sales milestone payments. In addition, CMS is obligated to pay annual royalties of 9% on net sales within the defined royalty term.

The CMS License Agreement remains in effect for an initial term of 20 years from the Effective Date and will automatically renew for additional five-year terms unless either party provides notice of non-renewal at least six months prior to the expiration of the then-current term.

The total transaction price at inception was determined to consist of the $3.0 million upfront payment. The Company identified two distinct performance obligations: (1) the license to the Company’s pharmaceutical intellectual property, and (2) certain regulatory, technical, and clinical assistance to be provided by the Company and the Joint Steering Committee, which includes representatives from both the Company and CMS, through the expected commercialization of the Product. The upfront payment of $3 million was allocated to the identified performance obligations based on their relative standalone selling prices (SSPs). The SSP for the license was determined using the residual method due to the highly variable nature of similar license transactions, while the SSP for services was based on estimated costs plus a margin.

License of Intellectual Property

The license to the Company’s intellectual property represents a distinct performance obligation. The license was transferred to CMS on the Effective Date to satisfy this performance obligation. The Company allocated $2,525,900 of the total transaction price to the license and recognized the corresponding revenue in the first quarter of 2025.

Regulatory, Technical, and Clinical Assistance

The Company’s promise to provide supporting services, whether directly or in participation with the Joint Steering Committee, to CMS is expected to be primarily fulfilled during the early stages of the contract through commercialization of the Product. These services represent a distinct performance obligation and will be recognized over time as the services are rendered. Based on estimated effort and project timelines, $223,300 of revenue was allocated to be recognized ratably over the first year 2025, with $192,500 expected to be recognized in 2026 and $58,300 in 2027. As of June 30, 2025, the Company recognized $111,650 of revenue related to these services.

Development and Regulatory Milestone Payments

The potential development and regulatory milestone payments are contingent upon the occurrence of certain milestones as defined in the CMS License Agreement. These payments have been fully constrained until the Company concludes that achievement of the milestone is probable and that recognition of revenue related to the milestone will not result in a significant reversal in amounts recognized in future periods. As such, they have been excluded from the transaction price. At the end of each subsequent reporting period, the Company will re-evaluate the probability of achievement of each milestone and any related constraint and, if necessary, adjust its estimate of the overall transaction price. The updated transaction price will be allocated to the two identified performance obligations based on estimated SSP. As of June 30, 2025, the Company has not recognized any revenue associated with the development and regulatory milestones.

Sales Milestone Payments and Royalties

Any consideration related to sales milestones or royalties will be recognized if and when the related sales occur as such amounts are determined to relate predominantly to the license granted to CMS. Accordingly, this consideration has been excluded from the transaction price. No allocation to performance obligations will be performed, as both the license and related assistance are expected to be satisfied by the time sales milestones and royalties are earned. No sales milestone or royalty revenue was recognized as of June 30, 2025.

As of June 30, 2025, no amounts were due from CMS, and no receivables or contract assets had been recorded in relation to the CMS License Agreement.

NOTE 12 – RELATED PARTY TRANSACTIONS AND BALANCES

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel include the Company’s executive officers and members of its Board of Directors.

In February 2021, the Company signed a consulting agreement with Michael McFadden, CEO of the Company, requiring an annual base compensation of $500,000. A new employment agreement was signed in March 2022 which included in the agreement is a provision for termination payment without just cause of:

Severance payments for a period of twelve months with the following terms:

Months 1 through 6: 100% of annual base salary;

ii)

Months 7 through 9: 50% of annual base salary; and

iii)

Months 10 through 12: 25% of annual base salary.

Bonus severance equal to the average of bonuses paid of the two most recent full fiscal years prior to termination plus the bonus that would have been paid in the fiscal year of termination.

Also included in the agreement is a provision for termination payment due to a change of control, the CEO will receive:

a cash payment equal to the annual base salary;

a full bonus payable in cash immediately, irrespective of whether targets have been met; and

continuation of healthcare benefits for twelve months from date of change of control event.

On February 18, 2025, the Company increased Mr. McFadden’s annual base compensation to $625,000.

In April 2022, Mr. McFadden was granted the ability to earn up to 327,830 bonus rights of which 65,566 bonus rights had been earned as of June 30, 2025 (Note 9). The value of these bonus rights was determined to be $134,958 and $74,587 as of June 30, 2025, and December 31, 2024, respectively, and is included in other liabilities.

In May 2021, the Company hired Lauren D’Angelo as the Company’s Chief Commercial Officer. In 2023 Ms. D’Angelo was promoted to Chief Operating Officer of the Company. The employment agreement signed in May 2021 with Ms. D’Angelo requires an annual base compensation currently at $420,000 and includes a provision for a termination payment due to a change of control as follows:

a cash payment equal to the annual base salary;

a full bonus payable in cash immediately, irrespective of whether targets have been met; and

continuation of healthcare benefits for twelve months from date of change of control event.

On February 18, 2025, the Company increased Ms. D’Angelo’s annual base compensation to $500,000.

In May 2022, Ms. D’Angelo was granted the ability to earn up to 42,618 bonus rights of which 29,505 bonus rights had been earned as of June 30, 2025 (Note 9). The value of these bonus rights was determined to be $52,893 and $28,196 as of June 30, 2025, and December 31, 2024, respectively, and is included in other liabilities.

As of June 30, 2025, and December 31, 2024, $397,644 and $799,941, respectively, is owing to directors and officers of the Company and has been included in accounts payable and accrued liabilities. These balances are in relation to fees and management compensation and are non-interest bearing, unsecured and due on demand.

As of June 30, 2025, and December 31, 2024, the Company owed NLS $nil and $911,463 respectively. During the six months ended June 30, 2025, and 2024, the Company recorded interest expense and amortization of the premium, included in accretion expense, of $4,894 and $37,754, respectively (Note 7).

Summary of key management personnel compensation:

	For the Six Months Ended
	June 30, 2025		June 30, 2024
Management fees and salaries in research and development	$	41,680	$	372,786
Management fees and salaries in selling, general and administrative expenses		1,233,828		725,279
Share-based compensation in research and development		34,434		264,722
Share-based compensation in selling, general and administrative expenses		1,261,617		453,868
Total related party transactions	$	2,571,559	$	1,816,655

NOTE 13 – COMMITMENTS AND CONTINGENCIES

ALPHA-1062 Technology

In March 2015, the Company entered into the Memogain Technology License Agreement (“License Agreement”) with NLS for the exclusive right and license to further develop and exploit the ALPHA-1062, formerly Memogain, Technology. The License Agreement set out the consideration as follows:

●

The Company assumed all of NLS’s obligations under the Memogain Asset Purchase Agreement which consisted of cumulative total payments to Galantos Pharma GmbH of $11,742,000 (EUR 10,000,000), the cumulative total may be increased to $17,613,000 (EUR 15,000,000) subject to certain provisions, involving sub-licensing the ALPHA-1062 technology and Company the receiving an upfront out-licensing payment of no less than $9,394,000 (EUR 8,000,000). Royalty payments, are determined as follows (collectively the “Galantos Royalty Payments”):

3% of the net sales revenue received by the Company from the sale of any products relating to the ALPHA-1062 Technology;

10% of any sublicensing revenue; and

25% of an upfront payment or milestone payment paid by a sub-licensee to the Company;

●

Upon completion of the Galantos Royalty Payments, a royalty payment to NLS of 1% of the revenue received from the ALPHA-1062 Technology by the Company over $100 million per annum; and

●

The issuance of a promissory note of $1,400,000 to NLS (Note 7).

The expiration date is twenty years from the Commencement Date (March 15, 2035) or the expiration of the last patent obtained (existing patents extend through 2044) pursuant, whichever event shall last occur, unless earlier terminated pursuant to bankruptcy or insolvency of the licensee; court order against the licensee; or a winding up, liquidation or termination of the existence of the licensee occurs.

As of June 30, 2025, the Company has recognized royalty fees of $797,389, of which $755,944 has been paid.

On January 1, 2016, the Company assumed NLS’s obligations under a Royalty Agreement with Galantos Consulting dated August 31, 2013, which consist of cumulative total payments to Galantos Consulting of $2,348,000 (EUR 2,000,000), the cumulative total may be increased to $3,523,000 (EUR 3,000,000) subject to certain provisions, which is to be paid as follows (collectively the “Galantos Consulting Payments”):

●

1% of the net sales revenue received by the Company from the sale of any products relating to the ALPHA-1062 Technology;

●

2% of any sublicensing revenue; and

SEC Form 10-Q filed by Alpha Cognition Inc.