ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDIITION AND RESULTS OF OPERATIONS
The following discussion and analysis should
be read in conjunction with our audited consolidated financial statements for the fiscal year ended December 31, 2025, and the related
notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States. 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.
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For additional details regarding our business,
see the discussion under “Business” in Item 1 of Part I of this Annual Report on Form 10-K.
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 $820 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 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 were voluntarily
delisted from the CSE on December 17, 2024.
Operations
As of December 31, 2025, the Company had an accumulated
deficit of $97,106,775 which has been primarily financed by equity. The Company had $66,105,189 in cash and cash equivalents, including
restricted cash, and $9,130,075 in current liabilities (of which $44,464 is payable from the Company’s available restricted cash
balance) as of December 31, 2025. The Company’s continuing operations, as intended, are highly dependent upon its ability to obtain
additional funding and eventually positive generate 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.
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Licensing Revenue
License 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.
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, and royalty payments under license or purchase
agreements.
Prior to receiving FDA approval in July 2024, costs associated with
the manufacturing of ZUNVEYL were expensed as research and development expenses.
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:
● other expenses including travel and consulting services.
Selling, General and Administrative expenses
Selling, general and administrative expenses costs 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 attendance to various conferences. Personnel costs consist of salaries, benefits,
and share-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.
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Results of Operations
Comparison of the Year Ended December 31, 2025 and 2024
For the Year Ended December 31, Dollar Percentage
Revenue
Operating Expenses
Other income (expense)
Net loss per share, basic $ (1.17 ) $ (2.04 ) $ 0.87 (43 )
Net loss per share, diluted $ (1.18 ) $ (2.04 ) $ 0.86 (42 )
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Revenue
Comparison of Revenue for Year Ended December 31, 2025 and 2024
Revenue increased by $10,220,275, or 100%, from
$0 for the year ended December 31, 2024 to $10,220,275 for the year ended December 31, 2025. The increase is due to the start of commercial
sales of ZUNVEYL in the first quarter of 2025 and the Company’s entrance into the License, Collaboration and Distribution agreement
with CMSI (the “CMSI License Agreement”) pursuant to which the Company received a non-creditable upfront payment of $3 million
in January 2025, of which approximately $179,000 has been deferred. The Company expects that revenue from commercial sales of ZUNVEYL
will continue to grow year over year as the Company expands its sale force and implements its sale strategy in the coming fiscal year.
The Company is also eligible to receive up to $11 million in development and regulatory milestone payments with CMSI, as well as up to
$30 million sales milestone payments.
Cost of Product Sales and Cost of Licensing Revenue
Comparison of Cost of Sales and Cost of Licensing Revenue for
the Year Ended December 31, 2025 and 2024
Cost of product sales increased by $474,006, or
100%, from $0 for the year ended December 31, 2024 to $474,006 for the year ended December 31, 2025. The increase is due to the start
of commercial sales of ZUNVEYL in the first quarter of 2025. The Company expects that cost of product sales will continue to increase
year over year in relation to expected increased sales of ZUNVEYL in the coming fiscal year as the Company expands its sales of ZUNVEYL
however the Company does expect to realize some cost savings to scale as ZUNVEYL production and distribution in streamlined and potential
cost saving measures in sales strategy is realized in the coming year.
Cost of licensing revenue increased by $1,441,317,
or 100%, from $0 for the year ended December 31, 2024 to $1,441,317 for the year ended December 31, 2025. The increase is from salaries;
royalty payments, and pass-through-costs, such as consulting fees and active pharmaceutical ingredients, were allocated to activities
supporting the CMSI agreement. The Company expects that cost of licensing revenue will continue to decrease year over year until requirements
of the CMSI agreement have been fulfilled.
Research and Development expenses
Comparison of Research and Development for the Year Ended December
31, 2025 and 2024
Research and development expenses decreased by $2,052,440, or 52%,
from $3,920,412 for the year ended December 31, 2024, to $1,867,972 for the year ended December 31, 2025. The net change is due to decrease
is primarily due to lower product development costs of approximately $762,000, and less time allocated to management and employees, which
resulted in lower management fees and salaries, share-based compensation and employee costs of approximately $1.2 million.
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Selling, General and Administrative Expenses
Comparison of Selling, General and Administrative Expenses for the
Year Ended December 31, 2024 and 2023
Selling, general and administrative expenses increased
by $21,063,893 or 263%, from $8,012,230 for the year ended December 31, 2024, to $29,076,123, for the year ended December 31, 2025 In
support of the Company’s expansion in commercial operations and launch of ZUNVEYL, there has been an increase of $13.8 million in
management fees and salaries and employee costs, $2.4 million in marketing and commercial operations, increase in regulatory costs of
approximately $1.5 million and $1.1 million in other general and administrative expenses. Share-based compensation increased by approximately
$4 million primarily due to the grant options issued during the 2025 year end and fair value revaluation of CAD options. Consulting fees
have decreased by approximately $1,330,000 due to reduction in services for raising capital.
Interest Income
Interest income consists of interest earned and interest charges
on the Company’s cash and cash equivalents.
Interest income had a net change of $1,737,706 or 1,075% from interest income, net of $161,664 for the year ended December 31,
2024, to interest income, net of $1,899,370 for the year ended December 31, 2025.
Change in Fair Value of Derivative Liabilities and Conversion
of Convertible Debt
The Company used the Monte Carlo Simulation to
determine the fair value of the initial recognition of the convertible debentures and conversion feature liability in the 2024 year end.
Subsequent to the 2024 year end, the convertible debenture warrants were valued using the binomial lattice model to factor in the redemption
features associated with these warrants. This model requires the input of subjective assumptions including expected share price, volatility
and interest rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s net loss and
liabilities.
The Company uses the Black-Scholes Option Pricing
Model to determine the fair value of stock options, and derivative liabilities. This model requires the input of subjective assumptions
including expected share price volatility, interest rate, and forfeiture rate. Changes in the input assumptions can materially affect
the fair value estimate and the Company’s net loss and equity reserves.
The gain of $88,155 for the year ended December 31, 2025, for the fair
value of the warrant liabilities was a net change of $3,252,862, or 103%, compared to a loss of $3,164,707 for the year ended December
31, 2024. The net change is mainly attributable to the loss on recognition and revaluation of conversion feature liability of approximately
$2 million in the 2024 year end. The net change in the fair value of the warrants was primarily due to the fluctuation in the Company’s
stock price to the comparative period and the reallocation of the derivative for the 128,578 warrants exercised in the year ended December
31, 2025.
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, to generate capital to maintain its capacity
to meet working capital requirements. The Company has relied on debt and equity raises to finance its operating activities since incorporation.
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 ongoing 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.
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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:
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.
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In August 2025, the Company entered into an ATM
agreement with H.C. Wainright & Co., LLC as the sales agent. The Company currently has not utilized the ATM facility.
Until such time, as we can generate substantial product revenue, we
expect to finance our operations 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
us 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 September 24, 2024, the Company announced
the closing of a $4.545 million bridge financing through the issuance of convertible notes and warrants led by existing investors
and select new investors comprised of institutional funds and high-net-worth accredited investors.
On November 13, 2024, the Company completed a
public offering of common stock by issuing 8,695,653 common stock at a public offering price of $5.75 per share for gross proceeds of
approximately $50 million. In connection with the US public offering, the Company’s Common Stock began trading on The Nasdaq Capital
Market on November 12, 2024.
The completion of the public offering of common
stock was a “Qualified Offering” under the Company’s convertible notes, which automatically converted into 801,413 common
stock at closing of the public offering at a price of $5.75 per share, being the public offering price in the Qualified Offering. The
amount converted consisted of the converted principal amount of convertible notes and interest through November 13, 2024.
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Additionally, as a result of the closing of the
Qualified Offering, the Company issued an additional 215,421 warrants exercisable to acquire 215,421 Common Stock with an exercise price
of $7.19 per share and the exercise price of the Company’s existing 430,835 warrants issued in connection with the offering of the
convertible notes was repriced from $10.55 per share to $7.19 per share.
On December 12, 2024, the underwriter of the Company’s
underwritten U.S. public offering partially exercised its over-allotment option to purchase an additional 488,506 common stock at the
public offering price of $5.75 per share for additional gross proceeds of $2.8 million.
On October 2, 2025, the Company completed a public
offering of Common Stock by issuing 4,651,516 of Common Stock at a public offering price of $6.25 per share and 948,484 pre-funded warrants
exercisable to 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.
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 years ended December 31, 2025, and 2024:
For the Year Ended December 31, Dollar Percentage
Consolidated Statement of Cash Flows Data
Cash used in operating activities
Cash used in operating activities increased by $12,624,713 to $20,380,367
for the year ended December 31, 2025, from $7,755,654 for the comparative period. The purchase of API and manufacturing activity resulted
in higher cash outflows than the previous year of approximately $3.9 million. The increase is also related to in higher employee costs,
which increased by approximately $12.5 million, and commercial, marketing and other general and administrative costs increased by approximately
$2.4 million. As of December 31, 2025, there was accounts receivable balance of approximately $4.2 million, whereas in the previous year
period it was $0.
Cash used in investing activities
Cash used in investing activities increased by
$266,788 to $293,489 for the year ended December 31, 2025 from $26,701 compared to the comparative period. During the year ended December
31, 2025, investing activities consisted of acquiring computer equipment and software.
Cash provided by financing activities
Cash provided by financing activities for the year ended December 31,
2025, decreased by $16,636,901 compared to the comparative period. During the year ended December 31, 2025, financing activities primarily
consisted of raising net proceeds of $37,701,830 from stock and pre-funded warrants issued for cash, proceeds of $1,384,066 from the
exercise of options and warrants, principal repayment of the promissory note of $911,463 and receiving $174,675 in government grant proceeds
offset by $134,146 of related grant expenses. During the year ended December 31, 2024, financing activities primarily consisted of raising
proceeds of $56,541,384 from stock and units issued for cash, proceeds $4,545,000 from the issuance of convertible debentures offset by
issuance costs of $459,360, proceeds of $300,000 from the exercise of warrants and receiving $373,825 in government grant proceeds offset
by $446,366 of related expenses.
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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 14 – Commitments and Contingencies”
of the accompanying consolidated financial statements for a discussion of our contractual obligations and long-term commitments.
Contingencies
The Company did not have any contingencies as
of December 31, 2025, 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.
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.
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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.
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 7A. QUANTITATIVE AND QUALITATIVE DISCLSOURES
ABOUT MARKET RISK
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
The Report of Independent Registered Public Accounting Firm, our consolidated
financial statements and accompanying notes listed under Part IV, Item 15. Exhibits, Financial Statement Schedules of this Annual Report
on Form 10-K are set forth beginning on page F-1 immediately following the signature page hereof and incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
In connection with our change in accountants during
the fiscal year ended December 31, 2025, there were not any disagreements with our former accountant on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure, or any reportable event as described in paragraph (a)(1)(v)
of Item 304 of Regulation S-K.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
At the end of the period covered by this annual
report on Form 10-K for the fiscal year ended December 31, 2025, an evaluation was carried out under the supervision of and with
the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”),
of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) and
Rule 15d-15(e) under the Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that as of the end of the period
covered by this annual report, our disclosure controls and procedures were not effective in ensuring that: (i) information required
to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports
filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for
accurate and timely decisions regarding required disclosure.
Management determined that disclosure controls
and procedures were not effective due to the material weakness in our internal control over financial reporting, as described below, which
required us to correct certain accounting items in our audited financial statements.
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Management’s Report on Internal Control
Over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f)
and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial
officers and effected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal
control over financial reporting as of December 31, 2025. In making this assessment, management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013 Framework).
Based on this assessment and due to the material
weaknesses described below, management concluded that our internal control over financial reporting ineffective as of December 31, 2025.
Material Weaknesses and Plan to Remediate
The material weakness identified is a result of
a lack 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.
We plan to remediate the material weakness by
enhancing our system of internal control over financial reporting, including, but not limited to, engaging external technical accounting
experts to advise and review all complex accounting transactions, ensuring appropriate analysis, documentation, and oversight prior to
the finalization of our financial statements, implementing an accounting standards compliance process to ensure timely adoption and assessment
of evolving accounting standards, and strengthening financial disclosure resources those involving the third-party valuation specialist.
Although we are committed to continuing to improve our internal control processes and intend to remediate our material weaknesses, we
recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving
their objectives.
Changes in Internal Control over Financial
Reporting
Other than the ongoing steps being taken to implement
the remediation plan described above, there has been no other changes in our internal control over financial reporting during the quarter
ended December 31, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION
(a) None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS
Not applicable.
107
PART III
Item
10. Directors, Executive Officers and Corporate Governance.
The
information required by this Item 10 will be included in our definitive proxy statement (the “Proxy Statement”) to be filed
with the SEC with respect to our 2026 Annual Meeting of Stockholders and is incorporated herein by reference.
Item
11. Executive Compensation.
The
information required by this Item 11 will be included in our Proxy Statement and is incorporated herein by reference.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The
information required by this Item 12 will be included in the Security Ownership of Certain Beneficial Owners and Management sections
of our Proxy Statement and is incorporated herein by reference.
Item
13. Certain Relationships and Related Transactions, and Director Independence.
The
information required by this Item 13 will be included in our Proxy Statement and is incorporated herein by reference.
Item
14. Principal Accountant Fees and Services.
Our
independent public accounting firm is CBIZ CPAs P.C. New York, New York, USA, PCAOB Auditor ID: 199.
The
information required by this Item 14 will be included in our Proxy Statement and is incorporated herein by reference.
108
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS
SCHEDULES
109
(3) Exhibits. The following exhibits are filed as part of this report:
Exhibit Number Description
110
111
23.1 Consent of CBIZ CPAs P.C.
23.2 Consent of Manning Elliott
101.SCH(1) XBRL Taxonomy Extension – Schema
101.CAL(1) XBRL Taxonomy Extension – Calculations
101.DEF(1) XBRL Taxonomy Extension – Definitions
101.LAB(1) XBRL Taxonomy Extension – Labels
101.PRE(1) XBRL Taxonomy Extension – Presentations
* Filed herewith
# Indicates management contract or compensatory plan
ITEM 16. FORM 10-K SUMMARY
None.
112
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) 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: March 31, 2026 By: /s/ Michael McFadden
Michael McFadden,
Chief Executive Officer
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated:
Signature Capacity Date
/s/ Michael McFadden Chief Executive Officer and Director March 31, 2026
Michael McFadden (Principal Executive Officer)
Henry Du (Principal Accounting and Financial Officer)
/s/ Len Mertz Director March 31, 2026
Len Mertz
/s/ Kenneth Cawkell Director March 31, 2026
Kenneth Cawkell
/s/ Robert Wills Director March 31, 2026
Robert Wills
/s/ Phillip Mertz Director March 31, 2026
Phillip Mertz
/s/ Rajeev Bakshi Director March 31, 2026
Rajeev Bakshi
113
ALPHA COGNITION INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements as of and for the Years Ended December
31, 2025 and 2024:
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID:199) F-2
Consolidated Balance Sheets F-4
Consolidated Statements of Operations and Comprehensive Loss F-5
Consolidated Statements of Stockholders’ Equity (Deficiency) F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-9
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
Alpha Cognition, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Alpha
Cognition, Inc. (the “Company”) as of December 31, 2025, and the related consolidated statements of operations and comprehensive
loss, stockholders’ equity (deficiency) and cash flows for the year ended December 31, 2025, and the related notes (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the
year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ CBIZ CPAs P.C.
CBIZ CPAs P.C.
We have served as the Company’s auditor since 2025
San Diego, California
March 31, 2026
F-2
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors Alpha Cognition Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Alpha
Cognition Inc. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements
of operations and comprehensive loss, stockholders’ equity (deficiency) and cash flows for the years then ended, and the related
notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for
our opinion.
CHARTERED PROFESSIONAL ACCOUNTANTS
/s/ Manning Elliott LLP
Vancouver, Canada
March 31, 2025, except as to Note 2A, as to which the date is March
31, 2026
We have served as the Company’s auditor since 2019
F-3
ALPHA COGNITION INC.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
ASSETS
Current assets
Accounts receivable, net 4,236,136 -
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of promissory note - related party - 911,463
Current deferred income 153,171 -
Stockholders’ equity
The accompanying notes to the consolidated financial
statements are an integral part of these statements.