It's a paid game but still have mouse issues for v1.2 both stand alone and with Itch app.
Edit: Initially, because v1.2 mouse issue was still there after following the fix I found online, I played v1.1 instead and didn't get the mouse issue. However, there were sound glitches and few lags.
I decided to move the entire v1.2 folder from drive D to drive C and ran it as Administrator. Mouse started working.