Alpha Cognition Inc(ACOG) - 2024 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Condensed Consolidated Financial Statements This section presents the unaudited interim consolidated financial statements for Alpha Cognition Inc. as of September 30, 2024, and for the three and nine-month periods then ended, including balance sheets, statements of operations, statements of stockholders' deficiency, and statements of cash flows, along with detailed notes explaining the company's financial position, operational results, and significant accounting policies, covering key events such as FDA approval of ZUNVEYL, recent financing activities, and a change in functional currency to USD Condensed Consolidated Balance Sheets As of September 30, 2024, the company's total assets increased to $5.03 million from $2.45 million at year-end 2023, primarily due to a rise in cash and cash equivalents, while total liabilities also increased to $7.95 million from $7.16 million, driven by the issuance of convertible debentures, with the company remaining in a stockholders' deficiency position, which improved from a deficiency of $4.70 million to $2.92 million Condensed Consolidated Balance Sheet Data (Unaudited) | Balance Sheet Items | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $5,028,072 | $2,452,170 | | Cash and cash equivalents | $3,666,389 | $1,404,160 | | Total Liabilities | $7,947,703 | $7,155,865 | | Convertible debentures, net | $1,002,874 | - | | Warrant liabilities | $2,449,478 | $4,455,747 | | Total Stockholders' Deficiency | ($2,919,631) | ($4,703,695) | Condensed Interim Consolidated Statements of Operations and Comprehensive Loss For the nine months ended September 30, 2024, the company reported a net loss of $9.0 million, or ($1.51) per share, compared to a net loss of $8.0 million, or ($2.23) per share, for the same period in 2023, with the increased loss driven by higher general and administrative expenses, partially offset by lower research and development costs as the company transitions towards commercialization Statement of Operations Highlights (Unaudited) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Research and development | $2,879,945 | $3,773,880 | | General and administrative expenses | $6,440,568 | $3,744,162 | | Net Operating Loss | ($9,320,513) | ($7,518,042) | | Net Loss | ($8,978,129) | ($8,030,256) | | Net Loss Per Share | ($1.51) | ($2.23) | Condensed Interim Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, net cash used in operating activities was $5.5 million, while net cash provided by financing activities was $7.7 million, primarily from the issuance of units for cash and proceeds from convertible debentures, resulting in a net increase in cash and cash equivalents of $2.3 million, ending the period with a balance of $3.8 million Cash Flow Summary (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($5,451,927) | ($6,769,171) | | Net cash provided by financing activities | $7,730,753 | $5,613,412 | | Change in cash and cash equivalents | $2,278,826 | ($1,175,332) | | Cash and cash equivalents, end of period | $3,773,399 | $908,364 | Notes to Condensed Interim Consolidated Financial Statements The notes provide critical details on the company's operations, accounting policies, and financial items, including the FDA approval for ZUNVEYL, a reverse stock split, a significant public offering subsequent to the reporting period, and the company's assessment of its going concern status, which management believes is secured for the next 12 months following the recent financing, along with other significant notes detailing R&D grants, related party transactions, convertible debentures, and commitments related to technology licenses - The company is a commercial-stage biopharmaceutical firm focused on neurodegenerative diseases, receiving FDA approval for ZUNVEYL for treating mild-to-moderate Alzheimer's disease on July 29, 2024[15][16] - On November 13, 2024, the company completed a public offering, issuing 8,695,653 common shares at $5.75 per share for gross proceeds of approximately $50 million, which is expected to cover liabilities and commitments for the next 12 months[18][19] - Effective August 31, 2023, the company changed its functional currency from Canadian Dollar (CAD) to U.S. Dollar (USD), reflecting a shift in its primary economic environment and funding sources[23] - In September 2024, the company issued $4.545 million in convertible debentures, which automatically converted into common shares upon the completion of the November 2024 public offering[79][158] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's transition to a commercial-stage entity following the FDA approval of ZUNVEYL, analyzing operational results by comparing the third quarter and first nine months of 2024 to the same periods in 2023, detailing reasons for shifts in R&D and G&A expenses, outlining liquidity and capital resources including recent financing activities, and discussing critical accounting policies and estimates - Following FDA approval, the company is focused on the commercial launch of ZUNVEYL, anticipated in Q1 2025, with a commercial strategy targeting long-term care facilities and a Wholesale Acquisition Cost (WAC) set at $649 per month[160] - The company's pipeline includes ZUNVEYL in combination with memantine, sublingual and intranasal formulations of ALPHA-1062, and Progranulin assets (ALPHA-0602/0702/0802) which it intends to out-license[160][162] - Management states that with the net proceeds of approximately $46.42 million from the November 2024 public offering, existing cash will be sufficient to fund operations and commercialization costs for at least the next 24 months[199][235] Results of Operations For the nine months ended September 30, 2024, total operating expenses increased by 24% to $9.3 million, primarily due to a 72% rise in G&A expenses related to IPO preparations and consulting fees, partially offset by a 24% decrease in R&D expenses as costs for the ALPHA-1062 NDA submission declined, resulting in the net loss for the period widening to $9.0 million from $8.0 million in the prior year Comparison of Nine Months Ended September 30, 2024 and 2023 | Expense Category | Nine Months 2024 | Nine Months 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Research and development | $2,879,945 | $3,773,880 | (24)% | | General and administrative | $6,440,568 | $3,744,162 | 72% | | Total operating expenses | $9,320,513 | $7,518,042 | 24% | - R&D expenses decreased by $0.9 million (24%) for the nine months ended Sep 30, 2024, mainly due to lower product development costs for ALPHA-1062 following the NDA submission in September 2023[182] - G&A expenses increased by $2.7 million (72%) for the nine months ended Sep 30, 2024, primarily driven by $2.3 million in consulting fees related to the Spartan Consulting Agreement and increased professional and filing fees for the US IPO[185] Liquidity and Capital Resources The company has historically relied on external financing, with recent capital raises including the multi-tranche Q2 2023 private placement totaling $8.45 million, a $4.545 million bridge financing in September 2024, and a subsequent public offering in November 2024 raising approximately $50 million in gross proceeds, which are expected to support the commercial launch of ZUNVEYL and ongoing operations - On November 13, 2024, the company completed a public offering for gross proceeds of approximately $50 million, significantly strengthening its capital position[210] - In September 2024, the company closed a $4.545 million bridge financing via convertible notes, which subsequently converted to equity upon the closing of the public offering[209][211] Cash Flow Summary (Nine Months Ended) | Cash Flow Activity | September 30, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Cash used in operating activities | ($5,451,927) | ($6,769,171) | | Net cash provided by financing activities | $7,730,753 | $5,613,412 | Critical Accounting Policies and Estimates Management highlights several critical accounting policies, including the use of estimates, functional currency determination, grant accounting, fair value measurements, and share-based compensation, with the going concern assessment being a key estimate where management concludes that the proceeds from the November 2024 public offering are sufficient to fund operations for at least the next 12 months - The going concern assessment concludes that after the November 2024 public offering, the company has sufficient capital to fund operations and commercialization costs for at least the next 12 months[235] - The company uses the Black-Scholes model for valuing share-based payments and liability-based awards, which requires subjective assumptions about volatility, expected term, and interest rates[229][232] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2024, with no material changes to the company's internal control over financial reporting during the quarter - The CEO and CFO concluded that as of September 30, 2024, the company's disclosure controls and procedures were effective[244] - No changes in internal control over financial reporting occurred during the nine months ended September 30, 2024, that materially affected, or are reasonably likely to materially affect, internal controls[245] PART II – OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings - As of the report date, the company is not involved in any material legal proceedings[247] Risk Factors There have been no material changes from the risk factors previously disclosed in the company's Registration Statement on Form S-1 filed on July 30, 2024 - No material changes to risk factors have occurred since the Form S-1 filing on July 30, 2024[248] Unregistered Sales of Equity Securities and Use of Proceeds This section discloses unregistered sales of equity, including the issuance of 14,000 common shares from warrant exercises, and details the use of proceeds from the November 2024 public offering, noting that approximately $46.42 million in net proceeds were received, of which about $502,000 has been used for consulting fees, leaving a remainder of approximately $45.9 million - In July 2024, the company issued 14,000 common shares from the exercise of warrants at $10.00 per share, for proceeds of $140,000[250] - From the November 13, 2024 public offering, the company received net proceeds of approximately $46.42 million, and as of the filing date, about $502,000 has been used, with $45.9 million remaining[252][253][254] Defaults Upon Senior Securities None Mine Safety Disclosure Not applicable Other Information The company reports no other material information for the period and confirms that no directors or officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements during the quarter - During the quarter ended September 30, 2024, no directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[257] Exhibits This section lists the exhibits filed as part of the Form 10-Q, including articles of incorporation, forms of securities, material agreements, and officer certifications