Alpha Cognition Inc

Previous wording

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements for the three and six months ended June 30,2024, 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.”

Current wording

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements for the three and nine months ended September 30,2024, 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.”

Previous wording

The Company is a biopharmaceutical company dedicated to developing treatments for patients suffering from neurodegenerative diseases, such as Alzheimer’s disease (“Alzheimer’s disease” or “AD”), for which there are limited or no treatment options. On July 26, 2024, the Company received approval by the FDA of the Company’s New Drug Application (the “NDA”) for ZUNVEYL® (benzgalantamine) previously known as ALPHA-1062 (“ZUNVEYL” or “ALPHA-1062”) oral tablet formulation for the treatment of mild-to-moderate Alzheimer’s disease. The Company will now focus on the development of commercial manufacturing and commercial sales of ZUNVEYL oral tablet formulation. The Company’s commercial development program for ZUNVEYL is primarily focused on building a long term care commercial team that can focus on providing key points of differentiation, exploiting key issues with existing AChEI treatments, and franchising potential additional indications and new products. The company will target largest volume nursing homes specializing in Alzheimer’s, leveraging an account based sales team with demonstrated success in LTC, positioning ZUNVEYL with Medicare payors, and working with strategic and clinical partnerships with consultant pharmacists and long term care pharmacies. The Company has three additional pre-clinical development programs: ZUNVEYL in combination with memantine for the treatment of moderate-to-severe Alzheimer’s disease, ALPHA-1062 sublingual formulation, ALPHA-1062 intranasal (“ALPHA-1062IN”) formulation for the treatment of cognitive impairment with mild traumatic brain injury (mTBI; otherwise known as concussion) and 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).

Current wording

The Company is a biopharmaceutical company dedicated to developing treatments for patients suffering from neurodegenerative diseases, such as Alzheimer’s disease (“Alzheimer’s disease” or “AD”), for which there are limited or no treatment options. On July 26, 2024, the Company received approval by the FDA of the Company’s New Drug Application (the “NDA”) for ZUNVEYL® (benzgalantamine) previously known as ALPHA-1062 (“ZUNVEYL” or “ALPHA-1062”) oral tablet formulation for the treatment of mild-to-moderate Alzheimer’s disease. The Company will now focus on the development of commercial manufacturing and commercial sales of ZUNVEYL oral tablet formulation. The Company’s commercial development program for ZUNVEYL is primarily focused on building a long-term care commercial team that can focus on providing key points of differentiation, exploiting key issues with existing AChEI treatments, and franchising potential additional indications and new products. The company will target 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. The company’s anticipated launch is in Q1 2025. Alpha Cognition has set the Wholesale Acquisition Cost (WAC) for its latest therapeutic product at $649 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: ZUNVEYL in combination with memantine for the treatment of moderate-to-severe Alzheimer’s disease, ALPHA-1062 sublingual formulation, ALPHA-1062 intranasal (“ALPHA-1062IN”) formulation for the treatment of cognitive impairment with mild traumatic brain injury (mTBI; otherwise known as concussion) and 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).

Previous wording

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 shares commenced trading on the CSE under the symbol “ACOG”, previously the Company’s shares were traded on the TSX-V until April 28, 2023, when the Company had them delisted. The Company’s shares also quoted for trading on the OTCQB under the trading symbol “ACOGF”.

Current wording

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 shares commenced trading on the CSE under the symbol “ACOG”, previously the Company’s shares 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 shares commenced trading on The Nasdaq Capital Market under the symbol “ACOG”, previously the Company’s common shares were quoted for trading on the OTCQB under the trading symbol “ACOGF”.

Previous wording

The Company has not generated revenues from its operations to date and as of June 30, 2024, and had a deficit of $68,766,396 (December 31, 2023 – $61,648,173) which has been primarily financed by equity. The Company had $1,194,183 in cash and cash equivalents, including restricted cash, and $1,571,135 in current liabilities (of which $175,321 is payable from the Company’s available restricted cash balance) as of June 30, 2024. The Company’s continuing operations, as intended, are highly dependent upon its ability to obtain additional funding and eventually generate cash flows. Management is of the opinion that it does not 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”), commercialization of ZUNVELY and operating costs. Possible sources of such capital may come from private placements and public offerings of the Company’s common shares and funds received from the exercise of warrants and share 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. These factors indicate the existence of a material uncertainty which causes significant doubt in the ability of the Company to continue as a going concern.

Current wording

The Company has not generated revenues from its operations to date and as of September 30, 2024, and had a deficit of $70,626,302 (December 31, 2023 – $61,648,173) which has been primarily financed by equity. The Company had $3,666,389 in cash and cash equivalents, including restricted cash, and $3,005,836 in current liabilities (of which $107,010 is payable from the Company’s available restricted cash balance) as of September 30, 2024. The Company’s continuing operations, as intended, are highly dependent upon its ability to obtain additional funding and eventually generate cash flows. Management is of the opinion that it does not 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”), commercialization of ZUNVEYL and operating costs. Possible sources of such capital may come from private placements and public offerings of the Company’s common shares and funds received from the exercise of warrants and share 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. These factors indicate the existence of a material uncertainty which causes significant doubt in the ability of the Company to continue as a going concern.

Previous wording

The Company received grant revenue from the Army Medical Research and Material Command on June 5, 2023, for a pre-clinical study on the use of the ALPHA-1062 Intranasal to reduce blast of mTBI induced functional deficit and brain abnormalities. All funds relating to government grants are being recorded under the gross method of accounting for government grants whereby any income received and associated expenses incurred will be reported as grant income and included in research and development expenses, respectively on the statement of operations and comprehensive loss. When grant proceeds are initially received, they are recorded as deferred income and restricted cash. Grant proceeds used to pay for study costs and are expensed as incurred, with a corresponding amount of grant revenue recorded along with a reduction of the balance of the deferred income liability. The Company classifies the balance of cash received from grants as restricted cash, when the proceeds from the grant have been designated for use in specified research. During the three months ended June 30, 2024 and June 30, 2023, the Company recorded grant income of $138,561 and $0, respectively and during the six months ended June 30, 2024, and June 30, 2023, the Company recorded grant income of $272,340 and $0, respectively, from its R&D Grant in the consolidated statements of operations and comprehensive loss.

Current wording

The Company received grant revenue from the Army Medical Research and Material Command on June 5, 2023, for a pre-clinical study on the use of the ALPHA-1062 Intranasal to reduce blast of mTBI induced functional deficit and brain abnormalities. All funds relating to government grants are being recorded under the gross method of accounting for government grants whereby any income received and associated expenses incurred will be reported as grant income and included in research and development expenses, respectively on the statement of operations and comprehensive loss. When grant proceeds are initially received, they are recorded as deferred income and restricted cash. Grant proceeds used to pay for study costs and are expensed as incurred, with a corresponding amount of grant revenue recorded along with a reduction of the balance of the deferred income liability. The Company classifies the balance of cash received from grants as restricted cash, when the proceeds from the grant have been designated for use in specified research. During the three months ended September 30, 2024 and September 30, 2023, the Company recorded grant income of $61,122 and $32,757, respectively and during the nine months ended September 30, 2024, and September 30, 2023, the Company recorded grant income of $333,462 and $32,757, respectively, from its R&D Grant in the consolidated statements of operations and comprehensive loss.

Previous wording

Research and development expenses decreased by $276,026, or 22%, from $1,246,226 for the three months ended June 30, 2023, to $967,200 for the three months ended June 30, 2024. Research and development costs decreased primarily due to lower product development costs and consulting fees for ALPHA-1062 in AD following the submission of the NDA filed in September of 2023, offset by grant expenses of $138,561 which were incurred in 2024 following the receipt of the DOD grant in June 2023, and increased management fees and salaries. The Company’s research and development expenses are summarized below:

Current wording

Research and development expenses decreased by $433,687, or 30%, from $1,429,716 for the three months ended September 30, 2023, to $996,029 for the three months ended September 30, 2024. Research and development costs decreased primarily due to lower product development costs and consulting fees for ALPHA-1062 in AD, offset by grant expenses of $61,122 which were incurred in 2024 following the receipt of the DOD grant in June 2023, and increased management fees and salaries. The Company’s research and development expenses are summarized below:

Previous wording

Comparison of Research and Development for the Six Months ended June 30, 2024 and 2023

Current wording

Comparison of Research and Development for the Nine months ended September 30, 2024 and 2023

Previous wording

Research and development expenses decreased by $460,248, or 20%, from $2,344,164 for the six months ended June 30, 2023, to $1,883,916 for the six months ended June 30, 2024. Research and development costs decreased primarily due to lower product development costs including clinical trial costs and consulting fees for ALPHA-1062 in AD following the submission of the NDA filed in September of 2023, offset by grant expenses of $272,340 which were incurred in 2024 following the receipt of the DOD grant in June 2023 and increased management fees and salaries. The Company’s research and development expenses are summarized below:

Current wording

Research and development expenses decreased by $893,935, or 24%, from $3,773,880 for the nine months ended September 30, 2023, to $2,879,945 for the nine months ended September 30, 2024. Research and development costs decreased primarily due to lower product development costs including clinical trial costs and consulting fees for ALPHA-1062 in AD following the submission of the NDA filed in September of 2023, offset by grant expenses of $333,462 which were incurred in 2024 following the receipt of the DOD grant in June 2023 and increased management fees and salaries. The Company’s research and development expenses are summarized below:

Previous wording

General and administrative expenses decreased by $27,821 or 2%, from $1,481,832 for the three months ended June 30, 2023, to $1,454,011, for the three months ended June 30, 2024. Management fees and salaries, professional fees, registrar and filing fees, investor relations and other general and administrative costs were primarily higher in the three months ended June 30, 2024, in support of the Company’s NDA filing for ALPHA-1062 and general business operating support. Share-based compensation was lower primarily due to fluctuations in the Company stock price and accounting for equity awards that were issued after June 30, 2023. The following table depicts the fluctuation in the general and administrative accounts:

Current wording

General and administrative expenses increased by $155,558 or 12%, from $1,336,197 for the three months ended September 30, 2023, to $1,491,755, for the three months ended September 30, 2024. Consulting fees, financing fees, registrar and filing fees, investor relations and other general and administrative costs were primarily higher in the three months ended September 30, 2024, in support of the Company’s US IPO filing and general business operating support. Share-based compensation was lower primarily due to fluctuations in the Company stock price and accounting for equity awards that were issued after September 30, 2023. The following table depicts the fluctuation in the general and administrative accounts:

Previous wording

Comparison of General and Administrative Expenses for the Six Months ended June 30, 2024 and 2023

Current wording

Comparison of General and Administrative Expenses for the Nine months ended September 30, 2024 and 2023

Previous wording

General and administrative expenses increased by $2,578,572or 109%, from $2,370,241for the six months ended June 30, 2023, to $4,948,813, for the six months ended June 30, 2024, primarily due to the increase in expenses related to consulting fees, management fees and salaries, professional fees, investor relations and registrar and filing fees. Consulting fees during the six months ended June 30, 2024, included $2,273,949 relating to the issuance of 727,914 Common Shares pursuant to the Spartan Consulting Agreement. Management fees and salaries, professional fees, registrar and filing fees, investor relations were primarily higher in the six months ended June 30, 2024, in support of the Company’s NDA filing for ALPHA-1062 and general business operating support. Share-based compensation was lower primarily due to fluctuations in the Company stock price and accounting for equity awards that were issued after June 30, 2023. The following table depicts the fluctuation in the general and administrative accounts:

Current wording

General and administrative expenses increased by $2,696,406 or 72%, from $3,744,162 for the nine months ended September 30, 2023, to $6,440,568, for the nine months ended September 30, 2024, primarily due to the increase in expenses related to consulting fees, financing fees, professional fees, investor relations and registrar and filing fees. Consulting fees during the nine months ended September 30, 2024, included $2,273,949 relating to the issuance of 582,331 Common Shares pursuant to the Spartan Consulting Agreement. Management fees and salaries, professional fees, registrar and filing fees, investor relations were primarily higher in the nine months ended September 30, 2024, in support of the Company’s NDA filing for ALPHA-1062, the US IPO filing and general business operating support. Share-based compensation was lower primarily due to fluctuations in the Company stock price and accounting for equity awards that were issued after September 30, 2023. The following table depicts the fluctuation in the general and administrative accounts:

Previous wording

The foreign exchange gain (loss) changes by $(11,440), or (63)%, from a loss of $18,302 for the three months ended June 30, 2023, to a loss of $6,682 for the three months ended June 30, 2024. The foreign exchange (loss) gain increased by $31,208, or 21%, from a gain of $9,717 as of June 30, 2023, to a loss of $21,491 as of June 30, 2024, due primarily to the fluctuations in exchange rate between the Canadian Dollar and the U.S. Dollar. This variance is largely due to the Company changing its functional currency from the CAD to the USD on August 31, 2023, therefore having less transactions needing to be denominated in a foreign currency. The change in mix and balance of the Company’s assets and liabilities over the periods also impacted the changes in foreign currency exchange (loss) gain.

Current wording

The foreign exchange gain (loss) changes by $5,086, or 38%, from a loss of $13,301 for the three months ended September 30, 2023, to a loss of $8,217 for the three months ended September 30, 2024. The foreign exchange loss increased by $26,124, or 729%, from a loss of $3,584 as of September 30, 2023, to a loss of $29,708 as of September 30, 2024, due primarily to the fluctuations in exchange rate between the Canadian Dollar and the U.S. Dollar. This variance is largely due to the Company changing its functional currency from the CAD to the USD on August 31, 2023, therefore having less transactions needing to be denominated in a foreign currency. The change in mix and balance of the Company’s assets and liabilities over the periods also impacted the changes in foreign currency exchange (loss) gain.

Previous wording

Interest income decreased $15, or 1%, from $2,175 for the three months ended June 30, 2023, to $2,160 for the three months ended June 30, 2024. Interest income increased $11,883, or 506%, from $2,347 for the six months ended June 30, 2023, to $14,230 for the six months ended June 30, 2024.

Current wording

Interest income decreased $796, or 29%, from $2,172 for the three months ended September 30, 2023, to $1,916 for the three months ended September 30, 2024. Interest income increased $11,087, or 219%, from $5,059 for the nine months ended September 30, 2023, to $16,146 for the nine months ended September 30, 2024.

Previous wording

The Company received grant revenue from the Army Medical Research and Material Command on June 5, 2023, for a pre-clinical study on the use of the ALPHA-1062 Intranasal to reduce blast of mTBI induced functional deficit and brain abnormalities. During the three and six months ended June 30, 2024, the Company recorded grant income of $138,561 and $272,340, respectively, from its R&D Grant, no grant income was reported in the comparable 2023 periods.

Current wording

The Company received grant revenue from the Army Medical Research and Material Command on June 5, 2023, for a pre-clinical study on the use of the ALPHA-1062 Intranasal to reduce blast of mTBI induced functional deficit and brain abnormalities. During the three months ended September 30, 2024 and 2023, the Company recorded grant income of $61,122 and $32,757, respectively. During the nine months ended September 30, 2024 and 2023, the Company recorded grant income of $333,462 and $32,757, respectively.

Previous wording

Interest expense increased $13,683, or 893%, from $1,533 for the three months ended June 30, 2023, to $15,216 for the three months ended June 30, 2024. Interest expense increased $19,066, or 433%, from $4,408 for the six months ended June 30, 2023, to $23,474 for the six months ended June 30, 2024, following the increase in interest rates on the NLS note which occurred in 2023. Interest expense relates primarily to the interest paid on the NLS promissory note.

Current wording

Interest expense increased $9,072, or 94%, from $9,607 for the three months ended September 30, 2023, to $18,679 for the three months ended September 30, 2024. Interest expense increased $28,136, or 201%, from $14,017 for the nine months ended September 30, 2023, to $42,153 for the nine months ended September 30, 2024, following the increase in interest rates on the NLS note which occurred in 2023. Interest expense relates primarily to the interest paid on the NLS promissory note and the accrued interest for the convertible debentures.

Previous wording

During the three and six months ended June 30, 2024, the Company recorded an impairment of intangible assets of $0 and $39,166, respectively, from the impairment of the ALPHA-0602 license as the Company decided to discontinue development of the ALPHA-602 technology, no impairments were reported in the comparable 2023 periods.

Current wording

During the three and nine months ended September 30, 2024, the Company recorded an impairment of intangible assets of $0 and $39,166, respectively, from the impairment of the ALPHA-0602 license as the Company decided to discontinue development of the ALPHA-602 technology, no impairments were reported in the comparable 2023 periods.

Previous wording

The gain of $187,056 for the three months ended June 30, 2024 for the fair value of the warrant liability was a net change of $258,912, or 360%, compared to a loss of $71,856 for the three months ended June 30, 2023. The loss of $432,933 for the six months ended June 30, 2024 for the fair value of the warrant liability was a net change of $416,275, or 2499%, compared to a loss of $16,658 for the six months ended June 30, 2023. The change was primarily due to the fluctuation in the Company’s stock price as well as the volatility of the financial markets, coupled with the addition of new warrants issued during the first quarter of 2023 which were priced differently that the Company’s functional currency at the time of issuance.

Current wording

The gain of $416,806 for the three months ended September 30, 2024 for the fair value of the warrant liabilities was a net change of $932,577, or 181%, compared to a loss of $515,771 for the three months ended September 30, 2023. The loss of $16,127 for the nine months ended September 30, 2024 for the fair value of the warrant liabilities was a net change of $516,302, or 97%, compared to a loss of $532,429 for the nine months ended September 30, 2023. The change was primarily due to the fluctuation in the Company’s stock price as well as the volatility of the financial markets, coupled with the addition of new warrants issued during the first quarter of 2023 which were priced differently that the Company’s functional currency at the time of issuance and new warrants issued during the third quarter of 2024 which have a variable exercise price.

Previous wording

The Company recorded a provision for loan losses of $55,000 relating to its loan to Alpha Seven during the six months ended June 30, 2024, following a delay in Alpha Seven’s initial capital raise and therefore potential inability to repay the loan when due.

Current wording

The Company recorded a provision for loan losses of $55,000 relating to its loan to Alpha Seven during the nine months ended September 30, 2024, following a delay in Alpha Seven’s initial capital raise and therefore potential inability to repay the loan when due.

Previous wording

For the three months ended June 30, 2024, the currency translation adjustments recorded decreased $27,898, or 100%, from a gain of $27,898 to $nil. The currency translation adjustment was $(8,341) for June 30, 2023, compared to $nil for the six months ended June 30, 2024. The change is due to the Company changing its functional currency from the CAD to the USD on August 31, 2023, resulting in no currency translation adjustment being required after August 31, 2023.

Current wording

For the three months ended September 30, 2024, the currency translation adjustments recorded increased $11,232, or 100%, from a loss of $11,232 to $nil. The currency translation adjustment was $(19,573) for September 30, 2023, compared to $nil for the nine months ended September 30, 2024. The change is due to the Company changing its functional currency from the CAD to the USD on August 31, 2023, resulting in no currency translation adjustment being required after August 31, 2023.

Previous wording

Based upon our current operating plan, we estimate that our existing cash, cash equivalents and marketable securities as of the date of this filing, will not be sufficient to fund our projected base ongoing operating expenses, the initial costs to prepare for commercialization of ZUNVEYL in AD, planned CMC costs, ongoing operating costs and capital expenditures through at least the next 12 months. We expect to look to raise additional capital to continue to further advance our commercialization plans and ongoing operating costs. However, we 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 is also contemplating raising additional capital by pursuing both dilutive and non-dilutive strategic sources of capital; to fully execute its commercial and operating plans following receipt of the NDA approval for ZUNVEYL from the FDA. Any additional capital would further support our planned costs to begin commercial activities including launching U.S. sales of ZUNVEYL in AD.

Current wording

Based upon our current operating plan, we estimate that our existing cash, cash equivalents and marketable securities as of the date of this filing, will be sufficient to fund our projected base ongoing operating expenses, the initial costs to prepare for commercialization of ZUNVEYL in AD, planned CMC costs, ongoing operating costs and capital expenditures through at least the next 24 months. We expect to look to raise additional capital to continue to further advance our commercialization plans and ongoing operating costs. However, we 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 is also contemplating raising additional capital by pursuing both dilutive and non-dilutive strategic sources of capital; to fully execute its commercial and operating plans following receipt of the NDA approval for ZUNVEYL from the FDA. Any additional capital would further support our planned costs to begin commercial activities including launching U.S. sales of ZUNVEYL in AD.

Previous wording

We have no other committed sources of capital. Until such time, if ever, we can generate substantial product revenue, we expect to finance our operations through equity offerings, debt financings, or 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 accpetable 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 through the sale of equity or convertible debt securities, 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 acquisition, 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.

Current wording

We have no other committed sources of capital. Until such time, if ever, we can generate substantial product revenue, we expect to finance our operations through equity offerings, debt financings, or 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 through the sale of equity or convertible debt securities, 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 acquisition, 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.

Previous wording

During the first quarter of 2023 the Company completed the brokered private placement by issuing 23,747,648 units at a price of CAD$0.255 for total proceeds of $4,506,055 (CAD$6,055,650) with each unit consisting of one Common share and one warrant exercisable at a price of CAD$0.39 per warrant for a term of 5 years from the closing date (“Q1 2023 PP”).

Current wording

During the first quarter of 2023 the Company completed the brokered private placement by issuing 949,906 units at a price of CAD$6.38 for total proceeds of $4,506,055 (CAD$6,055,650) with each unit consisting of one Common share and one warrant exercisable at a price of CAD$9.75 per warrant for a term of 5 years from the closing date (“Q1 2023 PP”).

Previous wording

On May 30, 2023, the Company announced a best-efforts private placement offering of up to $6,500,000 of units at the initial pricing of $0.22 per unit (“Q2 2023 PP”). Each unit consists of one common share and one-half of a warrant. Each whole warrant will entitle the holder to purchase an additional common share of the Company at the initial pricing of $0.31 per share for a period of three years from the closing date. The aggregate proceeds may be increased by 30% to accommodate any overallotment. The Company also announced that it entered into an Investment Banking Agreement (“IBA”) with Spartan Securities LLC (“Spartan”) pursuant to which Spartan will act as agent on a best-efforts basis in connection with the Q2 2023 PP. In accordance with the Q2 2023 PP, the Company has agreed to pay Spartan cash commissions of 10% of the gross proceeds, issue Spartan finder’s warrants equal to 10% of the number of the warrants issued to investors, in each case excluding investors on the Company’s president’s list and pay Spartan a non-accountable expense fee equal to 5% of the gross proceeds of the Q2 2023 PP excluding the president’s list.

Current wording

On May 30, 2023, the Company announced a best-efforts private placement offering of up to $6,500,000 of units at the initial pricing of $5.50 per unit (“Q2 2023 PP”). Each unit consists of one common share and one-half of a warrant. Each whole warrant will entitle the holder to purchase an additional common share of the Company at the initial pricing of $7.75 per share for a period of three years from the closing date. The aggregate proceeds may be increased by 30% to accommodate any overallotment. The Company also announced that it entered into an Investment Banking Agreement (“IBA”) with Spartan Securities LLC (“Spartan”) pursuant to which Spartan will act as agent on a best-efforts basis in connection with the Q2 2023 PP. In accordance with the Q2 2023 PP, the Company has agreed to pay Spartan cash commissions of 10% of the gross proceeds, issue Spartan finder’s warrants equal to 10% of the number of the warrants issued to investors, in each case excluding investors on the Company’s president’s list and pay Spartan a non-accountable expense fee equal to 5% of the gross proceeds of the Q2 2023 PP excluding the president’s list.

Previous wording

Cash used in operating activities increased by $1,291,639 to $3,832,469 for the six months ended June 30, 2024, from $5,165,453 for the comparative period. The increase in cash flows from operating activities represents the effect on cash flows from net losses adjusted for items not affecting cash, principally amortization and depreciation, accrued expenditures for government grant, share-based compensation, impairment of intangible assets, provision for loan losses, shares issued for services, and the changes in the value of warrant liability and bonus rights liability, in addition to net changes in non-cash balances related to working capital items.

Current wording

Cash used in operating activities decreased by $1,317,244 to $5,451,927 for the nine months ended September 30, 2024, from $6,769,171 for the comparative period. The change in cash flows from operating activities represents the effect on cash flows from net losses adjusted for items not affecting cash, principally amortization and depreciation, accrued expenditures for government grant, share-based compensation, impairment of intangible assets, provision for loan losses, shares issued for services, and the changes in the value of conversion feature liability, warrant liabilities, and bonus rights liability, in addition to net changes in non-cash balances related to working capital items.

Previous wording

There were no investing activities that occurred during the six months ended June 30, 2024, or 2023.

Current wording

There were no investing activities that occurred during the nine months ended September 30, 2024, or 2023.

Previous wording

Cash provided by financing activities for the six months ended June 30, 2024, decreased by $743,445 compared to the comparative period. During the six months ended June 30, 2024, financing activities primarily consisted of raising proceeds of $3,732,469 from units issued for cash and receiving $290,825 in government grant proceeds offset by $205,917 of related grant expenses. The funds raised under financing activities were offset by share issuance costs of $405,753. During the six months ended June 30, 2023, financing activities primarily consisted of raising proceeds of $4,506,055 from units issued for cash offset by share issuance costs of $208,686.

Current wording

Cash provided by financing activities for the nine months ended September 30, 2024, increased by $2,117,341 compared to the comparative period. During the nine months ended September 30, 2024, financing activities primarily consisted of raising proceeds of $3,732,469 from units issued for cash, raising proceeds of $4,545,000 from the issuance of convertible debentures, and receiving $373,825 in government grant proceeds offset by $357,228 of related grant expenses. The funds raised under financing activities were offset by share issuance costs of $405,753 and debt issuance costs of $459,360. During the nine months ended September 30, 2023, financing activities primarily consisted of raising proceeds of $5,851,148 from units issued for cash offset by share issuance costs of $394,736.

Previous wording

The Company did not have any contingencies as at June 30, 2024, or the date of this report.

Current wording

The Company did not have any contingencies as of September 30, 2024, or the date of this report.

Previous wording

We continue to assess the ability to continue as a going concern, which involves management judgement and analysis of resources and prospects. The Company has reported negative cash flow from operating activities since inception and expects to experience negative operating cash flows for the foreseeable future. The Company has not generated revenues from its operations to date and as at June 30, 2024, had a deficit of $68,766,396 (December 31, 2023 - $61,648,173) which has been primarily financed by equity. The Company had $1,194,183 in cash and restricted cash and $1,571,135 in current liabilities (of which $146,423 is payable from the Company’s available restricted cash balance) as of June 30, 2024. The Company’s continuing operations, as intended, are highly dependent upon its ability to obtain additional funding and generate cash flows. Based upon our current operating plan we estimate that our existing cash, cash equivalents and marketable securities as of the date of this filing would not be sufficient to fund our projected base ongoing operating expenses, the initial costs to prepare for commercialization of ZUNVEYL in AD, planned CMC costs, ongoing operating costs and capital expenditures through at least the next 12 months. We expect to look to raise additional capital to continue to further advance our commercialization plans and ongoing operating costs. However, we 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 is also contemplating raising additional capital by pursuing both dilutive and non-dilutive strategic sources of capital; to fully execute its commercial and operating plans following receipt of the NDA approval for ZUNVEYL from the FDA. Any additional capital would further support our planned costs to begin commercial activities including launching U.S. sales of ZUNVEYL in AD.

Current wording

We continue to assess the ability to continue as a going concern, which involves management judgement and analysis of resources and prospects. The Company has reported negative cash flow from operating activities since inception and expects to experience negative operating cash flows for the foreseeable future. The Company has not generated revenues from its operations to date and as of September 30, 2024, had a deficit of $70,626,302 (December 31, 2023 - $61,648,173) which has been primarily financed by equity. The Company had $3,773,399 in cash and restricted cash and $3,005,836 in current liabilities (of which $56,233 is payable from the Company’s available restricted cash balance) as of September 30, 2024. The Company’s continuing operations, as intended, are highly dependent upon its ability to obtain additional funding and generate cash flows. Based upon our current operating plan and our closing of our public offering of common shares for approximately $46.42 million in net proceeds on November 13, 2024, we estimate that our existing cash, cash equivalents and marketable securities as of the date of this filing would be sufficient to fund our projected base ongoing operating expenses, the initial costs to prepare for commercialization of ZUNVEYL in AD, planned CMC costs, ongoing operating costs and capital expenditures through at least the next 12 months. However, we may look to raise additional capital to continue to further advance our commercialization plans and ongoing operating costs through a debt financing in the next 12 months. We 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 is also contemplating raising additional capital by pursuing both dilutive and non-dilutive strategic sources of capital; to fully execute its commercial and operating plans following receipt of the NDA approval for ZUNVEYL from the FDA. Any additional capital would further support our planned costs to begin commercial activities including launching U.S. sales of ZUNVEYL in AD.