UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-Q

______________________________________

(Mark One)

 

☒

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

 

For the quarterly period ended December 31,September 30, 20222023

or

 

☐

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

For the transition period from to

Commission file number: 001-35776

______________________________________

Acasti Pharma Inc.

(Exact name of registrant as specified in its charter)

______________________________________

Québec, Canada

98-1359336

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

30092572 boul. de la Concorde East, Suite 102Daniel-Johnson, 2nd Floor

Laval, Québec, Canada H7E 2B5H7T 2R3

(Address of principal executive offices, including zip code)

450-686-4555

(Registrant’s telephone number, including area code)

______________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, no par value per share

ACST

NASDAQNasdaq Stock Market

Indicate by check mark whether the registrant:registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934)Act). Yes ☐ No ☒

 

The number of outstanding common shares of the registrant, no par value per share, as of February 14,November 9, 2023, was 44,612,8319,399,404.

 

 

ACASTI PHARMA INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended December 31, 2022September 30, 2023

Table of Contents

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

74

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2019

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

4138

Item 4.

Controls and Procedures

4138

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

4138

Item 1A.

Risk Factors

4139

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

4139

Item 3.

Defaults Upon Senior Securities

4139

Item 4.

Mine Safety Disclosures

4139

Item 5.

Other Information

4139

Item 6.

Exhibits

4239

2

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains information that may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,Canadian securities laws and forward-looking informationstatements within the meaning of CanadianU.S. federal securities laws, both of which we refer to in this quarterly report as forward-looking statements. Forward-lookingForward- looking statements can be identified by the use of terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not statements about the present or historical facts. Forward-looking statements in this quarterly report include, among other things, information or statements about:

•
our ability to build a premier, late-stage specialty pharmaceutical company focused on rare and orphan disease and on developing and commercializing products that improve clinical outcomes using our novel drug delivery technologies;
•
our ability to apply new proprietary formulations to existing pharmaceutical compounds to achieve enhanced efficacy, faster onset of action, reduced side effects, and more convenient drug delivery that can result in increased patient compliance;
•
the potential for our drug candidates to receive final orphan drug designation from the U.S. Food and Drug Administration (“FDA”) or regulatory approval under the Section 505(b)(2) regulatory pathway under the Federal Food, Drug and Cosmetic Act;
•
the future prospects of our GTX-104 drug candidate, including but not limited to GTX-104’s potential to be administered to improve the management of hypotension in patients with subarachnoid hemorrhage (“SAH”); GTX-104’s potential to reduce the incidence of hypotension or vasospasm in SAH patients resulting in better outcomes; GTX-104’s potential to provide for reduced use of rescue therapies, such as vasopressors in patients with SAH; the timing of the FDA's clarifying guidance through a written Type C meeting, and whether the FDA will agree with our proposed Phase 3 safety study design and target endpoints for GTX-104; the timing and outcome of the initiation and completion of the Phase 3 safety study for GTX-104; our ability to ultimately file a new drug application (“NDA”) for GTX-104 under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act; and the timing and ability to receive FDA approval for marketing GTX-104;
•
the future prospects of our GTX-102 drug candidate, including but not limited to GTX-102’s potential to provide clinical benefits to decrease symptoms associated with Ataxia Telangiectasia (“A-T”); GTX-102’s potential ease of drug administration; the timing and outcomes of a PK bridging study and a Phase 3 efficacy and safety study for GTX-102; the timing of an NDA filing under Section 505(b)(2) in connection with GTX-102; and the ability to receive FDA approval for marketing GTX-102;
•
the future prospects of our GTX-101 drug candidate, including but not limited to GTX-101’s potential to be administered to postherpetic neuralgia (“PHN”) patients to treat the severe nerve pain associated with the disease; assumptions about the biphasic delivery mechanism of GTX-101, including its potential for rapid onset and continuous pain relief for up to 24 hours; and the timing and outcomes of a multiple ascending dose PK bridging study, and subsequent Phase 2 and Phase 3 efficacy and safety studies; the timing of an NDA filing under Section 505(b)(2) for GTX-101; and the timing and ability to receive FDA approval for marketing GTX-101;
•
the quality of our clinical data, the cost and size of our development programs, expectations and forecasts related to our target markets and the size of our target markets; the cost and size of our commercial infrastructure and manufacturing needs in the United States, European Union, and the rest of the world; and our expected use of a range of third-party contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”) at multiple locations;
•
expectations and forecasts related to our intellectual property portfolio, including but not limited to the probability of receiving final orphan drug designation from the FDA for our leading pipeline products; our patent portfolio strategy; and outcomes of our patent protection filings;
•
our strategy, future operations, prospects and the plans of our management with a goal to enhance shareholder value;
•
our intellectual property position and duration of our patent rights;
•
the potential adverse effects that the COVID-19 pandemic may have on our business and operations;
•
our need for additional financing, and our estimates regarding our operating runway and timing for future financing and capital requirements;
•
our expectation regarding our financial performance, including our costs and expenses, liquidity, and capital resources;
•
our projected capital requirements to fund our anticipated expenses; and
•
our ability to establish strategic partnerships or commercial collaborations or obtain non-dilutive funding.

Although the forward-looking statements in this quarterly report are based upon what we believe are reasonable assumptions, you should not place undue reliance on those forward-looking statements since actual results may vary materially from them. Important assumptions made by us when making forward-looking statements include, among other things, assumptions by us that:

•
we are able to attract and retain key management and skilled personnel;
•
third parties provide their services to us on a timely and effective basis;
•
we are able to take advantage of new business opportunities in the pharmaceutical industry;
•
we are able to secure and defend our intellectual property rights, and to avoid infringing upon the intellectual property rights of third parties;
•
there are no material adverse changes in relevant laws or regulations; and
•
we are able to obtain the additional capital and financing we require when we need it.

3

 

In addition, the forward-looking statements in this quarterly report are subject to a number of known and unknown risks, uncertainties and other factors many of which are beyond our control, that could cause our actual results and developments to differ materially from those that are disclosed in or implied by the forward-looking statements, including, among others:

•
We may not achieve our publicly announced milestones on time, or at all.
•
We are heavily dependent on the success of our lead drug candidates, GTX-104, GTX-102 and GTX-101.candidate, GTX-104.
•
Our futureClinical development is a lengthy and expensive process with an uncertain outcome, and results will suffer if we do not effectively manage our expanded operations.
•
Weof earlier studies and trials may not be able to maintain our operations and advance our research and development and commercializationpredictive of our lead drug candidates without additional funding.
•
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
•
We may be subject to foreign exchange rate fluctuations.
•
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
•
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
•
We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations and our ability to compete.
•
We may face future product liability claims, and if claims are brought against us, we may incur substantial liability.
•
We rely significantly on information technology andtrial results. Failure can occur at any failure, inadequacy, interruption or security lapsestage of that technology, including any cybersecurity incidents, could harm our ability to operate our business effectively.
•
Even if our drug candidates receive regulatory approval in the United States, we may never obtain regulatory approval or successfully commercialize our products outside of the United States.clinical development.
•
We are subject to uncertainty relating to healthcare reform measures and reimbursement policies which, if not favorable to our drug candidates, could hinder or prevent our drug candidates’ commercial success.
•
Our commercial success depends upon attaining significant market acceptance of our drug products and drug candidates, if approved, among physicians, nurses, pharmacists, patients and the medical community.
•
Guidelines and recommendations published by government agencies can reduce the use of our drug candidates and negatively impact our ability to gain market acceptance and market share.
•
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our drug products, if approved, we may be unable to generate any revenue.
•
If we obtain approval to commercialize any approved drug products outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.
•
If we are unable to differentiate our drug products from branded reference drugs or existing generic therapies for similar treatments, or if the FDAU.S. Food and Drug Administration (“FDA”) or other applicable regulatory authorities approve products that compete with any of our drug products, our ability to successfully commercialize our drug products would be adversely affected.
•
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
•
We could incur substantial costs and disruption to our business and delays in the launch of our drug products if our competitors and/or collaborators bring legal actions against us, which could harm our business and operating results.
•
The COVID-19 pandemic, or a similar pandemic, epidemic, or outbreak of an infectious disease, may materially and adversely affect our business and our financial results and could cause a disruption to the development of our drug candidates.
•
We are subject to numerous complex regulatory requirements and failure to comply with these regulations, or the cost of compliance with these regulations, may harm our business.
•
If the FDA does not conclude that our drug candidates satisfy the requirements for the 505(b)(2) regulatory approval pathway, or if the requirements for approval of any of our drug candidates under Section 505(b)(2) are not as we expect, the approval pathway for our drug candidates will likely take longer, cost more and we could encounter significantly greater complications and risks than anticipated, and in any case may not be successful.
•
Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. Failure can occur at any stage of clinical development.
•
Delays in clinical trials are common and have many causes, and any delay could result in increased costs to us and could jeopardize or delay our ability to obtain regulatory approval and commence product sales. We may also find it difficult to enroll patients in our clinical trials, which could delay or prevent development of our drug candidates.
•
Our drug products or drug candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval or limit the scope of any approved label or market acceptance, or result in significant negative consequences following marketing approval, if any.

42

 

•
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our drug candidates, our business will be substantially harmed.
•
An NDA submitted under Section 505(b)(2) subjects us to the risk that we may be subject to a patent infringement lawsuit that would delay or prevent the review or approval of our drug candidate. The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.
•
Our drug development strategy relies heavily upon the 505(b)(2) regulatory pathway, which requires us to certify that we do not infringe upon third-party patents covering approved drugs. Such certifications often result in third-party claims of intellectual property infringement, the defense of which can be costly and time consuming, and an unfavorable outcome in any such litigation may prevent or delay our development and commercialization efforts, which would harm our business.
•
Our business is subject to extensive regulatory requirements and our drug candidates that obtain regulatory approval will be subject to ongoing and continued regulatory review, which may result in significant expense and limit our ability to commercialize such products.
•
Our employees, independent contractors, principal investigators, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.
•
Any relationships with healthcare professionals, principal investigators, consultants, customers (actual and potential) and third-party payers are and will continue to be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, marketing expenditure tracking and disclosure, or sunshine laws, government price reporting and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face penalties, including, without limitation, civil, criminal, and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations.
•
We are required to obtain regulatory approval for each of our drug candidates in each jurisdiction in which we intend to market such drug products, and the inability to obtain such approvals would limit our ability to realize their full market potential.
•
If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse effect on our business.
•
We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties.
•
Our success depends in part upon our ability to protect our intellectual property for our drug candidates, such as GTX-104, GTX-102 and GTX-101.
•
If we fail to comply with our obligations in the agreements under which we license rights to technology from third parties, or if the license agreements are terminated for other reasons, we could lose license rights that are important to our business.
•
We may be subject to claims challenging our inventorship or ownership of our patents and other intellectual property.candidates.
•
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
•
Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect any of our other future drug products and drug candidates.
•
We may not be able to protect our intellectual property rights throughout the world.
•
If our estimates or judgments relating to our critical accounting policies for intangible assets prove to be incorrect, impairment charges could result.
•
We do not have internal manufacturing capabilities, and if we fail to develop and maintain supply relationships with various third-party manufacturers, we may be unable to develop or commercialize our drug candidates.
•
Our contract manufacturers may encounter manufacturing failures that could delay the clinical development or regulatory approval of our drug candidates, or their commercial production, if approved.
•
We rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our drug candidates and our business could be substantially harmed.
•
We rely on third parties to manufacture commercial and clinical supplies of our drug candidates, and we intend to rely on third parties to manufacture commercial supplies of any approved drug products. The commercialization of any of our drug products could be stopped, delayed, or made less profitable if those third parties fail to provide us with sufficient quantities of active pharmaceutical ingredients, excipients, or drug products, or fail to do so at acceptable quality levels or prices or fail to maintain or achieve satisfactory regulatory compliance.
•
The design, development, manufacture, supply, and distribution of our drug candidates are highly regulated and technically complex.
•
We may not be successfulThe other risks and uncertainties identified in establishing development and commercialization collaborations, which could adversely affect, and potentially prevent,Item 1A. Risk Factors included in our ability to develop our drug candidates.
•
We may not be successful in maintaining development and commercialization collaborations, and any partner may not devote sufficient resources toAnnual Report on Form 10-K for the development or commercialization of our drug candidates or may otherwise fail in development or commercialization efforts, which could adversely affect our ability to develop certain of our drug candidates and our financial condition and operating results.
•
There is a significant risk that we may be classified as a PFIC for U.S. federal income tax purposes.year ended March 31, 2023.

5

•
We may not be able to use our net operating loss carry forwards to offset future taxable income for Canadian or U.S. federal income tax purposes.
•
The IRS may not agree that we should be treated as a foreign corporation for U.S. federal tax purposes.
•
We do not expect to pay any cash dividends for the foreseeable future.
•
The price of our common shares may be volatile.
•
Raising additional capital in the future may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or drug candidates.
•
The market price of our common shares could decline if our operating results fall below the expectations of investors or fluctuate.
•
There can be no assurance that an active market for our common shares will be sustained.
•
If we fail to meet applicable listing requirements, the NASDAQ Stock Market or the TSX Venture Exchange may delist our common shares from trading, in which case the liquidity and market price of our common shares could decline.
•
We may pursue opportunities or transactions that adversely affect our business and financial condition.
•
We are a “smaller reporting company” under the U.S. Securities and Exchange Commission’s (“SEC’s”) disclosure rules and have elected to comply with the reduced disclosure requirements applicable to smaller reporting companies.
•
As a non-accelerated filer, we are not required to comply with the auditor attestation requirements of the Sarbanes-Oxley Act.
•
We are a Québec incorporated company headquartered in Canada, and U.S. investors may be unable to enforce certain judgments against us.

All of the forward-looking statements in this quarterly report are qualified by this cautionary statement. There can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the consequences or effects on our business, financial condition, or results of operations that we anticipate. As a result, you should not place undue reliance on thethese forward-looking statements. Except as required by applicable law, we do not undertake to update or amend any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements are made as of the date of this quarterly report.

We express all amounts in this quarterly report in U.S. dollars, except where otherwise indicated. References to “$” and “U.S.$” are to U.S. dollars and references to “C$” or “CAD$” are to Canadian dollars.

Except as otherwise indicated, references in this quarterly report to “Acasti,” “the Company,Corporation,” “we,” “us” and “our” refer to Acasti Pharma Inc. and its consolidated subsidiaries, including Acasti Pharma U.S., which is formerly Grace Therapeutics, Inc. ("Grace").subsidiaries.


 

6

3

 

PART I. FINANCIAL INFORMATION

Item 1: Financial Information

Unaudited Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Balance Sheets

95

 

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

106

 

Condensed Consolidated Interim Statements of Changes Shareholders’ Equity

117

Condensed Consolidated Interim Statements of Cash Flows

128

Notes to the Condensed Consolidated Interim Financial Statements

139

 

7

Condensed Consolidated Interim Financial Statements of
(Unaudited)

ACASTI PHARMA INC.

Three and Nine months ended December 31, 2022 and 2021

84

 

ACASTI PHARMA INC.

Condensed Consolidated Interim Balance Sheet

(Unaudited)

 

 

December 31,
2022

 

March 31,
2022

 

 

September 30,
2023

 

March 31,
2023

(Expressed in thousands of U.S. dollars except share data)

 

Notes

 

$

 

$

 

 

Notes

 

$

 

$

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

26,241

 

 

 

30,339

 

 

 

 

26,991

 

27,875

Short-term investments

 

5

 

 

5,015

 

 

 

13,322

 

 

5

 

15

 

15

Receivables

 

 

 

 

778

 

 

 

548

 

 

4

 

837

 

802

Assets held for sale

 

6

 

 

352

 

 

 

352

 

Prepaid expenses

 

 

 

 

1,042

 

 

 

720

 

 

 

 

1,044

 

598

Total current assets

 

 

 

 

33,428

 

 

 

45,281

 

 

 

 

28,887

 

29,290

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Right of use asset

 

 

 

 

487

 

 

 

315

 

Operating lease right of use asset

 

 

 

47

 

463

Equipment

 

 

 

 

112

 

 

 

250

 

 

 

 

10

 

104

Intangible assets

 

4

 

 

69,810

 

 

 

69,810

 

 

 

 

41,128

 

41,128

Goodwill

 

 

 

 

12,964

 

 

 

12,964

 

 

 

 

8,138

 

8,138

Total assets

 

 

 

 

116,801

 

 

 

128,620

 

 

 

 

78,210

 

79,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other payables

 

 

 

 

3,360

 

 

 

3,156

 

 

6

 

1,351

 

3,336

Lease liability

 

 

 

 

73

 

 

 

104

 

Operating lease liability

 

7

 

46

 

75

Total current liabilities

 

 

 

 

3,433

 

 

 

3,260

 

 

 

 

1,397

 

3,411

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative warrant liabilities

 

 

 

 

—

 

 

 

10

 

 

8(b)

 

3,457

 

—

Lease liability

 

 

 

 

430

 

 

 

191

 

Operating lease liability

 

 

 

—

 

410

Deferred tax liability

 

 

 

 

16,218

 

 

 

16,889

 

 

 

 

6,611

 

7,347

Total liabilities

 

 

 

 

20,081

 

 

 

20,350

 

 

 

 

11,465

 

11,168

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

7(a)

 

 

258,294

 

 

 

257,990

 

Class A common shares, no par value per share; unlimited shares authorized as of September 30, 2023 and March 31, 2023; 9,399,404 and 7,435,533 shares issued and outstanding as of September 30, 2023 and March 31, 2023

 

8(a)

 

261,038

 

258,294

Class B common shares, no par value per share; unlimited shares authorized as of September 30, 2023 and March 31, 2023; 0 shares issued and outstanding as of September 30, 2023 and March 31, 2023

 

 

 

—

 

—

Class C common shares, no par value per share; unlimited shares authorized as of September 30, 2023 and March 31, 2023; 0 shares issued and outstanding as of September 30, 2023 and March 31, 2023

 

 

 

—

 

—

Class D common shares, no par value per share; unlimited shares authorized as of September 30, 2023 and March 31, 2023; 0 shares issued and outstanding as of September 30, 2023 and March 31, 2023

 

 

 

—

 

—

Class E common shares, no par value per share; unlimited shares authorized as of September 30, 2023 and March 31, 2023; 0 shares issued and outstanding as of September 30, 2023 and March 31, 2023

 

 

 

—

 

—

Additional paid-in capital

 

 

 

 

13,643

 

 

 

12,154

 

 

 

 

17,307

 

13,965

Accumulated other comprehensive loss

 

 

 

 

(6,038

)

 

 

(6,037

)

 

 

 

(6,038)

 

(6,038)

Accumulated deficit

 

 

 

 

(169,179

)

 

 

(155,837

)

 

 

 

(205,562)

 

(198,266)

Total shareholder’s equity

 

 

 

 

96,720

 

 

 

108,270

 

Total shareholders' equity

 

 

 

66,745

 

67,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

12

 

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

 

116,801

 

 

 

128,620

 

 

 

 

78,210

 

79,123

 

See accompanying notes to unaudited interim financial statements.

95

 

ACASTI PHARMA INC.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

(Unaudited)

Three and Nine months ended December 31, 2022 and 2021

 

 

Three months ended

 

 

Nine months ended

 

 

Three months ended

 

 

Six months ended

 

 

December 31,
2022

 

December 31,
2021

 

December 31,
2022

 

December 31,
2021

 

 

September 30,
2023

 

September 30,
2022

 

September 30,
2023

 

September 30,
2022

 

(Expressed in thousands of U.S dollars, except per share data)

 

Notes

 

$

 

 

$

 

$

 

 

$

 

(Expressed in thousands of U.S dollars, except share and per share data)

 

Notes

 

$

 

 

$

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses, net of government assistance

 

8

 

 

(2,450

)

 

 

(2,179

)

 

 

(8,332

)

 

 

(3,233

)

 

 

 

 

(460

)

 

 

(3,292

)

 

 

(1,555

)

 

 

(5,882

)

General and administrative expenses

 

 

 

 

(1,589

)

 

 

(1,808

)

 

 

(5,187

)

 

 

(7,441

)

 

 

 

 

(1,589

)

 

 

(1,680

)

 

 

(3,352

)

 

 

(3,599

)

Sales and marketing expenses

 

 

 

 

(206

)

 

 

(238

)

 

 

(563

)

 

 

(263

)

Impairment of Other asset and prepaid

 

 

 

 

—

 

 

 

(249

)

 

 

—

 

 

 

(249

)

Sales and marketing

 

 

 

 

(43

)

 

 

(136

)

 

 

(154

)

 

 

(357

)

Restructuring cost

 

14

 

 

—

 

 

 

—

 

 

 

(1,485

)

 

 

—

 

Loss from operating activities

 

 

 

 

(4,245

)

 

 

(4,474

)

 

 

(14,082

)

 

 

(11,186

)

 

 

 

 

(2,092

)

 

 

(5,108

)

 

 

(6,546

)

 

 

(9,838

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial income (expenses)

 

9

 

 

82

 

 

 

696

 

 

 

69

 

 

 

5,271

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange gain (loss)

 

 

 

 

(13

)

 

 

(12

)

 

 

(5

)

 

 

(90

)

Change in fair value of warrant liabilities

 

8(b)

 

 

(1,826

)

 

 

—

 

 

 

(1,826

)

 

 

10

 

Interest income and other expense

 

 

 

 

212

 

 

 

36

 

 

 

346

 

 

 

68

 

Total other income (expense), net

 

 

 

 

(1,627

)

 

 

24

 

 

 

(1,485

)

 

 

(12

)

Loss before income tax recovery

 

 

 

 

(4,163

)

 

 

(3,778

)

 

 

(14,013

)

 

 

(5,915

)

 

 

 

 

(3,719

)

 

 

(5,084

)

 

 

(8,031

)

 

 

(9,850

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax recovery

 

 

 

 

274

 

 

 

—

 

 

 

671

 

 

 

—

 

 

 

 

 

446

 

 

 

155

 

 

 

735

 

 

 

397

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and total comprehensive loss)

 

 

 

 

(3,889

)

 

 

(3,778

)

 

 

(13,342

)

 

 

(5,915

)

Net loss and total comprehensive loss

 

 

 

 

(3,273

)

 

 

(4,929

)

 

 

(7,296

)

 

 

(9,453

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share

 

 

 

 

(0.09

)

 

 

(0.09

)

 

 

(0.30

)

 

 

(0.23

)

 

10

 

 

(0.43

)

 

 

(0.66

)

 

 

(0.97

)

 

 

(1.28

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

44,612,831

 

 

 

44,288,183

 

 

 

44,497,907

 

 

 

25,785,579

 

 

 

 

 

7,552,677

 

 

 

7,425,166

 

 

 

7,494,425

 

 

 

7,406,689

 

See accompanying notes to unaudited interim financial statements

106

 

ACASTI PARMA INC.

Condensed Consolidated Interim Statements of Changes in Shareholder’sShareholders' Equity

(Unaudited)

Three and Nine months ended December 31, 2022 and 2021

 

 

 

Common Shares

 

 

 

 

 

 

 

 

(Expressed in thousands of U.S. dollars except share data)

 

Notes

 

Number

 

Dollar

 

Additional
paid-in
capital

 

Accumulated
other
comprehensive
loss

 

Deficit

 

Total

 

 

 

 

 

$

 

$

 

$

 

$

 

$

Balance, March 31, 2023

 

 

 

7,435,533

 

258,294

 

13,965

 

(6,038)

 

(198,266)

 

67,955

Net loss and total comprehensive loss for the period

 

 

 

—

 

—

 

—

 

—

 

(4,023)

 

(4,023)

Stock-based compensation

 

9

 

—

 

—

 

78

 

—

 

—

 

78

Balance at June 30, 2023

 

 

 

7,435,533

 

258,294

 

14,043

 

(6,038)

 

(202,289)

 

64,010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares and pre-funded warrants through private placement, net of offering costs

 

8(a)

 

1,951,371

 

2,744

 

2,963

 

—

 

—

 

5,707

Issuance of common shares upon the exercise of stock options

 

 

 

12,500

 

—

 

21

 

—

 

—

 

21

Net loss and total comprehensive loss for the period

 

 

 

—

 

—

 

—

 

—

 

(3,273)

 

(3,273)

Stock-based compensation

 

9

 

—

 

—

 

280

 

—

 

—

 

280

Balance at September 30, 2023

 

 

 

9,399,404

 

261,038

 

17,307

 

(6,038)

 

(205,562)

 

66,745

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

(Expressed in thousands of U.S. dollars except share data)

 

Notes

 

 

Number

 

 

Dollar

 

 

Additional
paid-in
capital

 

 

Accumulated
other
comprehensive
loss

 

 

Accumulated
deficit

 

 

Total

 

 

 

 

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Balance, March 31, 2022

 

 

 

 

 

44,288,183

 

 

 

257,990

 

 

 

12,154

 

 

 

(6,037

)

 

 

(155,837

)

 

 

108,270

 

Net loss and total comprehensive loss for the period

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(4,524

)

 

 

(4,524

)

Cumulative translation adjustment

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2

)

 

 

—

 

 

 

(2

)

Net proceeds from shares issued under the at-the-market (ATM) program

 

 

 

 

 

206,010

 

 

 

195

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

195

 

Stock based compensation

 

 

10

 

 

 

—

 

 

 

—

 

 

 

464

 

 

 

—

 

 

 

—

 

 

 

464

 

Balance at June 30, 2022

 

 

 

 

 

44,494,193

 

 

 

258,185

 

 

 

12,618

 

 

 

(6,039

)

 

 

(160,361

)

 

 

104,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss and total comprehensive loss for the period

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(4,929

)

 

 

(4,929

)

Cumulative translation adjustment

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1

)

 

 

—

 

 

 

(1

)

Net proceeds from shares issued under the at-the-market (ATM) program

 

 

 

 

 

118,638

 

 

 

109

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

109

 

Stock based compensation

 

 

10

 

 

 

—

 

 

 

—

 

 

 

582

 

 

 

—

 

 

 

—

 

 

 

582

 

Balance at September 30, 2022

 

 

 

 

 

44,612,831

 

 

 

258,294

 

 

 

13,200

 

 

 

(6,040

)

 

 

(165,290

)

 

 

100,164

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss and total comprehensive loss for the period

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,889

)

 

 

(3,889

)

Cumulative translation adjustment

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

 

 

—

 

 

 

2

 

Stock based compensation

 

 

10

 

 

 

—

 

 

 

—

 

 

 

443

 

 

 

—

 

 

 

—

 

 

 

443

 

Balance at December 31, 2022

 

 

 

 

 

44,612,831

 

 

 

258,294

 

 

 

13,643

 

 

 

(6,038

)

 

 

(169,179

)

 

 

96,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

(Expressed in thousands of US dollars except for share data)

 

Notes

 

 

Number

 

 

Dollar

 

 

Additional
paid-in
capital

 

 

Accumulated
other
comprehensive
loss

 

 

Accumulated
deficit

 

 

Total

 

 

 

 

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Balance, March 31, 2021

 

 

 

 

 

26,046,950

 

 

 

197,194

 

 

 

10,817

 

 

 

(6,333

)

 

 

(146,018

)

 

 

55,660

 

Net loss and total comprehensive loss for the period

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,118

)

 

 

(3,118

)

Cumulative translation adjustment

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

762

 

 

 

—

 

 

 

762

 

Stock based compensation

 

10

 

 

 

—

 

 

 

—

 

 

 

153

 

 

 

—

 

 

 

—

 

 

 

153

 

Balance at June 30, 2021

 

 

 

 

 

26,046,950

 

 

 

197,194

 

 

 

10,970

 

 

 

(5,571

)

 

 

(149,136

)

 

 

53,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss and total comprehensive loss for the period

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

981

 

 

 

981

 

Cumulative translation adjustment

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,149

)

 

 

—

 

 

 

(1,149

)

Stock based compensation

 

10

 

 

 

—

 

 

 

—

 

 

 

114

 

 

 

—

 

 

 

—

 

 

 

114

 

Common shares issued in relation to merger with Grade via share-for-share

 

 

 

 

 

18,241,233

 

 

 

60,801

 

 

 

—

 

 

 

0

 

 

 

—

 

 

 

60,801

 

Balance at September 30, 2021

 

 

 

 

 

44,288,183

 

 

 

257,995

 

 

 

11,084

 

 

 

(6,720

)

 

 

(148,155

)

 

 

114,204

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss and total comprehensive loss for the period

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,778

)

 

 

(3,778

)

Cumulative translation adjustment

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

187

 

 

 

—

 

 

 

187

 

Stock based compensation

 

 

13

 

 

 

—

 

 

 

—

 

 

 

454

 

 

 

—

 

 

 

 

 

 

454

 

Fees related to share-for-share issuance for merger with Grace

 

 

4

 

 

 

—

 

 

 

(5

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5

)

Balance at December 31, 2021

 

 

 

 

 

44,288,183

 

 

 

257,990

 

 

 

11,538

 

 

 

(6,533

)

 

 

(151,933

)

 

 

111,062

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares

 

 

 

 

 

 

 

 

(Expressed in thousands of US dollars except for share data)

 

Notes

 

Number

 

Dollar

 

Additional
paid-in
capital

 

Accumulated
other
comprehensive
loss

 

Deficit

 

Total

 

 

 

 

 

$

 

$

 

$

 

$

 

$

Balance, March 31, 2022

 

 

 

7,381,425

 

257,990

 

12,154

 

(6,037)

 

(155,837)

 

108,270

Net loss and total comprehensive loss for the period

 

 

 

—

 

—

 

—

 

—

 

(4,524)

 

(4,524)

Cumulative translation adjustment

 

 

 

—

 

—

 

—

 

(2)

 

—

 

(2)

Stock-based compensation

 

9

 

—

 

—

 

464

 

—

 

—

 

464

Net proceeds from shares issued under the at-the-market (ATM) program

 

 

 

34,335

 

195

 

—

 

—

 

—

 

195

Balance at June 30, 2022

 

 

 

7,415,760

 

258,185

 

12,618

 

(6,039)

 

(160,361)

 

104,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss and total comprehensive loss for the period

 

 

 

—

 

—

 

—

 

—

 

(4,929)

 

(4,929)

Cumulative translation adjustment

 

 

 

—

 

—

 

—

 

(1)

 

—

 

(1)

Net proceeds from shares issued under the at-the-market (ATM) program

 

 

 

19,773

 

109

 

 

 

 

 

 

 

109

Stock-based compensation

 

9

 

—

 

—

 

582

 

—

 

—

 

582

Balance at September 30, 2022

 

 

 

7,435,533

 

258,294

 

13,200

 

(6,040)

 

(165,290)

 

100,164

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

117

 

ACASTI PHARMA INC.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

Three and Nine months ended December 31, 2022 and 2021

 

 

 

Nine months ended

 

 

 

 

Six months ended

 

 

 

 

December 31,
2022

 

 

December 31,
2021

 

 

 

 

 

September 30,
2023

 

 

September 30,
2022

 

(thousands of U.S. dollars)

 

Notes

 

$

 

 

$

 

(Expressed in thousands of U.S. dollars)

 

Notes

 

$

 

 

$

 

Cash flows used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the period

 

 

 

 

(13,342

)

 

 

(5,915

)

 

 

 

 

(7,296

)

 

 

(9,453

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of equipment

 

 

 

 

116

 

 

 

—

 

 

 

 

 

9

 

 

 

106

 

Impairment of Other Asset and prepaid

 

 

 

 

—

 

 

 

249

 

Gain on sale of equipment

 

 

 

 

(58

)

 

 

—

 

Stock-based compensation

 

10

 

 

1,489

 

 

 

721

 

 

9

 

 

358

 

 

 

1,046

 

Change in fair value of warrant liabilities

 

 

 

 

(10

)

 

 

(4,908

)

 

 

 

 

1,826

 

 

 

(10

)

Income tax recovery

 

 

 

 

(671

)

 

 

—

 

 

 

 

 

(735

)

 

 

(397

)

Unrealized foreign exchange (gain) loss

 

 

 

 

(28

)

 

 

(418

)

 

 

 

 

—

 

 

 

(51

)

Write off of equipment

 

 

 

 

31

 

 

 

—

 

Changes in non-cash working capital items

 

11

 

 

(172

)

 

 

(3,818

)

Write-off of equipment

 

 

 

 

32

 

 

 

31

 

Changes in operating assets and liabilities

 

11

 

 

(2,489

)

 

 

(137

)

Net cash used in operating activities

 

 

 

 

(12,587

)

 

 

(14,089

)

 

 

 

 

(8,353

)

 

 

(8,865

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from (used in) investing activities:

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of equipment

 

 

 

 

(9

)

 

 

—

 

 

 

 

 

—

 

 

 

(9

)

Proceeds from sale of equipment

 

 

 

 

110

 

 

 

—

 

Acquisition of short-term investments

 

 

 

 

(5,015

)

 

 

(34,852

)

 

 

 

 

—

 

 

 

(14

)

Maturity of short-term investment

 

 

 

 

13,185

 

 

 

31,319

 

 

 

 

 

—

 

 

 

13,185

 

Net cash from (used in) investing activities

 

 

 

 

8,161

 

 

 

(3,533

)

Net cash from investing activities

 

 

 

 

110

 

 

 

13,162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from (used in) financing activities:

 

 

 

 

 

 

 

 

Net proceeds from issuance of common shares under the at-the-market (ATM)

 

(7a)

 

 

304

 

 

 

—

 

Net cash from (used in) financing activities

 

 

 

 

304

 

 

 

—

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net proceeds from issuance of common shares and warrants from private placement

 

(8a)

 

 

7,338

 

 

 

—

 

Proceeds from issuance of common shares from exercise of stock options

 

 

 

 

21

 

 

 

 

Net proceeds from shares issuance under the at-the-market (ATM) program

 

(8a)

 

 

—

 

 

 

304

 

Net cash from financing activities

 

 

 

 

7,359

 

 

 

304

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

 

 

 

 

(110

)

 

 

(176

)

 

 

 

 

—

 

 

 

(14

)

Translations effects on cash and cash equivalents related to reporting currency

 

 

 

 

134

 

 

 

(131

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

 

 

(4,098

)

 

 

(17,929

)

Net (decrease) increase in cash and cash equivalents

 

 

 

 

(884

)

 

 

4,587

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

 

 

30,339

 

 

 

50,942

 

 

 

 

 

27,875

 

 

 

30,339

 

Cash and cash equivalents, end of period

 

 

 

 

26,241

 

 

 

33,013

 

 

 

 

 

26,991

 

 

 

34,926

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents are comprised of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

 

 

 

26,241

 

 

 

33,013

 

 

 

 

 

10,596

 

 

 

34,926

 

Cash equivalents

 

 

 

 

—

 

 

 

—

 

 

 

 

 

16,395

 

 

 

—

 

 

See accompanying notes to unaudited interim financial statements.

128

 

 

ACASTI PHARMA INC.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

(Expressed in thousands of U.S. dollars except share and per share data)

Three and Nine months ended December 31, 2022 and 2021

1. Nature of operation

Acasti Pharma Inc. (“Acasti”Acasti��� or the “Corporation”) is incorporated under the Business Corporations Act (Québec) (formerly Part 1A of the Companies Act (Québec)). The Corporation is domiciled in Canada and its registered office is located at 30092572 boul. de la Concorde East, Suite 102,Daniel-Johnson, 2nd Floor Laval, Québec, Canada H7E 2B5.H7T 2R3.

The Corporation’s shares are listed on the Nasdaq Capital Market (the "Nasdaq"), and through March 27, 2023 the Corporation's shares were also listed on the TSX Venture Exchange ("TSXV"), in each case, under the symbol "ACST". On March 13, 2023 the Corporation received approval to voluntarily delist from the TSXV. Effective as at the close of trading on March 27, 2023, the Corporation's common shares are no longer listed and posted for trading on the TSXV.

 

In August 2021, the Corporation completed the acquisition via a share-for-share merger of Grace Therapeutics, Inc. (“Grace”), a privately held emerging biopharmaceutical company focused on developing innovative drug delivery technologies for the treatment of rare and orphan diseases. The post-merger Corporation is focused on building a late-stage specialty pharmaceutical company specializing in rare and orphan diseases and developing and commercializing products that improve clinical outcomes using ourits novel drug delivery technologies. The Corporation seeks to apply new proprietary formulations to existing pharmaceutical compounds to achieve enhanced efficacy, faster onset of action, reduced side effects, more convenient delivery and increased patient compliance; all of which could result in improved patient outcomes. The active pharmaceutical ingredients chosen by the Corporation for further development may be already approved in the target indication or could be repurposed for use in new indications.

 

The Corporation has incurred operating losses and negative cash flows from operations in each year since its inception. The Corporation expects to incur significant expenses and continued operating losses for the foreseeable future. The Corporation expects its expenses will increase substantially in connection with its ongoing activities, particularly as it advances clinical development for the first three drug candidates in the Corporation’s pipeline; continues to engage contract manufacturing organizations (“CMO's”) to manufacture its clinical study materials and to ultimately develop large-scale manufacturing capabilities in preparation for commercial launch; seeks regulatory approval for its drug candidates; and adds personnel to support its drug product development and future drug product launch and commercialization.

 

In May 2023, the Corporation implemented a strategic realignment plan to enhance shareholder value that resulted in the Corporation engaging a new management team, streamlining its research and development activities to concentrate on its lead product, GTX-104, and greatly reducing its workforce. Moving forward, the Corporation plans to build a smaller, more focused organization in the United States. Further development of GTX-102 and GTX-101 will occur at such time as additional funding is obtained or strategic partnerships are entered into.

On September 24, 2023, the Corporation entered into a securities purchase agreement with certain institutional and accredited investors. Gross proceeds to the Corporation from this private placement were approximately $7,500, before deducting fees and expenses. The Corporation issued and sold an aggregate of 1,951,371 common shares, no par value per share, pre-funded warrants to purchase up to an aggregate of 2,106,853 common shares, each at a purchase price of $1.8481 per common share and accompanying common warrants to purchase up to an aggregate of 2,536,391 common shares. The Corporation currently intends to use the net proceeds from the private placement for clinical trial expenses to further the Phase 3 clinical trial for GTX-104, pre-commercial planning, working capital and other general corporate purposes. The Corporation believes its cash runway, including net proceeds from this financing, will be sufficient to fund the Corporation’s operations into the second calendar quarter of 2026.

The Corporation will require additional capital to fund its daily operating needs beyond that time. The Corporation does not expect to generate revenue from product sales unless and until it successfully completes drug development and obtains regulatory approval, which the Corporation expects will take several years and is subject to significant uncertainty. To date, the Corporation has financed its operations primarily through public offerings and private placements of its common shares, warrants and convertible debt and the proceeds from research tax credits. Until such time that the Corporation can generate significant revenue from drug product sales, if ever, it will require additional financing, which is expected to be sourced from a combination of public or private equity or debt financing or other non-dilutive sources, which may include fees, milestone payments and royalties from collaborations with third parties. Arrangements with collaborators or others may require the Corporation to relinquish certain rights related to its technologies or drug product candidates. Adequate additional financing may not be available to the Corporation on acceptable terms, or at all. The Corporation’s inability to raise capital as and when needed could have a negative impact on its financial condition and its ability to pursue its business strategy.

Management expects the Corporation to have sufficient cash resources to satisfy its objectives into the second quarter of calendar 2024, which is 13 to 16 months from the issuance date of these Financial Statements. The Corporation will require additional capital to fund our daily operating needs beyond that time. The Corporation plans to raise additional capital prior to that time in order to maintain adequate liquidity. Negative results from studies or trials, if any, and depressed prices of the Corporation’s stock could impact the Corporation’s ability to raise additional financing. Raising additional equity capital is subject to market conditions not within the Corporation’s control. If the Corporation does notis unable to raise additional funds, in this time period, the Corporation may not be able to realize ourits assets and discharge ourits liabilities in the normal course of business.

 

The Corporation remains subject to risks similar to other development stage companies in the biopharmaceutical industry, including compliance with government regulations, protection of proprietary technology, dependence on third partythird-party contractors and consultants and potential product liability, among others. Please refer to the risk factors included in Part 1, Item 1A of the Corporation’s Annual Report on Form 10-K for the year ended March 31, 2023, filed with the SEC on June 23, 2023 (the “Annual Report”).

9

 

Reverse stock split

On August 26, 2021,June 29, 2023, the shareholdersBoard of Directors of the Corporation approved a resolutionan amendment to undertakethe Corporation's Articles of Incorporation to implement a reverse stock split of the Corporation's Class A common shares, withinno par value per share, at a rangeratio of 1-61-for-6 (the “Reverse Stock Split”). On July 4, 2023, the Corporation filed Articles of Amendment to 1-8its Articles of Incorporation with such specific ratiothe Registraire des entreprises du Québec, to be approved byimplement the Acasti Board.Reverse Stock Split. All references in these financial statements to number of common shares, warrants and options, price per share and weighted average number of shares outstanding prior to the reverse split have been adjusted to reflect the approved reverse split of 1-8,Reverse Stock Split, which was madebecame effective on August 31, 2021, on a retroactive basis as of the earliest period presented.July 10, 2023.

 

2. Summary of significant accounting policies:

Basis of presentation

TheseThe accompanying unaudited Consolidated Interim Financial Statementscondensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X under the Securities Exchange Act of 1934. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The unaudited condensed consolidated financial statements have been prepared on athe same basis consistent with those accounting principles followed byas the Corporationaudited annual consolidated financial statements as of and disclosedfor the year ended March 31, 2023, and, in note 2the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Corporation’s consolidated financial position as of September 30, 2023, the consolidated results of its most recent Annual Consolidated Financial Statements, except as disclosed in note 3 – Recent accounting pronouncementsoperations for the three and policiessix months ended September 30, 2023 and 2022, its statements of shareholders’ equity for the three and six months ended September 30, 2023 and 2022 and its consolidated cash flows for the six months ended September 30, 2023 and 2022.

These unaudited condensed consolidated financial statements should be read in conjunction with suchthe Corporation’s audited consolidated financial statements and the accompanying notes thereto.for the year ended March 31, 2023 included in the Corporation’s Annual Report. The condensed consolidated balance sheet data as of March 31, 2023 presented for comparative purposes was derived from the Corporation’s audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. The results for the three and six months ended September 30, 2023 are not necessarily indicative of the operating results to be expected for the full year or for any other subsequent interim period.

The Corporation’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended March 31, 2023 included in the Annual Report. There have been no changes to the Corporation's significant accounting policies since the date of the audited consolidated financial statements for the year ended March 31, 2023 included in the Annual Report.

 

13

Functional currency

On April 1, 2022, the Corporation’s functional currency was changed from the Canadian dollar to the US dollar. This change is reflected prospectively in the Corporation’s financial statements.

FASB ASC Topic 830, “Functional Currency Matters,” requires a change in functional currency to be reported as of the date it is determined there has been a change, and it is generally accepted practice that the change is made at the start of the most recent period that approximates the date of the change. Management determined it would enact this change effective on April 1, 2022. While the change was based on a factual assessment, the determination of the date of the change required management’s judgment given the change in the Corporation's primary economic and business environment, which has evolved over time. As part of management’s functional currency assessment, changes in economic facts and circumstances were considered. This included analysis of changes in: impact of the merger with Grace Therapeutics, management of operations, and in the composition of cash and short term investment balances. Additionally, budgeting is in USD, whereas this was previously performed in CAD. The Corporations cash outflows consist primarily of USD cash balances and less of CAD, as also reflected in the budget.

Use of estimates

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

Estimates are based on management’s best knowledge of current events and actions that management may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Estimates and assumptions include the measurement of stock-based compensation, derivative warrant liabilities, (note 7), stock-based compensation (note 10), assets heldaccruals for sale (note 6), supply agreement (note 12),research and development contracts and contract organization agreements, and valuation of intangibles (note 4) and goodwill. Estimates and assumptions are also involved in measuring the accrual of services rendered with respect to research and development expenditures at each reporting date, including whether contingencies should be accrued for, as well as in determining which research and development expenses qualify for investmentresearch and development tax credits and in what amounts. The Corporation recognizes the tax credits once it has reasonable assurance that they will be realized. Recorded tax credits are subject to review and approval by tax authorities and, therefore, could be different from the amounts recorded.

 

3. Recent accounting pronouncements

 

The Corporation has considered recent accounting pronouncements and concluded that they are either not applicable to the Corporation's business or that the effect is not expected to be material to the consolidated financial statements as a result of future adoption.

4. Intangible assets3. Fair Value Measurements

On August 27, 2021, the Corporation completed its acquisition of all outstanding equity interests in Grace Therapeutics Inc, via a merger. Grace, based in New Jersey and organized under the laws of Delaware, was a rare and orphan disease specialty pharmaceutical company.

In connection with the share-for-share non-cash transaction, Grace was merged with a new wholly owned subsidiary of Acasti and became a subsidiary of Acasti. As a result, Acasti acquired Grace’s entire therapeutic pipeline consisting of three unique clinical stage and multiple pre-clinical stage assets supported by an intellectual property portfolio consisting of various granted and pending patents in various jurisdictions worldwide. Under the terms of the acquisition, each issued and outstanding share of Grace common stock was automatically converted into the right to receive Acasti common shares equal to the equity exchange ratio set forth in the merger agreement.

 

Intangible assetsAssets and liabilities measured at fair value on a recurring basis as of $69,810 relate to the value of IPR&D, related to Grace’s therapeutic pipeline, consisting of three unique clinical stage programs/assets supported by intellectual property, the value of which has been attributedSeptember 30, 2023 are as follows:

$

Intangible assets – in-process research and development

GTX-104

27,595

GTX-102

31,908

GTX-101

10,307

Total

69,810

In addition, goodwill of $12,964 was recognized. The Corporation performed an impairment test as at August 27, 2022, the anniversary date of the acquisition for each of our IPR&D technologies as well as for goodwill. The Corporation has one reporting unit which we have determined to be the Company. The estimated fair values of identifiable intangible assets and the reporting unit were determined using the multi-period excess earnings method. As a result of this quantitative assessment, we did not identify an impairment loss.

 

The projected discounted cash flow models used to estimate the fair value of assets of our IPR&D reflect significant assumptions and are level 3 un-observable data regarding the estimates a market participant would make in order to evaluate a drug development asset, including the following:

•
Probability of clinical success of research and development and obtaining regulatory approval;
•
Forecasted net sales from up-front and milestone payments, royalties and product sales; and
•
A discount rate reflecting our weighted average cost of capital and specific risk inherent in the underlying assets.

1410

 

 

 

Total

 

Quoted prices in active markets (Level 1)

 

Significant other observable inputs (Level 2)

 

Significant unobservable inputs (Level 3)

 

 

$

 

$

 

$

 

$

 

Assets

 

 

 

 

 

 

 

 

 

   Guaranteed investment certificates and term deposits classified as cash equivalents

 

16,395

 

16,395

 

—

 

—

 

Total assets

 

16,395

 

16,395

 

—

 

—

 

Liabilities

 

 

 

 

 

 

 

 

 

   Derivative warrant liabilities

 

3,457

 

—

 

—

 

3,457

 

Total liabilities

 

3,457

 

—

 

—

 

3,457

 

 

Our IPR&D projects, consistent with othersThere were no changes in our industry, have risksvaluation techniques or transfers between Levels 1, 2 or 3 during the six months ended September 30, 2023. The Corporation’s derivative warrant liabilities are measured at fair value on a recurring basis using unobservable inputs that are classified as Level 3 inputs. Refer to Note 8(b) for the valuation techniques and uncertainties associated withassumptions used in estimating the timely and successful completionfair value of the derivative warrant liabilities.

4. Receivables

 

September 30, 2023

 

March 31,
2023

 

 

$

 

$

Sales tax receivables

 

360

 

338

Government assistance

 

356

 

412

Interest receivable

 

94

 

52

Other receivables

 

27

 

-

Total receivables

 

837

 

802

Government assistance is comprised of research and development investment tax credits from the Québec provincial government, which relate to quantifiable research and commercializationdevelopment expenditures under the applicable tax laws. The amounts recorded as receivables are subject to a government tax audit and the final amounts received may differ from those recorded. For the six months ended September 30, 2022, the Corporation recorded $81 as a reduction of product candidates, including our ability to confirm safetyresearch and efficacy based on data from clinical trials, our ability to obtain necessary regulatory approvals and our ability to successfully complete these tasks within budgeted costs. It is not permitted to market a human therapeutic without obtaining regulatory approvals, and such approvals require the completion of clinical trials that demonstrate that a product candidate is safe and effective. In addition, the availability and extent of coverage and reimbursement from third-party payers, including government healthcare programs and private insurance plans as well as competitive product launches, affect the revenues a product can generate. Consequently, the eventual realized values, if any, of acquired IPR&D projects may vary from their estimated fair values. The Corporation reviews individual IPR&D projects for impairment at our annual test datedevelopment expenses in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable including changes in technological or commercial feasibility or changes in the regulatory approval process.Statement of Loss and Comprehensive Loss.

 

5. Short-term investments

 

The Corporation holds various marketable securities, with maturities greater than 3 months at the time of purchase, as follows:

 

 

December 31,
2022

 

 

March 31,
2022

 

 

 

$

 

 

$

 

Term deposits issued in US currency earning interest at 0.475% and maturing on March 6, 2023

 

 

5,000

 

 

 

11,893

 

Term deposit issued in CAD currency earning interest at 0.50% and maturing on March 30, 2023

 

 

15

 

 

 

1,429

 

Total short-term investments

 

 

5,015

 

 

 

13,322

 

 

September 30, 2023

 

 

March 31,
2023

 

 

$

 

 

$

 

Term deposits issued in CAD currency earning interest at 3% and maturing on March 29, 2024

 

 

15

 

 

 

15

 

Total short-term investments

 

 

15

 

 

 

15

 

 

6. Trade and other payables

 

September 30, 2023

 

 

March 31, 2023

 

 

 

$

 

 

$

 

Trade payables

 

 

685

 

 

 

1,242

 

Accrued liabilities and other payables

 

 

460

 

 

 

946

 

Employee salaries and benefits payable

 

 

206

 

 

 

1,148

 

Total trade and other payables

 

 

1,351

 

 

 

3,336

 

7. Leases

The Corporation has historically entered into lease arrangements for its research and development and quality control laboratory facility located in Sherbrooke, Québec. As of September 30, 2023, the Corporation had one operating lease with required future minimum payments.

11

On March 14, 2022, the Corporation renewed the lease agreement effective April 1, 2022, resulting in a commitment of $556 over a 24 months base lease term and 48 months additional lease renewal term. In April 2023, the Corporation elected not to renew the additional 48 months lease renewal term with the lease expected to terminate March 31, 2024. The Corporation accounted for the change in lease term as a lease modification under ASC 842. Due to the modification in lease term, the Corporation remeasured the lease liability and right-of-use asset associated with the lease. As of the effective date of modification, the Corporation recorded an adjustment to the right-of-use asset and lease liability in the amount of $369 based on the net present value of lease payments discounted using an estimated incremental borrowing rate of 4.3%.

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Corporation’s operating lease for the six-month period ended September 30, 2023:

Operating cash flows for operating lease

 

$

47

 

Weighted-average remaining lease term (in years)

 

 

0.50

 

Weighted-average discount rate

 

 

4.3

%

As the Corporation's lease does not provide an implicit rate, the Corporation utilized its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Corporation could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

Future minimum lease payments under the Corporation’s operating lease as of September 30, 2023 were as follows:

 

September 30, 2023

 

 

 

$

 

2024

 

 

47

 

2025 and thereafter

 

 

-

 

Total lease payments

 

 

47

 

Less: interest

 

 

(1

)

Total lease liability

 

 

46

 

On July 19, 2023, the Corporation entered into a new short term lease for its headquarters located at 2572 boul. Daniel-Johnson, 2nd Floor Laval, Québec, Canada H7T 2R3. On July 24, 2023, the Corporation terminated the lease for its office located at 3009 boul. de la Concorde East, Suite 102, Laval, Québec, Canada H7E 2B5.

 

6. Assets held for sale8. Capital and other components of equity

During the period, the Corporation determined to actively market for sale Other assets and Production equipment and has met the criteria for classification of assets held for sale:

 

 

December 31,
2022

 

 

March 31,
2022

 

 

 

 

 

 

Reclassed as explained below

 

 

 

$

 

 

$

 

Other assets (a)

 

 

195

 

 

 

195

 

Production equipment (b)

 

 

157

 

 

 

157

 

 

 

 

352

 

 

 

352

 

 

a. Other assetsCommon Shares

Authorized capital stock

Unlimited number of shares

•
Class A shares ("Common Shares"), voting (one vote per share), participating and without par value. As of September 30, 2023, there were 9,399,404 Class A shares issued and outstanding.
•
Class B shares, voting (ten votes per share), non-participating, without par value and maximum annual non-cumulative dividend of 5% on the amount paid per share. Class B shares are convertible, at the holder’s discretion, into Common Shares, on a one-for-one basis, and Class B shares are redeemable at the holder’s discretion for CAD $4.80 per share, subject to certain conditions. As of September 30, 2023, there were no Class B shares issued and outstanding.
•
Class C shares, non-voting, non-participating, without par value and maximum annual non-cumulative dividend of 5% on the amount paid per share. Class C shares are convertible, at the holder’s discretion, into Common Shares, on a one-for-one basis, and Class C shares are redeemable at the holder’s discretion for CAD $1.20 per share, subject to certain conditions. As of September 30, 2023, there were no Class C shares issued and outstanding.
•
Class D and E shares, non-voting, non-participating, without par value and maximum monthly non-cumulative dividend between 0.5% and 2% on the amount paid per share. Class D and E shares are convertible, at the holder’s discretion, into Common Shares, on a one-for-one basis, and Class D and E shares are redeemable at the holder’s discretion, subject to certain conditions. As of September 30, 2023, there were no Class D or E shares issued and outstanding.

 

Other assets represent krill oil (“RKO”) held by the Corporation that was expected to be used in commercial inventory scale up related to the development and commercialization of the CaPre drug candidate. Given that the development of CaPre will no longer be pursued by Acasti, the Corporation is expected to sell this reserve. The other asset is being recorded at the fair value less cost to sell. Management’s estimate of the fair value of the RKO less cost to sell is based primarily on estimated market prices obtained from an appraiser specializing in the krill oil market. These projections are based on Level 3 inputs of the fair value hierarchy and reflect management’s best estimate of market participants’ pricing of the assets as well as the general condition of the asset.

b. Production equipment

December 31, 2022

 

Cost, net of
impairment

 

 

Accumulated
depreciation

 

 

Net book
value

 

 

 

$

 

 

$

 

 

$

 

Production equipment

 

 

1,179

 

 

 

(1,022

)

 

 

157

 

 

 

 

1,179

 

 

 

(1,022

)

 

 

157

 

During the three months ended June 30, 2022, the Corporation reclassed the following assets from assets held for sale as they no longer met the criteria of such classification.

 

 

Cost, net of
impairment

 

 

Accumulated
depreciation

 

 

Net
book
value reclassed from held for sale

 

 

 

$

 

 

$

 

 

$

 

Furniture and office equipment

 

 

17

 

 

 

(5

)

 

 

12

 

Computer equipment

 

 

94

 

 

 

(6

)

 

 

88

 

Laboratory equipment

 

 

585

 

 

 

(435

)

 

 

150

 

 

 

 

696

 

 

 

(446

)

 

 

250

 

Furthermore, depreciation expense of $167 was recognized related to the period from the date that the assets were classified as held for sale until the quarter ended June 30, 2022. The reclassification from held for sale to equipment was reflected on the comparative balance sheet.

1512

 

 

 

7. Capital and other components of equityPrivate Placement

 

(a)

“At-the-marketOn September 24, 2023, the Corporation entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional and accredited investors in connection with a private placement of the Corporation's securities (the “Offering”). Pursuant to the Purchase Agreement, the Corporation agreed to offer and sell in the Offering ” 1,951,371sales agreement Common Shares, at a purchase price of $
1.848 per Common Share and pre-funded warrants (the “Pre-funded Warrants”) to purchase up to 2,106,853 Common Shares (the “Pre-funded Warrant Shares”) at a purchase price equal to the purchase price per Common Share less $0.0001. Each Pre-funded Warrant is exercisable for one Pre-funded Warrant Share at an exercise price of $0.0001 per Pre-funded Warrant Share, is immediately exercisable and will expire once exercised in full. Pursuant to the Purchase Agreement, the Corporation also issued to such institutional and accredited investors common warrants (the “Common Warrants” and, together with the Pre-funded Warrants, the “Warrants”) to purchase Common Shares, exercisable for an aggregate of 2,536,391 Common Shares (the “Common Warrant Shares” and, together with the Pre-Funded Warrant Shares, the “Warrant Shares”). Under the terms of the Purchase Agreement, for each Common Share and each Pre-funded Warrant issued in the Offering, an accompanying five-eighths (0.625) of a Common Warrant was issued to the purchaser thereof. Each whole Common Warrant is exercisable for one Common Warrant Share at an exercise price of $3.003 per Common Warrant Share, is immediately exercisable and will expire on the earlier of (i) the 60th day after the date of the acceptance by the U.S. Food and Drug Administration of a New Drug Application for the Corporation's product candidate GTX-104 or (ii) five years from the date of issuance. The Common Warrants were offered and sold at a purchase price of $0.125 per whole underlying Common Warrant Share, which purchase price was included in the offering price per Common Share and Pre-funded Warrant issued in the Offering.

The Offering closed on September 25, 2023 (the “Closing Date”). The net proceeds to the Corporation from the Offering was approximately $7,300, after deducting fees and expenses.

At-the-Market (“ATM”) Program

 

On June 29, 2020, the Corporation entered into an amended and restated sales agreement (the “Sales Agreement”) with B. Riley FBR, Inc. ("B.Riley"), Oppenheimer & Co. Inc. and H.C. Wainwright & Co., LLC (collectively, the “Agents”) to amend the Corporation’s existing ATM program. Under the terms of the Sales Agreement, which hashad a three-year term, the Corporation maycould issue and sell from time-to-time common sharesCommon Shares having aggregate gross proceeds of up to $75,000,00075,000 through the Agents. Subject to the terms and conditions of the Sales Agreement, the Agents willwould use their commercially reasonable efforts to sell the common sharesCommon Shares from time to time, based upon the Corporation’s instructions. The Corporation hashad no obligation to sell any of the common sharesCommon Shares and maycould, at any time, suspend sales under the Sales Agreement. The Corporation and the Agents maycould terminate the Sales Agreement in accordance with its terms. Under the terms of the Sales Agreement, the Corporation has provided the Agents with customary indemnification rights and the Agents will bewere entitled to compensation at a commission rate equal to 3.0% of the gross proceeds from each sale of the common shares.Common Shares. The Sales Agreement expired pursuant to its terms on June 29, 2023.

On November 10, 2021, the Corporation filed a prospectus supplement relating to its at-the-market program with B. Riley, Oppenheimer & Co. Inc. and H.C. Wainwright & Co., LLC acting as agents. Under the terms of the ATM Sales Agreement and the prospectus supplement, the Corporation may issue and sell from time-to-time common shares having aggregate gross proceeds of up to $75,000,000 through the agents. The common shares will be distributed at market prices prevailing at the time of the sale and, as a result, prices may vary between purchasers and during the period of distribution. The volume and timing of sales under the ATM program, if any, will be determined at the sole discretion of the Corporation’s board of directors and management. Costs incurred relating to prospectus supplement were $198 and are included in General and administrative expenses during the three-and nine-months ending December 31, 2021.

During the ninesix months ended December 31,September 30, 2023, no Common Shares were sold under the ATM program. During the six months ended September 30, 2022, 324,64854,108 common sharesCommon Shares were sold for total grossnet proceeds of approximately $314304 with commissions, legal expenses and costs related to the share sale amounting to $10. The common sharesCommon Shares were sold at the prevailing market prices, which resulted in an average price of approximately $0.955.70 per share. During the three and nine months ended December 31, 2021, no common shares were sold under the ATM program.

 

(b)
Warrants

The outstanding warrants of the Corporation are composed of the following as at December 31, 2022, and March 31, 2022:b. Warrants

 

 

 

December 31, 2022

 

 

March 31, 2022

 

 

 

Number
outstanding

 

 

Amount

 

 

Number
outstanding

 

 

Amount

 

 

 

 

 

 

$

 

 

 

 

 

$

 

Liability

 

 

 

 

 

 

 

 

 

 

 

 

May 2018 Canadian public offering warrants (i)

 

 

824,218

 

 

 

—

 

 

 

824,218

 

 

 

10

 

December 2017 U.S. public offering warrants (ii)

 

 

—

 

 

 

—

 

 

 

884,120

 

 

 

—

 

 

 

 

824,218

 

 

 

—

 

 

 

1,708,338

 

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

December 2017 US public offering broker warrants (iii)

 

 

—

 

 

 

—

 

 

 

32,390

 

 

 

161

 

 

 

 

—

 

 

 

—

 

 

 

32,390

 

 

 

161

 

During the six-month period ended June 30, 2023,

(i) Warrants137,370 of the May 2018 Canadian public offering warrants to acquire one common share at an exercise price of CAD $10.4862.88, expiring expired on May 9, 2023.

(ii)

As further discussed above, on September 25, 2023, the Corporation issued an aggregate of 4,643,244 Warrants exercisable for 4,643,244 Warrant Shares in the Offering pursuant to the terms of the Purchase Agreement entered into with certain institutional and accredited investors. Pursuant to the terms of the Purchase Agreement, the Corporation sold Pre-funded Warrants to acquirepurchase up to one2,106,853 common sharePre-funded Warrant Shares. Each Pre-funded Warrant is exercisable for one Pre-funded Warrant Share at an exercise price of $10.080.0001, expired on December 27, 2022.

(iii) per Pre-funded Warrant Share, is immediately exercisable and will expire once exercised in full. Pursuant to the Purchase Agreement, the Corporation also issued to such institutional and accredited investors Common Warrants to acquire purchase an aggregate of 2,536,391 Common Warrant Shares. Each whole Common Warrant is exercisable for one common share Common Warrant Share at an exercise price of $10.103.003, expired per Common Warrant Share, is immediately exercisable and will expire on December 19, 2022.the earlier of (i) the 60th day after the date of the acceptance by the U.S. Food and Drug Administration of a New Drug Application for the Corporation's product candidate GTX-104 or (ii) five years from the date of issuance.

 

16The Common Warrants issued as a part of the Offering are derivative warrant liabilities given the warrant indenture did not meet the fixed-for-fixed criterion and that the Common Warrants are not indexed to the Corporation’s own stock. Proceeds were allocated amongst Common Shares, Pre-funded Warrants and Common Warrants by applying the residual method, with fair value of the Common Warrants determined using the Black-Scholes model, resulting in an initial warrant liability of $1,631 and $45 of issuance costs allocated to Common Warrants. Accordingly, $2,822 and $3,047 of gross proceeds were allocated to Common Shares and Pre-funded Warrants, respectively;

13

 

 

8. Government assistance

Government assistance is comprised of a government grant from the Canadian federal government and research and development investment tax credits receivable from the Québec provincial government, which relate to qualifiable research and development expenditures under the applicable tax laws. The amounts recorded as receivables are subject to a government tax audit and the final amounts received may differ from those recorded. For the nine months ended December 31, 2022 and 2021, the Corporation recorded $19678 and $18484, respectively, as a reduction of researchissuance costs were allocated to Common Shares and development expensesPre-funded Warrants, respectively. For the six months ended September 30, 2023, Common Warrants were revalued at fair value through profit and loss.

The derivative warrant liabilities are measured at fair value at each reporting period and the reconciliation of changes in fair value is presented in the Statement of Loss and Comprehensive Loss.following table:

Balance - March 31, 2023

$-

Issued during the year

1,631

Change in fair value

1,826

Balance - September 30, 2023

$3,457

 

9. Net financial incomeThe warrant liability was determined based on the fair value of warrants at the issue date and the reporting dates using the Black-Scholes model with the following weighted average assumptions will expire on the earlier of (i) the 60th day after the date of the acceptance by the U.S. Food and Drug Administration of a New Drug Application for the Corporation's product candidate GTX-104 or (ii) five years from the date on issuance.

 

 

Three months ended

 

 

Nine months ended

 

 

 

December 31,
2022

 

 

December 31,
2021

 

 

December 31,
2022

 

 

December 31,
2021

 

 

 

$

 

 

$

 

 

$

 

 

$

 

Foreign exchange gain (loss)

 

 

15

 

 

 

(172

)

 

 

(75

)

 

 

172

 

Change in fair value of warrant liabilities

 

 

—

 

 

 

828

 

 

 

10

 

 

 

4,908

 

Interest income and bank charges

 

 

64

 

 

 

40

 

 

 

59

 

 

 

191

 

Other income

 

 

3

 

 

 

—

 

 

 

75

 

 

 

—

 

Financial income (expenses)

 

 

82

 

 

 

696

 

 

 

69

 

 

 

5,271

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issue Date

 

Reporting date

 

 

September 25, 2023

 

September 30, 2023

Risk-free interest rate

 

5.00%

 

4.94%

Share price

 

$1.78

 

$2.78

Expected warrant life

 

2.54

 

2.53

Dividend yield

 

0%

 

0%

Expected volatility

 

80.90%

 

84.36%

 

10.The weighted average assumptions were prorated based on the probability of the warrant liability expiring on the 60th day after the date of the acceptance by the U.S. Food and Drug Administration of a New Drug Application for the Corporation's product candidate GTX-104 and of it expiring on five years from the date of issuance. The weighted average fair value of the Common Warrants were determined to be $0.64 and $1.36 per Common Warrant, as of September 25, 2023 and September 30, 2023, respectively. The risk-free interest rate at the issue date and on the reporting date of September 30, 2023 was based on the interest rate corresponding to the U.S. Treasury rate issue with a remaining term equal to the expected term of the warrants. The expected volatility was based on the historical volatility for the Company.

9. Stock-based compensation:compensation

 

At December 31, 2022,September 30, 2023, the Corporation hashad in place a stock option plan for directors, officers, employees, and consultants of the Corporation (“Stock Option Plan”). An amendment of the Stock Option Plan was approved by shareholders on September 28, 2022. The amendment provides for an increase to the existing limits for common shares reserved for issuance under the Stock Option Plan.

 

The Stock Option Plan continues to provideprovides for the granting of options to purchase common shares. TheUnder the terms of the Stock Option Plan, the exercise price of the stock options granted under this amended plan isthe Stock Option Plan may not be lower than the closing price of the Corporation’s common shares on the TSXVNasdaq Capital Market at the close of marketssuch market the day preceding the grant. The maximum number of common shares that may be issued upon exercise of options granted under the amended Stock Option Plan shall not exceed 20% of the aggregate number of issued and outstanding shares of the Corporation as of July 28, 2022. The terms and conditions for acquiring and exercising options are set by the Corporation’s Board of Directors, subject to, among others, to the following limitations: the term of the options cannot exceed ten years and (i) all options granted to a director will be vested evenly on a monthly basis over a period of at least twelve (12) months, and (ii) all options granted to an employee will be vested evenly on a quarterly basis over a period of at least thirty-six (36) months.

 

The total number of sharesoptions issued to any one consultant within any twelve-month period cannot exceed 2% of the Corporation’s total issued and outstanding common shares (on a non-diluted basis). The Corporation is not authorized to granttotal number of options issued within any twelve-month period such numberto all directors, employees and/or consultants of options under the Stock Option Plan that could resultCorporation (or any subsidiary of the Corporation) conducting investor relations services, cannot exceed in a number of common shares issuable pursuant to options granted to (a) related persons exceedingthe aggregate 2% of the Corporation’s issued and outstanding common shares (on a non-diluted basis) on, calculated at the date an option is granted or (b)to any one eligible person in a twelve-month period exceeding 2% of the Corporation’s issued and outstanding common shares (on a non-diluted basis) on the date an option is granted.such person.

 

The following table summarizes information about activities within the Stock Option Plan for the nine monthsix-month period ended:ended September 30, 2023:

 

 

December 31, 2022

 

 

December 31, 2021

 

 

 

Weighted average
exercise price

 

 

Number of
options

 

 

Weighted average
exercise price

 

 

Number of
options

 

 

 

CAD $

 

 

 

 

 

CAD $

 

 

 

 

Outstanding at beginning of period

 

 

3.94

 

 

 

2,989,381

 

 

 

8.33

 

 

 

911,871

 

Granted

 

 

1.10

 

 

 

1,482,500

 

 

 

2.05

 

 

 

2,077,900

 

Exercised

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Forfeited

 

 

7.66

 

 

 

(22,263

)

 

 

10.39

 

 

 

(7,995

)

Expired

 

 

37.06

 

 

 

(3,774

)

 

 

—

 

 

 

—

 

Outstanding at end of period

 

 

2.94

 

 

 

4,445,844

 

 

 

3.95

 

 

 

2,981,776

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at end of period

 

 

4.65

 

 

 

1,957,215

 

 

 

8.84

 

 

 

761,563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

Number of
options

 

 

Weighted average
exercise price

 

 

Weighted average
grant date
fair value

 

Outstanding, March 31, 2023

 

 

740,957

 

 

 

13.60

 

 

 

11.23

 

Granted

 

 

446,502

 

 

 

2.64

 

 

 

2.27

 

Exercised

 

 

(12,500

)

 

 

1.27

 

 

 

2.27

 

Forfeited/Cancelled

 

 

(613,594

)

 

 

13.68

 

 

 

1.61

 

Outstanding, September 30, 2023

 

 

561,365

 

 

 

4.14

 

 

 

2.08

 

Exercisable, September 30, 2023

 

 

141,455

 

 

 

6.70

 

 

 

1.56

 

Forfeited and cancelled options were as a result of the Corporations restructuring that occurred during the six months ended September 30, 2023. On July 14, 2023, the Corporation's Board of Directors approved the grant of 446,502 stock options at an exercise price of $2.64 under the Corporation's Stock Option Plan.

 

The weighted average grant date fair value of awards for options granted during the six months ended September 30, 2023 was $2.27. The fair value of options granted was estimated using the Black-Scholes option pricing model, resulting in the following weighted average assumptions for the options granted:

 

17

 

Nine months ended

September 30, 2023

 

 

December 31,
2022

$

Weighted average

Exercise price

 

CAD $

1.10

2.64

Share price

 

CAD $

1.10

Weighted average grant-date fair value per award

CAD $

0.94

Volatility

117.56

%

Risk-free interest rate

3.27

%

Expected life

5.73

2.64

Dividend

 

0%

Risk-free interest

 

—3.62

%

Estimated life (years)

 

5.78

Expected volatility

 

118.40%

No options were granted during the three month period ended December 31, 2022.

Stock-based compensation payment transactions

The fair value of stock-based compensation transactions is measured using the Black-Scholes option pricing model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility for a duration equal to the estimated weighted average life of the instruments, life based on the average of the vesting and contractual periods for employee awards as minimal prior exercises of options in which to establish historical exercise experience; and contractual life for broker warrants), and the risk-free interest rate (based on government bonds). Service and performance conditions attached to the transactions, if any, are not taken into account in determining fair value. The expected life of the stock options is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may also not necessarily be the actual outcome.

 

Compensation expense recognized under the Stock Option Plan for the nine months ended December 31, 2022 and 2021 wasstock option plan is summarized as follows:

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

December 31,
2022

 

 

December 31,
2021

 

 

December 31,
2022

 

 

December 31,
2021

 

 

 

$

 

 

$

 

 

$

 

 

$

 

Research and development expenses

 

 

139

 

 

 

154

 

 

 

481

 

 

 

242

 

General and administrative expenses

 

 

280

 

 

 

281

 

 

 

930

 

 

 

460

 

Sales and marketing expenses

 

 

24

 

 

 

19

 

 

 

78

 

 

 

19

 

 

 

 

443

 

 

 

454

 

 

 

1,489

 

 

 

721

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Six months ended

 

 

 

September 30, 2023

 

 

September 30, 2022

 

 

September 30, 2023

 

 

September 30, 2022

 

 

$

 

 

$

 

 

$

 

 

$

 

Research and development expenses

 

 

82

 

 

 

184

 

 

 

84

 

 

 

342

 

General and administrative expenses

 

 

198

 

 

 

368

 

 

 

258

 

 

 

650

 

Sales and marketing expenses

 

 

-

 

 

 

30

 

 

 

16

 

 

 

54

 

 

 

280

 

 

 

582

 

 

 

358

 

 

 

1,046

 

 

1As of September 30, 2023, there was $680 of total unrecognized compensation cost, related to non-vested stock options, which is expected to be recognized over a remaining weighted average vesting period of1. Supplemental cash flow disclosure 1.48 years.

Corporation equity incentive plan

The Corporation established an equity incentive plan (the “Equity Incentive Plan”) for employees, directors, and consultants. The Equity Incentive Plan provides for the issuance of restricted share units (RSUs), performance share units, restricted shares, deferred share units and other stock-based awards, subject to restricted conditions as may be determined by the Board of Directors. There were no such awards outstanding as of September 30, 2023 and 2022, and no stock-based compensation was recognized for the period ended September 30, 2023 and 2022 under the Equity Incentive Plan.

15

 

 

(a) Changes in non-cash operating items10. Loss per share

 

 

 

 

 

 

 

 

 

 

Nine months ended

 

 

 

December 31,
2022

 

 

December 31,
2021

 

 

 

$

 

 

$

 

Receivables

 

 

(268

)

 

 

292

 

Prepaid expenses

 

 

(382

)

 

 

(1,507

)

Trade and other payables

 

 

478

 

 

 

(2,603

)

 

 

 

(172

)

 

 

(3,818

)

The Corporation has generated a net loss for all periods presented, therefore diluted loss per share is the same as basic loss per share since the inclusion of potentially dilutive securities would have had an anti-dilutive effect. All currently outstanding options and warrants could potentially be dilutive in the future.

The Corporation excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common shareholders for the periods indicated because including them would have had an anti-dilutive effect:

 

September 30, 2023

 

September 30, 2022

Options outstanding

 

561,365

 

740,974

September 2023 US private offering pre-funded warrants

 

2,106,853

 

—

September 2023 US private offering warrants

 

2,536,391

 

—

May 2018 public offering warrants

 

—

 

137,370

December 2017 public offering warrants

 

—

 

147,354

December 2017 public offering broker warrants

 

—

 

5,399

11. Supplemental cash flow disclosure

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Six Months ended

 

 

September 30,
2023

 

 

September 30,
2022

 

 

$

 

 

$

 

Receivables

 

 

(35

)

 

 

(359

)

Prepaid expenses

 

 

(446

)

 

 

(704

)

Trade and other payables

 

 

(1,986

)

 

 

926

 

Write-off of operating lease right of use asset

 

 

(23

)

 

 

—

 

Total changes in operating assets and liabilities

 

 

(2,489

)

 

 

(137

)

16

 

12. Financial instruments

a. Concentration of credit risk

Financial instruments that potentially subject the Corporation to a concentration of credit risk consist primarily of cash and cash equivalents and investments. Cash and cash equivalents and investments are all invested in accordance with the Corporation’s Investment Policy with the primary objective being the preservation of capital and the maintenance of liquidity, which risk is managed by dealing only with highly rated Canadian institutions. The carrying amount of financial assets, as disclosed in the consolidated balance sheets, represents the Corporation’s credit exposure at the reporting date.

b. Foreign currency risk

The Corporation is exposed to financial risk related to the fluctuation of foreign exchange rates and the degrees of volatility of those rates. Foreign currency risk is limited to the portion of the Corporation's business transactions denominated in currencies other than the Corporation's functional currency of the U.S. dollar. Fluctuations related to foreign exchange rates could cause unforeseen fluctuations in the Corporation's operating results. The Corporation does not use derivative instruments to hedge exposure to foreign exchange risk. The fluctuation of the Canadian dollar in relation to the U.S. dollar and other foreign currencies will consequently have an impact upon the Corporation’s net loss.

c. Liquidity risk

Liquidity risk is the risk that the Corporation will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Corporation manages liquidity risk through the management of its capital structure and financial leverage. It also manages liquidity risk by continuously monitoring actual and projected cash flows. The Board of Directors reviews and approves the Corporation's operating budgets, and reviews material transactions outside the normal course of business. The Corporation currently does not have long-term debt nor arranged committed sources of financing and is operating via use of existing cash and short-term investment balances. Refer to Note 1 – Nature of Operations.

The Corporation’s financial liabilities obligations include trade and other payables, which fall due within the next 12 months.

13. Commitments and contingencies

Research and development contracts and contract research organizations agreements

 

We utilizeThe Corporation utilizes contract manufacturing organizations ("CMOs") for the development and production of clinical materials and contract research organizations (“CROs”) to perform services related to ourits clinical trials. Pursuant to the agreements with these contract manufacturing organizationsCMOs and contract research organizations, we haveCROs, the Corporation has either the right to terminate the agreements without penalties or under certain penalty conditions. As of September 30, 2023, the Corporation has no commitments from CMOs and approximately $8,500 of commitments for the next twelve months to CROs.

 

18

SupplyRaw krill oil supply contract

 

On October 25, 2019, the Corporation signed a supply agreement with Aker Biomarine Antarctic.BioMarine Antarctic AS. (“Aker”AKBM”) to purchase raw krill oil product for a committed volume of commercial starting material for CaPre, one of the Corporation’s former drug candidates, for a total fixed value of $3.13,100 million.based on the value of krill oil at that time. As at Decemberof March 31, 2022, the remaining balance of the commitment with Aker amountsamounted to $2.82,800 million.. During the second calendar quarter of 2022, AkerAKBM informed the Corporation that AkerAKBM believed it had satisfied the terms of the supply agreement as to their abilityobligation to deliver the remaining balance of raw krill oil product, and that the Corporation was therefore required to accept the remaining product commitment and to pay Aker the $2.8 million balance.commitment. The Corporation disagreesdisagreed with Aker’sAKBM’s position and believesbelieved that Aker isAKBM was not entitled to further payment under the supply agreement. Accordingly, no liability has been recorded.was recorded by the Corporation. The dispute wasremained unresolved as of Decemberboth March 31, 2022,2023 and remains unresolved. There is uncertainty as to whether2022. On October 18, 2023, the Corporation will be requiredentered into a settlement agreement with AKBM to make further paymentsettle any and all potential claims regarding amounts due under the supply agreement. Pursuant to Akerthe terms of the settlement agreement, in exchange for a release and waiver of claims arising out of the supply agreement by AKBM and any of AKBM’s affiliates, the Corporation and AKBM agreed to the following: (a) AKBM retained ownership of all raw krill oil product, including amounts previously delivered to the Corporation, (b) AKBM acquired and took ownership of all production equipment related to the production of CaPre, (c) AKBM acquired and took ownership of all data from research, clinical trials and pre-clinical studies with respect to CaPre, and (d) AKBM acquired and took ownership over all rights, title and interest in and to all intellectual property rights related to CaPre owned by the Corporation, including all patents and trademarks. Pursuant to the terms of the settlement agreement, AKBM acknowledged that the CaPre assets were transferred on an “as is” basis, and in connection therewith the Corporation disclaimed all representations and warranties in connection with the dispute. Additionally, inCaPre assets, including any representations with respect to performance or sufficiency. The value of the eventraw krill oil previously delivered to the Corporation, is requiredthe production equipment and the intellectual property rights related to accept delivery from AkerCaPre were fully impaired in prior

17

reporting periods and had a carrying value of nil as of March 31, 2023. As of September 30, 2023, no liability was recorded by the remaining balance of krill oil product under the supply agreement, there is uncertainty as to whether the Corporation can recover value from the product, which may result in the Corporation incurring a loss on the supply agreement in the near term.Corporation.

 

Legal proceedings and disputes

 

In the ordinary course of business, the Corporation is at times subject to various legal proceedings and disputes. The Corporation assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Corporation will incur a loss and the amount of the loss can be reasonably estimated, the Corporation records a liability in its consolidated financial statements. These legal contingencies may be adjusted to reflect any relevant developments. Where a loss is not probable or the amount of loss is not estimable, the Corporation does not accrue legal contingencies. While the outcome of legal proceedings is inherently uncertain, based on information currently available, management believes that it has established appropriate legal reserves. Any incremental liabilities arising from pending legal proceedings are not expected to have a material adverse effect on the Corporation’s financial position, results of operations, or cash flows. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the Corporation’s financial position, results of operations, or cash flows. No reserves or liabilities have been accrued as at December 31, 2022.of September 30, 2023.

14. Restructuring Costs

On May 8, 2023, the Corporation communicated its decision to terminate a substantial amount of its workforce as part of a plan that intended to align the Corporation’s organizational and management cost structure to prioritize resources to GTX-104 and reduce losses to improve cash flow and extend available cash resources. The Corporation incurred $1,485 of costs primarily consisting of employee severance costs and legal fees.

 

 

1918

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation

This management’s discussion and analysis (“MD&A”) is presented in order to provide the reader with an overview of the financial results and changes to our consolidated balance sheet as at December 31, 2022, and for the three and nine month period then ended.September 30, 2023. This MD&A also explains the material variations in our results of operations balance sheet and cash flows for the three and ninesix months ended DecemberSeptember 30, 2023 and 2022, consolidated balance sheets as of September 30, 2023 and March 31, 20222023, and 2021.cash flows as for the six months ended September 30, 2023 and 2022.

Market data, and certain industry data and forecasts included in this MD&A were obtained from internal corporationCorporation surveys and market research and those conducted by third parties hired by us, publicly available information, reports of governmental agencies and industry publications, and independent third-party surveys. We have relied upon industry publications as our primary sources for third-party industry data and forecasts. Industry surveys, publications and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of that information is not guaranteed. We have not independently verified any of the data from third-party sources or the underlying economic assumptions they have made. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based upon our management’s or contracted third parties’ knowledge of our industry, have not been independently verified. Our estimates involve risks and uncertainties, including assumptions that may prove not to be accurate, and these estimates and certain industry data are subject to change based on various factors, including those discussed in this quarterly report and in our most recently filed annual reportAnnual Report on Form 10-K.10-K, filed with the Securities and Exchange Commission (the “SEC”) on June 23, 2023 (the “Annual Report”). This MD&A contains forward-looking information. You should review our Special Note Regarding Forward-Looking Statements presented at the beginning of this quarterly report.

This MD&A approved by the Board of Directors on February 14, 2023 should be read in conjunction with our unaudited condensed consolidated interim financial statements for the three and ninesix months ended December 31,September 30, 2023 and 2022 and 2021 included elsewhere in this quarterly report. Our interim financial statements were prepared in accordance with U.S. GAAP.

All amounts appearing in this MD&A for the period-by-period discussions are in thousands of U.S. dollars, except share and per share amounts or unless otherwise indicated.

Business Overview

On August 27, 2021, we completed our acquisition of Grace via a merger following the approval of Acasti’s shareholders and Grace’s stockholders. Following completion of the merger, Grace became a wholly owned subsidiary of Acasti and was renamed Acasti Pharma U.S. Inc.

The successful completion of the merger positions Acasti as a premier, late-stage specialty pharmaceutical company with now two Phase 3 ready drug candidates, and additional products in the clinical and preclinical pipeline. We are focused on developing and commercializing products for rare and orphan diseases that have the potential to improve clinical outcomes by using the Company’sour novel drug delivery technologies. We seek to apply new proprietary formulations to approved and marketed pharmaceutical compounds to achieve enhanced efficacy, faster onset of action, reduced side effects, and more convenient drug delivery and increased patient compliance; all of which could result in improved patient outcomes. The active pharmaceutical ingredients used in the drug candidates under development by Acasti may be already approved in a target indication or could be repurposed for use in new indications.

The existing well understood efficacy and safety profiles of these marketed compounds provides the opportunity for us to utilize the Section 505(b)(2) regulatory pathway under the Federal Food, Drug and Cosmetic Act (the “FFDCA”) for the development of our reformulated versions of these drugs, and therefore may provide a potentially shorter path to regulatory approval. Under Section 505(b)(2), if sufficient support of a product’s safety and efficacy either through previous FDAU.S. Food and Drug Administration ("FDA") experience or sufficiently within the existing and accepted scientific literature, can be established, it may eliminate the need to conduct some of the preclinicalpre-clinical studies and clinical studiestrials that new drug candidates might otherwise require.

In connection with the merger, we acquired Grace’s entireOur therapeutic pipeline, which has the potential to address critical unmet medical needs for the treatment of rare and orphan diseases. The pipeline consists of three unique clinical stage and multiple pre-clinical stage assets supported by an intellectual property portfolio of more than 40 granted and pending patents in various jurisdictions worldwide. These drug candidates aim to improve clinical outcomes in the treatment of rare and orphan diseases by applying proprietary formulation and drug delivery technologies to existing pharmaceutical compounds to achieve improvements over the current standard of care, or to provide treatment for diseases with no currently approved therapies.

RareWe believe that rare disorders represent an attractive area for drug development, and there remains an opportunity for Acastius to utilize already approved drugs that have established safety profiles and clinical experience to potentially address significant unmet medical needs. A key advantage of pursuing therapies for rare disorders is the potential to receive orphan drug designation (“ODD”) from the FDA. Acasti's firstOur three drug candidates currently in clinical development have received ODD status, provided certain conditions are met at NDAnew drug application ("NDA") approval. ODD provides for seven years of marketing exclusivity in the United States post-launch, provided certain conditions are met, and the potential for faster regulatory review. ODD status can also result in tax credits of up to 50% of clinical development costs conducted in the United States upon marketmarketing approval and a waiver of the new drug application (NDA)NDA fees, which we estimate can translate into savings of $1 - $2 million.approximately $3.2 million for our lead drug candidate, GTX-104. Developing drugs for rare diseases can often allow for clinical trials that are more manageably scaled and may require a smaller, more targeted commercial infrastructure.

The specific diseases targeted for drug development by Acastius are well understood, although thesethe patient populations suffering from such diseases may remain poorly served by available therapies or in some cases, approved therapies do not yet exist. We aim to effectively treat debilitating symptoms that result from these underlying diseases.

2019

 

Our three most advanced programs are:lead drug candidate:

•
GTX-104 an IVis a clinical stage, novel, injectable formulation of nimodipine designedbeing developed for intravenous infusion (IV) in aneurysmal subarachnoid hemorrhage (aSAH) patients to treat Subarachnoid Hemorrhage (“SAH”),address significant unmet medical needs. The unique nanoparticle technology of GTX-104 facilitates aqueous formulation of insoluble nimodipine for a rare brain disorderstandard peripheral IV infusion. GTX-104 provides a convenient IV delivery of nimodipine in the Intensive Care Unit eliminating the need for which we have completed multiplenasogastric tube administration in unconscious or dysphagic patients. Intravenous delivery of GTX-104 also has the potential to lower food effects, drug-to-drug interactions, and eliminate potential dosing errors. Further, GTX-104 has the potential to better manage hypotension in aSAH patients. GTX-104 has been administered in over 150 healthy volunteers and was well tolerated with significantly lower inter- and intra-subject pharmacokinetic variability compared to oral nimodipine. The pivotal pharmacokinetics (“PK”) studies, including a successful PK bridging study recentlywas successfully completed in May 2022. SAH is a central nervous system condition that causes acute bleeding on the surface of the brain as the result of a ruptured aneurysm and requires immediate medical attention to prevent long-term disability or death. GTX-104 could be administered to improve the management of hypotension and reduce the incidence of vasospasm in SAH patients and potentially lead to better patient outcomes.

Other pipeline drug candidates:

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GTX-102, an oral-mucosal betamethasone spray for the treatment of Ataxia Telangiectasia (“A-T”), a complex orphan pediatric genetic neurodegenerative disorder usually diagnosed in young children, for which no FDA approved treatment currently exists.

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GTX-101, a topical bioadhesive film-forming bupivacaine spray for Postherpetic Neuralgia (“PHN”), which can be persistent and often causes debilitating pain following infection by the shingles virus. We believe that GTX-101 could be administered to patients with PHN to treat pain associated with the disease.

In May 2023, we announced the strategic decision to prioritize development of GTX-104 with a goal to advance the product candidate to commercialization, while conserving resources as much as possible to complete development efficiently. We estimate that the deferral of GTX-102 and GTX-101 clinical development could be at least three years given the timeline to complete the development and potential commercial launch of GTX-104. Further development of GTX-102 and GTX-101 will occur at such time as we obtain additional funding or enter into strategic partnerships for license or sale with third parties.

The decision to defer further development of GTX-102 and GTX-101 triggered a comprehensive impairment review of our intangible assets as of March 31, 2023. Given the extended timeline, we increased the discount rates used to value the related assets in order to recognize additional risks related to prioritizing one asset over the others, financing the projects given limited available resources and the need to preserve cash to advance GTX-104 as far as possible, potential competitor advances that could arise over three years, and the general market depression affecting small cap development companies like us and the prohibitively high dilution and expense of available funding in the capital markets. Increasing the discount rates significantly reduced the discounted cash flow values for each of the programs deferred. Accordingly, in the quarter ended March 31, 2023 we booked impairment charges related to GTX-102 and GTX-101 of $22.7 million and $6.0 million respectively, together with further adjustments made to deferred taxes and goodwill directly related to those assets. The impairment charge overall amounted to $33.5 million. We continue to believe that GTX-102 and GTX-101 may eventually provide significant value when development resumes and, if approved, commercialized successfully.

Our management team possesses significant experience in drug formulation and drug delivery research and development, clinical and pharmaceutical development and manufacturing, regulatory affairs, and business development, as well as being well-versed in late-stage drug development and commercialization. Prior to joining Acasti, the AcastiImportantly, our team has been collectively involvedis comprised of industry professionals with deep expertise and knowledge, including a world-renowned practicing neurosurgeon-scientist and respected authority in theaSAH, as well as product development, chemistry, manufacturing and approvalcontrols (“CMC”), planning, implementation, management, and execution of numerous successfully marketed drugs, including TORADOL™, NAPROSYN™, ANDROGEL™, SUBSYS™, MARINOL™, KEPPRA XR™, CLARITIN®, EUFLEX®, EFFEXOR®, SONATA®, ATIVAN®, RD-HEPARIN®, RAPAMUNE®, ETODOLAC, ARICEPT®, CARDIZEM®, DEFLAZACORT®, AND MACIMORELIN®.global Phase 2 and Phase 3 trials for a drug candidate for aSAH.

The table below summarizes planned key fiscal 2023 milestones for our three clinical drug candidates:

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GTX-104 Overview

Nimodipine was granted FDA approval in 1988, and is the only approved drug that has been clinically shown to improve neurological outcomes in SAH.aSAH patients. It is only available in the United States as a generic oral capsule and as a branded oral liquid solution called NYMALIZE™, which is manufactured and sold by Arbor Pharmaceuticals (acquired in September 2021 by Azurity Pharmaceuticals). Nimodipine has poor water solubility and high permeability characteristics as a result of its high lipophilicity. Additionally, orally administered nimodipine has dose-limiting side-effects such as hypotension, poor absorption and low bioavailability resulting from high first-pass metabolism, and a narrow administration window as food effects lower bioavailability significantly. Due to these issues, blood levels of orally administered nimodipine can be highly variable, making it difficult to manage blood pressure in SAHaSAH patients. Nimodipine capsules are also difficult to administer, particularly to unconscious patients or those with impaired ability to swallow. Concomitant use with CYP3A inhibitors is contraindicated (NIMODIPINE Capsule PI).

NIMOTOP™ is an injectable form of nimodipine that is manufactured by Bayer Healthcare. It is approved in Europe and in other regulated markets (but not in the United States). It has limited utility for SAHaSAH patients because of its high organic solvent content, namely 23.7% ethanol and 17% polyethylene glycol 400 (NIMOTOP SmPC).

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•
GTX-104 is a clinical stage, novel formulation of nimodipine for IV infusion in SAHaSAH patients. It uses surfactant micelles as the drug carrier to solubilize nimodipine. This unique nimodipine injectable formulation is composed of a nimodipine base, an effective amount of polysorbate 80, a non-ionic hydrophilic surfactant, and a pharmaceutically acceptable carrier for injection. GTX-104 is supplied as an aqueous concentrate that upon dilution with saline, dextrose or lactated ringer, is a ready-to-use infusion solution, which is stable and clear.

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Key Potential Benefits:

 

 

•
Novel nanoparticle technology facilitates aqueous formulation of insoluble nimodipine for a safe, standard peripheral IV infusion:infusion
•
Potential for betterBetter control of blood pressure and improved management of hypotension
•
100% bioavailability
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Eliminates food effects that impact the absorption of the oral form of nimodipine
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Lower inter and intra-subject variability as compared to oral nimodipine

 

GTX-104 could provide a more convenient mode of administration as compared to generic nimodipine capsules or NYMALIZE™, GTX-104 is administered as an initial bolus followed by a continuousand intravenous infusion as compared to oral administration via a nasogastric tube in unconscious patients every two to four hours for both nimodipine capsules and NYMALIZE™ solution.. Therefore, GTX-104 could be considered asmake a major contribution to patient care by potentially reducing the dosing frequency, and the associated nursing burden. More convenient continuous, and more consistent dosing can also reduce the risk of medication errors. In addition, as depicted in the charts below, two PK studies have shown that GTX-104 has the potential to provide improved bioavailability and lowershow reduced inter- and intra-subject variability compared to oral nimodipine, which is hypothesized to limit the risk of hypotension and to better achieve a desired therapeutic concentration. The variability was observed higher following the capsule administration (see charts below).as compared to IV infusion administration (nimodipine exposure variability at steady state observed 37.5% following oral capsule administration versus 15.5%, following GTX-104 IV infusion) Because of its IV formulation, we also expect GTX-104 to reduce certain drug-drug interactions and food effects.

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Despite the positive impact it has on recovery, physicians often must discontinue their patients onfrom oral nimodipine, primarily as a result of hypotensive episodes that cannot be controlled by titrating the oral form of drug. Such discontinuation could potentially be avoided by administering GTX-104, which because of its IV administration, may obviatereduce the complexity that results fromassociated with the need for careful attention to the timing of nimodipine administration at least one hour before or two hours after a meal. Administration of GTX-104 via a peripheral vein is often much more comfortable for the patients compared to administration by central venous access (as is the case for NIMOTOPTM), which can often be a difficult, invasive and more risky procedure. Also, unconscious patients will likely receive more consistent concentrations of nimodipine when delivered via the IV route as compared to oral gavage or a nasogastric tube. More consistent dosing is expected to result in a reduction of vasospasm and a better, more consistent management of hypotension. As summarized in the table below, we also anticipate reduced use of rescue therapies, such as vasopressors, and expensive hospital resources, such as the angiography suite, are possible by more effectively managing blood pressure with GTX-104. Reduced incidences of vasospasm could result in shorter length of stay and better outcomes.

 

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About aneurysmal Subarachnoid Hemorrhage (SAH)(aSAH)

SAHaSAH is bleeding over the surface of the brain in the subarachnoid space between the brain and the skull, which contains blood vessels that supply the brain. A primary cause of such bleeding is rupture of an aneurysm. The result is a relatively uncommon type of stroke that accounts for about 5% of all strokes and has an incidence of six per 100,000 person years (Becske, 2018).years.

In contrast to more common types of stroke in elderly individuals, SAHaSAH often occurs at a relatively young age, with approximately half the affected patients younger than 60 years old (Becske, 2018).old. Approximately 10% to 15% of aneurysmal SAH (“aSAH”) patients die before reaching the hospital, (Rinkel, 2016), and those who survive the initial hours post hemorrhage are admitted or transferred to tertiary care centers with high risk of complications, including rebleeding and delayed cerebral ischemia (“DCI”). Systemic manifestations affecting cardiovascular, pulmonary, and renal function are common and often complicate management of DCI. Approximately 70% of aSAH patients experience death or a permanent dependence on family members, and half die within one month after the hemorrhage. Of those who survive the initial month, half remain permanently dependent on a caregiver to maintain daily living (Becske, 2018).living.

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We estimate that approximately 50,000 individuals experience aSAH each year in the USU.S. based on third partythird-party market research. Theresearch, and that total addressable market for SAH is approximately $300 million in the U.S. There are an estimated 150,000 aSAH patients each year in China and approximately 55,000 patients in the European Union based on annual inpatient admissions and the average length-of-stay.

GTX-104 Recent Activities & Near Term Milestones: Conduct Phase 3 Safety StudyTrial

In September 2021, we initiated our pivotal PK bridging studytrial to evaluate the relative bioavailability of GTX-104 compared to currently marketed oral nimodipine capsules in approximately 50 healthy subjects. The PK studytrial was the next required step in our proposed 505(b)(2) regulatory pathway for GTX-104.

Final results from this pivotal PK studytrial were reported on May 18, 2022, and showed that the bioavailability of GTX-104 compared favorably with the oral formulation of nimodipine in all subjects, and no serious adverse events were observed for GTX-104.

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All three endpoints indicated that statistically there was no difference in exposures between GTX-104 and oral nimodipine over the defined time periods for both maximum exposure and total exposure. Plasma concentrations obtained following IV administration showed significantly less variability between subjects as compared to oral administration of capsules, since IV administration is not as sensitive to some of the physiological processes that affect oral administration, such as taking the drug with and without meals, variable gastrointestinal transit time, variable drug uptake from the gastrointestinal tract into the systemic circulation, and variable hepatic blood flow and hepatic first pass metabolism. Previous studies have shown these processes significantly affect the oral bioavailability of nimodipine, and therefore cause oral administration to be prone to larger inter- and intra-subject variability.

The bioavailability of oral nimodipine capsules observed was only 8% compared to 100% for GTX-104. Consequently, about one-twelfth the amount of nimodipine is delivered with GTX-104 to achieve the same blood levels as with the oral capsules.

No serious adverse events and no adverse events leading to withdrawal were reported during the study.trial.

Next StepsStep – Initiate Phase 3 Safety StudyTrial for GTX-104

Acasti developedIn April 2023, we received a population PK (popPK) model usingType C written meeting response and clarifying feedback from the data fromFDA on our GTX-104-001 and GTX-104-002 studies to derive the final dosing regimen for ourproposed Phase 3 safety study. We refined the model using covariates from aSAH patients from data found in the literature, including age, weight, circadian cycle and food effect. Basedtrial for GTX-104. The FDA provided additional comments on this model, we are recommending a dosing regimen for GTX-104our development plan that, pending submission of a 3.6mg initial bolus followed by a continuous infusion at the rate of 1.2mg/hr (see chart below).

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We submitted our dosing recommendations to the FDA along with this popPK data and the final PK bridging study report,clinical protocol and we requested a Type C meeting to get the agency’s guidance on our proposed phase 3 study design. The FDA has now granted us this meeting, and we expect to receive their clarifying guidance in the first calendar quarterapproval of 2023. If it is favorable, we anticipate that this FDA feedback shouldsame, will allow us to proceed with the initiation of thea Phase 3 Safety Study, recruitsafety clinical trial in aSAH patients. On July 5, 2023, we announced the alignment with the U.S. Food and Drug Administration on our GTX-104 pivotal Phase 3 safety trial protocol.

The FDA concurred with the suitability of the 505(b)(2) regulatory pathway with the selected Reference Listed Drug NIMOTOP oral capsules (NDA 018869), and that our GTX-104-002 PK trial may have met the criteria for a scientific bridge.

Based on the proposed design of our Phase 3 trial, which we have titled STRIVE-ON (Safety, Tolerability, Randomized, IV and Oral Nimodipine), the clinical sites,trial will be a prospective, open-label, randomized (1:1 ratio), parallel group trial of GTX-104 compared with oral nimodipine, in patients hospitalized for aSAH. Key trial design features include:

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Approximately 100 patients will be enrolled at an estimated 25 hospitals in the U.S.
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The primary endpoint is safety and enrollwill be measured as comparative adverse events, including hypotension, between the two groups.
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GTX-104 will be administered as a continuous IV infusion of 0.15 mg/hour, and a 30-minute IV bolus of 4 mg every 4 hours. Oral nimodipine will be administered as 60 mg (two 30 mg capsules) every 4 hours.
•
Both groups will receive their assigned GTX-104 or oral nimodipine for up to 21 consecutive days and will be evaluated from commencement of patient treatment through a 90-day follow-up period.

On October 23, 2023, we enrolled our first patient.patient in our STRIVE-ON clinical trial. The studytrial is expected to take aboutapproximately 18 months to complete from the time the first patient is enrolled, and we expect this safety studytrial to be the final clinical step required to seek FDA approval under the 505(b)(2) regulatory pathway. Before submitting a New Drug Application, Acasti plansan NDA, we plan to hold a pre-NDA meeting with the FDA to enhance the likelihood of market approval.FDA.

 

GTX-102 Overview

GTX-102 is a novel, concentrated oral-mucosal spray of betamethasone intended to improve neurological symptoms of Ataxia Telangiectasia (“A-T”)A-T for which there are currently no FDA-approved therapies. GTX-102 is a stable, concentrated oral spray formulation comprised of the gluco-corticosteroid betamethasone that together with other excipients can be sprayed conveniently over the tongue of the A-T patient and is rapidly absorbed.

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About Ataxia Telangiectasia

A-T is a rare genetic progressive autosomal recessive neurodegenerative disorder that affects children, with the hallmark symptoms of cerebellar ataxia and other motor dysfunction, and dilated blood vessels (telangiectasia) that occur in the sclera of the eyes. A-T is caused by mutations in the ataxia telangiectasia gene, which is responsible for modulating cellular response to stress, including breaks in the double strands of DNA.

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Children with A-T begin to experience balance and coordination problems when they begin to walk (toddler age), and ultimately become wheelchair-bound in their second decade of life. In pre-adolescence (between ages 5 and 8), patients experience oculomotor apraxia, dysarthria, and dysphagia. They also often develop compromised immune systems and are at increased risk of developing respiratory tract infections and cancer (typically lymphomas and leukemia) (U.S. National Cancer Institute A-T, 2015).

A-T is diagnosed through a combination of clinical assessment (especially neurologic and oculomotor deficits), laboratory analysis, and genetic testing. There is no known treatment to slow disease progression, and treatments that are used are strictly aimed at controlling the symptoms (e.g., physical, occupational or speech therapy for neurologic issues), or conditions secondary to the disease (e.g., antibiotics for lung infections, chemotherapy for cancer, etc.) (U.S. National Cancer Institute A-T, 2015). There are no FDA-approved therapeutic options currently available. Patients typically die by age 25 from complications of lung disease or cancer. According to a third-party report we commissioned, by Acasti Pharma US, A-T affects approximately 4,300 patients per year in the United States and has a potential total addressable market of $150 million, based on the number of treatable patients in the United States.

GTX-102 - R&D and Clinical StudiesTrials to Date

We have licensed the data from the multicenter, double-blinded, randomized, placebo-controlled crossover trial from Azienda Ospedaliera Universitaria Senese, Siena, Italy, where Dr. Zannolli et. al. studied the effect of oral liquid solution of betamethasone to reduce ataxia symptoms in patients with A-T. This oral liquid solution is not marketed in the United States, and therefore is not available for clinical use; currently, betamethasone is only available in the United States as an injectable or as a topical cream. This license gives us the right to reference the trial’s data in our NDA filing. On November 12, 2015, we submitted the data from the Zannolli trial to the FDA’s Division of Neurology at a pre-Investigational New Drug (“IND”) meeting and received guidance from the agency on the regulatory requirements to seek approval.

In a multicenter, double-blind, randomized, placebo-controlled crossover trial conducted in Italy, Dr. Zannolli et al. studied the effect of an oral liquid solution of betamethasone on the reduction of ataxia symptoms in 13 children (between ages 2 to 8 years) with A-T. The primary outcome measure was the reduction in ataxia symptoms as assessed by the International Cooperative Ataxia Rating Scale (“ICARS”).

In the trial, oral liquid betamethasone reduced the ICARS total score by a median of 13 points in the intent-to-treat (“ITT”) population and 16 points in the per-protocol (“PP”) population (the median percent decreases of ataxia symptoms of 28% and 31%, respectively). Adverse events in the trial were minimal, with no compulsory withdrawals and only minor side effects that did not require medical intervention. Clinical studytrial results in A-T patients administered oral betamethasone indicated that betamethasone significantly reduced ICARS total score relative to placebo (P = 0.01). The median ICARS change score (change in score with betamethasone minus change in score with placebo) was -13 points (95% confidence interval for the difference in medians was -19 to -5.5 points).

Based on the Zannolli data, we believe that our GTX-102 concentrated oral spray has the potential to provide clinical benefits in decreasing A-T symptoms, including assessments of posture and gait disturbance and kinetic, speech and oculomotor functions. In addition, GTX-102 may ease drug administration for patients experiencing A-T given its application of 1-3x/day of 140µL of concentrated betamethasone liquid sprayed onto the tongue using a more convenient metered dose delivery system, as these A-T patients typically have difficulty swallowing (lefton-greif 2000).swallowing.

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GTX-102 PK Data to Date:

GTX-102 administered as a concentrated oral spray achieves similar blood levels at only 1/70th the volume of an oral solution of betamethasone. This more convenient mode of administration will be important for A-T patients who have difficulties swallowing large volumes of liquids.

 

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GTX-102 Near-Term Milestones: Conduct PK Bridging and Confirmatory Phase 3 Clinical Trials

Acasti Pharma US has licensed the data from the multicenter, double-blinded, randomized, placebo-controlled crossover trial from Azienda Ospedaliera Universitaria Senese, Siena, Italy, where Dr. Zannolli et. al. studied the effect of oral liquid solution of betamethasone to reduce ataxia symptoms in patients with A-T. Note that this oral liquid solution is not marketed in the United States, and therefore is not available for clinical use; currently, betamethasone is only available in the United States as an injectable or as a topical cream. This license gives Acasti Pharma US the right to reference the study’s data in its NDA filing. On November 12, 2015, Acasti Pharma US submitted the data from the Zannolli study to the FDA’s Division of Neurology at a pre-Investigational New Drug (“IND”) meeting and received guidance from the agency on the regulatory requirements to seek approval.img180422703_4.jpg 

 

We initiated a PK bridging studytrial of our proprietary concentrated oral sprayGTX-102 as compared to the oral liquid solution of betamethasone used in the Zannolli studytrial and against the injectable form of betamethasone that is approved in the U.S. in the third calendar quarter of 2022. The primary objectives of the PK bridging studytrial were to evaluate the bioavailability, pharmacokinetics and safety of GTX-102. On December 28, 2022, we reported that the topline results of this studytrial met all primary outcome measures.

Results showed that GTX-102 betamethasone blood concentrations were highly predictable and consistent based on AUC (the area under the concentration time curve up to 72 hours post-dose, extrapolated to infinity) and Cmax (the maximum concentration occuringoccurring between 0 hour to 72 hours after studytrial drug administration), indicating good linearity and dose-proportionality. GTX-102 betamethasone blood concentrations were within the same range of exposure as IM betamethasone, based on AUC. This IM formulation will serve as a bridge for GTX-102 in the context of the proposed 505(b)(2) regulatory pathway. GTX-102 betamethasone blood concentrations were also within the same range of exposure as Oral Solution (OS), based on AUC. This OS formulation was used by Zannolli and may serve as a clinical comparator for further clinical development. Furthermore, statistically there was no significant difference (p>0.05) between GTX-102 administered at a fast rate (each spray immediately following the preceding one) vs. a slow rate (1 spray/minute), as indicated by Cmax and AUC. We believe this result is important because being able to use the fast or the slow rate of administration may provide greater flexibility for patients and caregivers. The Cmax of GTX-102 was within the same range of exposure as the OS, but the Cmax for the IM formulation was lower than both GTX-102 and the OS, as well as what has been reported previously for the IM in industry publications. It is important to note that achieving bioequivalence with the IM was not an objective of this study,trial, nor was it expected. Finally, of the 48 healthy adult subjects, no serious adverse events (AE) were reported, and the most frequent drug-related AEadverse effect was mild headache (4 cases).

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BasedThe further development of GTX-102 has been deprioritized in favor of our focus on this data, Acastidevelopment of GTX-104. Pending additional funding for GTX-102 or the signing of a strategic partnership, we will work with our clinical experts and the FDA to determine the best final dosing regimen for GTX-102 to incorporate into our Phase 3 studytrial design. Based on previous discussions with the FDA, we plan to conduct a

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confirmatory Phase 3 safety and efficacy trial in A-T patients, and plan to seek guidance from the FDA on the studytrial design at a Type B meeting. The Phase 3 studymeeting if and when development of GTX-102 resumes. It is expected to be initiated in the second half of 2023. If both studies meet their primary endpoints, a Pre-NDA meeting and an NDA filing under Section 505(b)(2) would follow.also possible that we may out-license or sell our GTX-102 drug candidate.

 

GTX-101 Overview

GTX-101 is a non-narcotic, topical bio-adhesive film-forming bupivacaine spray designed to ease the symptoms of patients suffering with postherpetic neuralgia (“PHN”). GTX-101 is administered via a metered-dose of bupivacaine spray and forms a thin bio-adhesive topical film on the surface of the patient’s skin, which enables a touch-free, non-greasy application. It also comes in convenient, portable 30 ml plastic bottles. Unlike oral gabapentin and lidocaine patches, we believe that the biphasic delivery mechanism of GTX-101 has the potential for rapid onset of action and continuous pain relief for up to eight hours. No skin sensitivity was reported in a Phase 1 study.trial.

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About Postherpetic Neuralgia (PHN)

PHN is neuropathic pain due to damage caused by the varicella zoster virus (“VZV”). Infection with VZV causes two distinct clinical conditions. Primary VZV infection causes varicella (i.e., chickenpox), a contagious rash illness that typically occurs among young children. Secondary VZV can reactivate clinically, decades after initial infection, to cause herpes zoster (“HZ”), otherwise known as shingles. Acute HZ arises when dormant virus particles, persisting within an affected sensory ganglion from the earlier, primary infection with VZV become reactivated when cellular immunity to varicella decreases. Viral particles replicate and may spread to the dorsal root, into the dorsal horn of the spinal cord, and through peripheral sensory nerve fibers down to the level of the skin. Viral particles also may circulate in the blood. This reactivation is accompanied by inflammation of the skin, immune response, hemorrhage, and destruction of peripheral and central neurons and their fibers. Following such neural degeneration, distinct types of pathophysiological mechanisms involving both the central and peripheral nervous systems may give rise to the severe nerve pain associated with PHN.

While the rash associated with HZ typically heals within two to four weeks, the pain may persist for months or even years, and this PHN manifestation is the most common and debilitating complication of HZ. There is currently no consensus definition for PHN, but it has been suggested by the Centers for Disease Control and Prevention (“CDC”) that PHN is best defined as pain lasting at least three months after resolution of the rash.

PHN is associated with significant loss of function and reduced quality of life, particularly in the elderly. It has a detrimental effect on all aspects of a patient's quality of life. The nature of PHN pain varies from mild to severe, constant, intermittent, or triggered by trivial stimuli. Approximately half of patients with PHN describe their pain as “horrible” or “excruciating,” ranging in duration from a few minutes to constant on a daily or almost daily basis (Katz, 2004).basis. The pain can disrupt sleep, mood, work, and activities of daily living, adversely impacting the

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quality of life and leading to social withdrawal and depression. PHN is the number-one cause of intractable, debilitating pain in the elderly, and has been cited as the leading cause of suicide in chronic pain patients over the age of 70 (Hess, 1990).70.

Current treatment of PHN most often consists of oral gabapentin (first line) and prescription lidocaine patches or antidepressants (second line), and refractory cases may be prescribed opioids to address persistent pain. Gabapentin and opioid abuse have continued to proliferate, and lidocaine patches are suboptimal for many reasons. An independent third partythird-party market research firm we commissioned by Acasti interviewed more than 250 physicians who regularly treat PHN patients, and found that approximately 40% of patients using lidocaine patches experience insufficient pain relief. Lidocaine patches are difficult to use, fall off, and look unsightly with possible skin sensitivity and irritation. Additionally, lidocaine patches can only be used for 12 hours on and then need to be removed for 12 hours before being reapplied. Prescription lidocaine patches are only approved for PHN, and the market is currently made up of both branded and generic offerings. It is estimated that PHN affects approximately 120,000 patients per year in the United States. According to a third-party report we commissioned, by Acasti, the total addressable market for GTX-101 could be as large as $2.5 billion, consisting of approximately $200 million for PHN pain and $2.3 billion for non-PHN pain indications.

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GTX-101 R&D History and Clinical StudiesTrials Completed to Date

To date, Acasti Pharma US haswe have conducted four Phase I studiestrials in healthy volunteers to assess the PK, safety and tolerability of GTX-101 and to determine the plasma levels of bupivacaine HCl administered as a single dose in various concentrations between 30 mg (three sprays) and 2100 mg (twenty sprays).

These studiestrials confirmed that bupivacaine delivered as a topical spray (GTX-101) is well absorbed through the skin, as demonstrated in the graph below, while very little is absorbed systemically.

In all three studies,four trials, the administration of GTX-101 to healthy volunteers was safe and well tolerated. In addition, no evidence of skin irritation was observed at the application site following the spray administrations. The data below is from two separate studiestrials of GTX-101 and the Lidoderm patch superimposed on each other.

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GTX-101 Near-Term Milestones: Conduct Dose Ranging Phase 1 Clinical Trials of GTX-101recent activities:

We believe that the PHN pain market will continue to grow, and non-opioid products like GTX-101 that can relieve PHN pain more quickly and in a sustained manner by means of a more efficient delivery system, will be an attractive therapy option for patients and physicians. GTX-101 is administered by spraying our proprietary bupivacaine formulation over the affected area, which we believe has the potential to provide several advantages over currently marketed products such as the lidocaine patch, including faster onset of action, sustained pain relief, possibly lower dosing requirements and improved dosing convenience, all which could lead to increased patient satisfaction and compliance.

 

The data from the single dose Phase 1 clinical trial for GTX-101 was submitted to the FDA’s Division of Anesthesiology and feedback was received at a pre-IND meeting on April 18, 2018, that informed the design of preclinicalpre-clinical toxicology studies and a clinical and regulatory pathway to approval under section 505(b)(2). We completed a minipig skin sensitivity study in the second calendar quarter of 2022, and we

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initiated a single dose PK studytrial in healthy human volunteers in July 2022. Topline results from this single dose PK studytrial were reported on December 23, 2022 and the results met all primary outcome measures.

 

The median Tmax (the time of maximum concentration between 0 hour and 240 hours after study drug administration) of bupivacaine in plasma following GTX-101 single-dose topical applications ranged between 18 to 24 hours depending on dose, while the median Tmax following the subcutaneous injection of 10 mg of bupivacaine was only 23 minutes. This result suggests that bupivacaine delivered by GTX-101 remains in the skin for a long period of time, potentially inducing prolonged analgesic effect in the sprayed area. The exposure to bupivacaine based on Cmax (the maximum concentration occuringoccurring at Tmax between 0 hour and 240 hours after study drug administration) and AUC (the area under the concentration time curve, extrapolated to infinity) following GTX-101 topical application as a single-dose increased with increasing dose.

The systemic exposure to bupivacaine following a 200mg dose of GTX-101 was approximately 29-fold less than a single subcutaneous dose of 10mg of bupivacaine based on Cmax and approximately 6-fold less than a single subcutaneous dose of 10mg of bupivacaine based on AUC. We predict these lower blood levels will correspond to an increased safety margin for GTX-101 with regards to toxicity risk. Mean half-life (T half) following GTX-101 single-dose topical applications ranged between 24 to 37 hours depending on dose, suggesting a slow elimination and potentially long duration of effect, while mean Tmax following the subcutaneous injection of 10 mg of bupivacaine was only 8 hours.

 

There were only two adverse events judged as related to the study drug by the investigator for each of GTX-101 and the bupivacaine subcutaneous injection. Following GTX-101 topical application: headache (1 event = 3%) and numbness (1 event = 3%) at the sprayed area following bupivacaine subcutaneous injection: dizziness (1 event = 8%) and nausea (1 event = 8%).

 

Acasti plansThe further development of GTX-101 has been deprioritized in favor of our focus on development of GTX-104. Pending additional funding for GTX-101 or the signing of a strategic partnership, we plan to follow this successful PK studytrial with a multiple ascending dose studytrial in 2023. Results from these non-clinical studies and clinical studiestrials are required before the initiation of our Phase 2 program in PHN patients. It is also possible that we may out-license or sell our GTX-101 drug candidate.

 

 

 

3028

 

Overall Commercialization Strategy

We plan to retain ourhave worldwide commercialization rights for some ofall our keypipeline drug candidates while for other drug candidates we may consider collaboration opportunitiesand plan to maximize market penetrationthe value of each asset. Currently, we have prioritized the development of GTX-104 and returns.de-emphasized the development of GTX-102 and GTX-101. If we receive regulatory approval we expect to build a small and focused commercial organizationfor GTX-104 in the United StatesUS, we may look to out-license commercialization or consider self-commercialization including outsourcing sales to ensure efficient commercial management and maximize market penetration and sell GTX-104 and GTX-102.financial returns. We believe the patient populations and medical specialists for these indications are sufficiently concentrated to allow us to cost-effectively promote these drug products following approval for commercial sale. Given that GTX-101 will be targeted to a larger primary care and pain specialist market, if GTX-101 receives regulatory approval, we will likelymay seek commercial partnerships to fully exploit the market potential of this drug product.GTX-104 in territories outside the US. It is possible that we may out-license or sell GTX-102 and/or GTX-101 for the US and/or global markets.

Recent Developments

September 2023 Private Placement Offering

 

AsOn September 24, 2023, we entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional and accredited investors in connection with a private placement offering of our securities (the “Offering”). Pursuant to the Purchase Agreement, we agreed to offer and sell in the Offering 1,951,371 Class A common shares, no par value per share (the “Common Shares”), at a purchase price of $1.848 per Common Share and pre-funded warrants (the “Pre-funded Warrants”) to purchase up to 2,106,853 Common Shares (the “Pre-funded Warrant Shares”) at a purchase price equal to the purchase price per Common Share less $0.0001. Each Pre-funded Warrant is exercisable for one Pre-funded Warrant Share at an exercise price of $0.0001 per Pre-funded Warrant Share, is immediately exercisable and will expire once exercised in full. Pursuant to the Purchase Agreement, we also issued to such institutional and accredited investors common warrants (the “Common Warrants” and, together with the Pre-funded Warrants, the “Warrants”) to purchase Common Shares, exercisable for an aggregate of 2,536,391 Common Shares (the “Common Warrant Shares” and, together with the Pre-Funded Warrant Shares, the “Warrant Shares”). Under the terms of the Purchase Agreement, for each Common Share and each Pre-funded Warrant issued in the Offering, an accompanying five-eighths (0.625) of a Common Warrant was issued to the purchaser thereof. Each whole Common Warrant is exercisable for one Common Warrant Share at an exercise price of $3.003 per Common Warrant Share, is immediately exercisable and will expire on the earlier of (i) the 60th day after the date of the acceptance by the U.S. Food and Drug Administration of a New Drug Application for our product candidates advance throughcandidate GTX-104 or (ii) five years from the pipeline, our commercial plans may change. Clinical data,date of issuance. The Common Warrants were offered and sold at a purchase price of $0.125 per whole underlying Common Warrant Share, which purchase price was included in the size ofoffering price per Common Share and Pre-funded Warrant issued in the development programs, the size of the target market, the size of a commercial infrastructure and manufacturing needs may all influence our U.S., European Union, and rest-of-world strategies.Offering.

 

Recent DevelopmentsThe Offering closed on September 25, 2023 (the “Closing Date”). Shore Pharma LLC, an entity controlled by Vimal Kavuru, the Chair of our Board of Directors, and SS Pharma LLC, the beneficial owner of 5.5% of our Common Shares outstanding prior to the Offering, each a related party of ours, participated in the Offering. The net proceeds to us from the Offering was approximately $7.3 million, after deducting fees and expenses.

Pursuant to the terms of the Purchase Agreement, we agreed to register for resale the Common Shares sold in the Offering and the Warrant Shares. On October 6, 2023, we filed a resale Registration Statement on Form S-3 with the SEC, registering the Common Shares sold in the Offering and the Warrant Shares for resale. The resale Registration Statement on Form S-3 was declared effective on October 16, 2023.

 

Announcement of Preliminary Topline PK Bridging Study Results, GTX-102

On December 28, 2022, we announced that preliminary topline results met all outcomes measures incompliance with the PK bridging study for GTX-102, our drug candidate for the treatment of A-T. The objectives of the study were to evaluate the bioavailability, pharmacokinetics, and safety of GTX-102, a novel, concentrated oral-mucosal metered spray of betamethasone in healthy volunteers. This PK study was the next step in the proposed 505(b)(2) regulatory pathway for GTX-102.

Announcement of Preliminary Topline Single Dose PK Results, GTX-101

On December 22, 2022, we announced that preliminary topline results met all outcomes measures in the single dose PK study for GTX-101, our drug candidate for the treatment of PHN. The PK bridging study to evaluate the relative bioavailability of GTX-101 compared to the reference listed drug in the U.S., bupivacaine subcutaneous injectable, met all primary outcome measures for the study. The final clinical study report is anticipated to be received by the Company in the first half of 2023. This PK study was the next step in our proposed 505(b)(2) regulatory pathway for GTX-101 and provides important information on the dose and dosing frequency in humans for future planned clinical studies.

Nasdaq letterminimum bid price requirement

 

On July 27, 2022,24, 2023, we received written notificationnotice (the “Notification Letter”) from theThe Nasdaq Listing Qualifications Department (“Nasdaq”) for failing to maintain aStock Market LLC notifying us that we had regained compliance with the minimum bid price of $1.00 per common share for the last 30 consecutive business days, as required byrequirement set forth in Nasdaq Listing Rule 5550(a)(2) - bid price (the “Minimum Bid Price Rule”). The Nasdaq notification had no immediate effectfor continued listing on the listingNasdaq Capital Market. The Notification Letter was sent following the implementation of a 1-for-6 reverse split of our common shares, and we had 180 calendar days, or until January 23, 2023, to regain compliance.Common Shares (the “Reverse Stock Split”), which became effective on July 10, 2023.

 

Reverse stock split

On January 24,June 29, 2023, our Board of Directors approved an amendment to our Articles of Incorporation to implement the Reverse Stock Split. On July 4, 2023, we received notification from NASDAQ that we are eligible for an additional 180 calendar days, or until July 24, 2023,filed Articles of Amendment to regain complianceour Articles of Incorporation with the Minimum Bid Price Rule. We were grantedRegistraire des entreprises du Québec, to implement the second extension because we meet the continued listing requirements for the market valueReverse Stock Split. All applicable references in this MD&A to number of publicly held shares and all other initial listing standards for NASDAQ Capital Market, except for the bid price requirement. If at any time over this additional 180 calendar day period the bid price of our common shares, closes at $1.00warrants and options, price per share or more for at least a minimumand weighted average number of ten consecutive business days, Nasdaq will provide written confirmation of compliance andshares outstanding prior to the matter will be closed.Reverse Stock Split have been adjusted to reflect the Reverse Stock Split, which was made effective on July 10, 2023.

We intend to monitor the closing bid price of our common shares and, if necessary, evaluate all available options to resolve the deficiency and regain compliance with the Minimum Bid Price Rule.29

 

COVID-19 Update

To date, the ongoing COVID-19 pandemic has not caused significant disruptions to our business operations and research and development activities.

The extent to which the COVID-19 pandemic impacts our business and prospects and the timing and completion of future clinical trials for our new drug candidates will depend on future developments, which remain highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 variants and the actions to contain the COVID-19 pandemic or treat its impact, among others.

 

Basis of Presentation of the Financial Statements

Our condensed consolidated interim financial statements, which include the accounts of our wholly owned subsidiaries, Acasti Pharma U.S., and Acasti Innovations AG, have been prepared in accordance with U.S. GAAP and the rules and regulations of the SEC related to quarterly reports filed on Form 10-Q. All intercompany transactions and balances are eliminated on consolidation.

 

Our assets as at December 31, 2022,of September 30, 2023, include cash and cash equivalents and short-term investments totaling $31.3$27.0 million and intangible assets and goodwill totaling $82.8$49.3 million. Our current liabilities total $3.4$1.4 million as at December 31, 2022of September 30, 2023 and are comprised primarily of amounts due to or accrued for creditors.

 

 

3130

Comparative Financial Information for the Three and Nine months ended December 31, 2022 and 2021

 

 

Three months ended

 

 

Nine months ended

 

 

 

December 31,
2022

 

 

December 31,
2021

 

 

Increase (Decrease)

 

 

December 31,
2022

 

 

December 31,
2021

 

 

Increase (Decrease)

 

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Net income (loss)

 

 

(3,889

)

 

 

(3,778

)

 

 

111

 

 

 

(13,342

)

 

 

(5,915

)

 

 

7,427

 

Basic and diluted gain (loss) per share

 

 

(0.09

)

 

 

(0.09

)

 

 

—

 

 

 

(0.30

)

 

 

(0.23

)

 

 

0.07

 

Total assets

 

 

116,801

 

 

 

114,227

 

 

 

2,574

 

 

 

116,801

 

 

 

114,227

 

 

 

2,574

 

Working capital1

 

 

29,995

 

 

 

46,100

 

 

 

(16,105

)

 

 

29,995

 

 

 

46,100

 

 

 

(16,105

)

Total non-current financial liabilities

 

 

430

 

 

 

268

 

 

 

162

 

 

 

430

 

 

 

268

 

 

 

162

 

Total shareholders’ equity

 

 

96,720

 

 

 

111,062

 

 

 

(14,342

)

 

 

96,720

 

 

 

111,062

 

 

 

(14,342

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Working capital is calculated by subtracting current liabilities from current assets. Because there is no standard method endorsed by U.S. GAAP requirements, the results may not be comparable to similar measurements presented by other public companies.

 

Results of Operations for the Three and NineSix months ended December 31,September 30, 2023 and 2022 and 2021

 

 

Three months ended

 

Nine months ended

 

 

Three months ended

 

Six months ended

 

 

December 31,
2022

 

December 31,
2021

 

Increase (Decrease)

 

 

December 31,
2022

 

December 31,
2021

 

Increase (Decrease)

 

 

September 30,
2023

 

September 30,
2022

 

Increase (Decrease)

 

September 30,
2023

 

September 30,
2022

 

Increase (Decrease)

 

 

$

 

$

 

$

 

$

 

$

 

$

 

 

$

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses, net of government assistance

 

 

2,450

 

 

 

2,179

 

 

 

271

 

 

 

8,332

 

 

 

3,233

 

 

 

5,099

 

 

 

460

 

 

 

3,292

 

 

 

(2,832

)

 

 

1,555

 

 

 

5,882

 

 

 

(4,327

)

General and administrative expenses

 

 

1,589

 

 

 

1,808

 

 

 

(219

)

 

 

5,187

 

 

 

7,441

 

 

 

(2,254

)

 

 

1,589

 

 

 

1,680

 

 

 

(91

)

 

 

3,352

 

 

 

3,599

 

 

 

(247

)

Sales and marketing expenses

 

 

206

 

 

 

238

 

 

 

(32

)

 

 

563

 

 

 

263

 

 

 

300

 

 

 

43

 

 

 

136

 

 

 

(93

)

 

 

154

 

 

 

357

 

 

 

(203

)

Impairment of Other asset and prepaid

 

 

—

 

 

 

249

 

 

 

(249

)

 

 

—

 

 

 

249

 

 

 

(249

)

Restructuring costs

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,485

 

 

 

—

 

 

 

1,485

 

Loss from operating activities

 

 

(4,245

)

 

 

(4,474

)

 

 

(229

)

 

 

(14,082

)

 

 

(11,186

)

 

 

2,896

 

 

 

(2,092

)

 

 

(5,108

)

 

 

(3,016

)

 

 

(6,546

)

 

 

(9,838

)

 

 

(3,292

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Income (expense)

 

 

82

 

 

 

696

 

 

 

(614

)

 

 

69

 

 

 

5,271

 

 

 

(5,202

)

Foreign exchange gain (loss)

 

 

(13

)

 

 

(12

)

 

 

(1

)

 

 

(5

)

 

 

(90

)

 

 

85

 

Change in fair value of warrant liabilities

 

 

(1,826

)

 

 

—

 

 

 

(1,826

)

 

 

(1,826

)

 

 

10

 

 

 

(1,836

)

Interest income and other expense

 

 

212

 

 

 

36

 

 

 

176

 

 

 

346

 

 

 

68

 

 

 

278

 

Income tax recovery

 

 

274

 

 

 

—

 

 

 

274

 

 

 

671

 

 

 

—

 

 

 

671

 

 

 

446

 

 

 

155

 

 

 

291

 

 

 

735

 

 

 

397

 

 

 

338

 

Net income (loss)

 

 

(3,889

)

 

 

(3,778

)

 

 

111

 

 

 

(13,342

)

 

 

(5,915

)

 

 

7,427

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(3,273

)

 

 

(4,929

)

 

 

(1,656

)

 

 

(7,296

)

 

 

(9,453

)

 

 

(2,157

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

The net loss of $3,889$3,273 or $0.09$0.43 per share for the three months ended December 31, 2022 increasedSeptember 30, 2023 decreased by $111$1,656 from the net loss of $3,778$4,929 or $0.09$0.66 per share for the three months ended December 31, 2021.September 30, 2022.

The net loss of $13,342$7,296 or $0.30$0.97 per share for the ninesix months ended December 31, 2022, increasedSeptember 30, 2023 decreased by $7,427$2,157 from the net loss of $5,915$9,453 or $0.23$1.28 per share for the ninesix months ended December 31, 2021.September 30, 2022.

Research and development expenses

Research and development expenses consist primarily of:

•
fees paid to external service providers such as clinicalcontract research organizations ("CROs") and contract manufacturing organizations ("CMOs") related to clinical trials, including contractual obligations for clinical development, clinical sites, manufacturing and scale-up, and formulation of clinical drug supplies;
•
fees paid to contract service providers related to drug discovery efforts including chemistry and biology services;
•
patent-related services; and
•
salaries and related expenses for research and development personnel, including expenseexpenses related to stock options.

We record research and development expenses as incurred.

Our research and development during the three and ninesix months ended December 31, 2022,September 30, 2023, was focused primarily on our clinical development programs for our GTX-104 GTX-102, and GTX-101 drug candidates.candidate. Research and development expenses during the three and ninesix months ended December 31, 2021 related toSeptember 30, 2022 were focused primarily on our clinical development programs GTX-104, GTX-102, and GTX-101 drug candidates, which were acquired in the completion of our TRILOGY Phase 3 clinical program for our former drug candidate, CaPre, as well as the initiation and progression of development work related to GTX 104, GTX 102 and GTX 101.Grace Therapeutics, Inc. (“Grace”) merger on August 27, 2021.

32

The following table summarizes our research and development expenses for the periods presented:

31

Research and development expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months

 

 

Nine months ended

 

 

 

December 31,
2022

 

 

December 31,
2021

 

 

Increase (Decrease)

 

 

December 31,
2022

 

 

December 31,
2021

 

 

Increase (Decrease)

 

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Third-party contract research expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clinical development programs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GTX-104

 

 

136

 

 

 

780

 

 

 

(644

)

 

 

575

 

 

 

957

 

 

 

(382

)

GTX-102

 

 

696

 

 

 

—

 

 

 

696

 

 

 

1,280

 

 

 

—

 

 

 

1,280

 

GTX-101

 

 

88

 

 

 

148

 

 

 

(60

)

 

 

2,331

 

 

 

148

 

 

 

2,183

 

Other third-party contract research expenses

 

 

241

 

 

 

272

 

 

 

(31

)

 

 

851

 

 

 

458

 

 

 

393

 

Professional fees

 

 

677

 

 

 

51

 

 

 

626

 

 

 

1,210

 

 

 

94

 

 

 

1,116

 

Other research and development costs

 

 

60

 

 

 

81

 

 

 

(21

)

 

 

224

 

 

 

144

 

 

 

80

 

Government grants & tax credits

 

 

(115

)

 

 

(55

)

 

 

(60

)

 

 

(196

)

 

 

(184

)

 

 

(12

)

Total third-party research and development expenses1

 

 

1,783

 

 

 

1,277

 

 

 

506

 

 

 

6,275

 

 

 

1,617

 

 

 

4,658

 

Salaries and benefits

 

 

522

 

 

 

748

 

 

 

(226

)

 

 

1,483

 

 

 

1,374

 

 

 

109

 

Stock-based compensation

 

 

139

 

 

 

154

 

 

 

(15

)

 

 

481

 

 

 

242

 

 

 

239

 

Depreciation and write off of equipment

 

 

6

 

 

 

—

 

 

 

6

 

 

 

93

 

 

 

—

 

 

 

93

 

Total

 

 

2,450

 

 

 

2,179

 

 

 

271

 

 

 

8,332

 

 

 

3,233

 

 

 

5,099

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Six months ended

 

 

September 30,
2023

 

 

September 30,
2022

 

 

Increase (Decrease)

 

 

September 30,
2023

 

 

September 30,
2022

 

 

Increase (Decrease)

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Total third-party research and development expenses 1

 

 

152

 

 

 

2,561

 

 

 

(2,409

)

 

 

965

 

 

 

4,573

 

 

 

(3,608

)

Government grants & tax credits

 

 

4

 

 

 

109

 

 

 

(105

)

 

 

55

 

 

 

(81

)

 

 

136

 

Salaries and benefits

 

 

209

 

 

 

472

 

 

 

(263

)

 

 

435

 

 

 

961

 

 

 

(526

)

Research and development expense before stock-based compensation and depreciation

 

 

365

 

 

 

3,142

 

 

 

(2,777

)

 

 

1,455

 

 

 

5,453

 

 

 

(3,998

)

Stock-based compensation

 

 

83

 

 

 

184

 

 

 

(101

)

 

 

83

 

 

 

342

 

 

 

(259

)

Depreciation and write-off of equipment

 

 

12

 

 

 

(34

)

 

 

46

 

 

 

17

 

 

 

87

 

 

 

(70

)

Total

 

 

460

 

 

 

3,292

 

 

 

(2,832

)

 

 

1,555

 

 

 

5,882

 

 

 

(4,327

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Total third-party research and development expenses isare calculated before salaries and benefits, depreciation, write-off of equipment and stock-based compensation. Because there is no standard method endorsed by U.S. GAAP, the results may not be comparable to similar measurements presented by other public companies.

 

Total third-party research and development expenses before salaries and benefits, depreciation, write off of equipment and stock-based compensation expenses for the three and ninesix months ended December 31, 2022,September 30, 2023, totaled $1,783$152 and $6,275,$965, respectively, compared to $1,277$2,561 and $1,617$4,573 for the three and ninesix months ended December 31, 2021.September 30, 2022, respectively. This increasedecrease of $506$2,409 and $4,658, respectively$3,608 related mostly to the initiation ofrestructuring to align our organizational and management cost structure to prioritize resources to GTX-104 and reduce losses and cash flow. Our clinical development programs for GTX 104, GTX 102GTX-102, and GTX 101 followingGTX-101 were de-prioritized in the acquisition of Grace.current year compared to the prior year.

Third-party contract research expenses related to GTX-104 amounted to $136Government grants and $575,tax credits of $4 and $55 for the three and ninesix months ended December 31, 2022, as our PK bridging study wound down. Third party contract research expenses relatedSeptember 30, 2023, respectively, decreased by ($105) and increased by $136 compared to GTX-102 amounted to $696$109 and $1,280$(81) for the three and ninesix months ended December 31,September 30, 2022, respectively. The changes within government grants and tax credits are mostly related to the initiation of the PK bridging study and for clinical trial materials. Third party contract research expenses related to GTX-101 amounted to $88 and $2,331, for the three and nine months ended December 31, 2022 were mostly related to the planning and initiation of the Phase 1 single dose study. Other third-party contract research expenses of $851 for the nine months ended December 31, 2022 increased by $393, from $851, for the nine months ended December 31, 2021, due to increased IP legal costs to supportadjustments of provisions regarding the estimated realizability of credits receivable after assessments and maintain our patents that support GTX-104, GTX-102 and GTX-101. Professional fees of $677 and $1,210 for the three and nine months ended December 31, 2022, increased by $626 and $1,116, respectively,correspondence from $51 and $94 related to increased specialized clinical and regulatory consultants supporting our clinical programs for GTX-104, GTX-102 and GTX-101.

For the three and nine months ended December 31, 2022, total third-party research and development expenses were reduced by $115 and $196 respectively, related to government credit eligible research activities related to our clinical programs for GTX-104, GTX-102 and GTX-101.tax authorities.

 

Salaries and benefits of $522$209 and $435 for the three and six months ended December 31, 2022,September 30, 2023, respectively, decreased by $226$263 and $526 compared to $748$472 and $961 for the three and six months ended December 31, 2021.September 30, 2022, respectively. The decrease relates to a reduced accrual of our employee incentive bonus program. The salariesreduction in research and benefits of $1,483 fordevelopment headcount due to the nine months ended December 31, 2022 increased by $109 from $1,374 for the nine months ended December 31, 2021. The increase for the nine month period relatedrestructuring as we prioritize resources to additional R&D headcount required to support three clinical stage programs.GTX-104.

 

3332

 

General and administrative expenses

General and administrative expenses consist primarily of salaries and related benefits, including share-based compensation, related to our executive, finance, legal, and support functions, includeincluding professional fees for auditing, tax, consulting, rent and utilities and insurance.

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Nine months ended

 

 

Three months ended

 

 

Six months ended

 

 

December 31,
2022

 

 

December 31,
2021

 

 

Increase (Decrease)

 

 

December 31,
2022

 

 

December 31,
2021

 

 

Increase (Decrease)

 

 

September 30,
2023

 

 

September 30,
2022

 

 

Increase (Decrease)

 

 

September 30,
2023

 

 

September 30,
2022

 

 

Increase (Decrease)

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Salaries and benefits

 

 

490

 

 

 

612

 

 

 

(122

)

 

 

1,494

 

 

 

1,215

 

 

 

279

 

 

 

228

 

 

 

472

 

 

 

(244

)

 

 

570

 

 

 

1,004

 

 

 

(434

)

Professional fees

 

 

406

 

 

 

512

 

 

 

(106

)

 

 

1,443

 

 

 

4,656

 

 

 

(3,213

)

 

 

864

 

 

 

434

 

 

 

430

 

 

 

1,809

 

 

 

1,037

 

 

 

772

 

Other

 

 

393

 

 

 

403

 

 

 

(10

)

 

 

1,266

 

 

 

1,110

 

 

 

156

 

 

 

297

 

 

 

418

 

 

 

(121

)

 

 

710

 

 

 

874

 

 

 

(164

)

General and administrative expense before stock-based compensation and depreciation 1

 

 

1,289

 

 

 

1,527

 

 

 

(238

)

 

 

4,203

 

 

 

6,981

 

 

 

(2,778

)

 

 

1,389

 

 

 

1,324

 

 

 

65

 

 

 

3,089

 

 

 

2,915

 

 

 

174

 

Stock-based compensation

 

 

280

 

 

 

281

 

 

 

(1

)

 

 

930

 

 

 

460

 

 

 

470

 

 

 

199

 

 

 

368

 

 

 

(169

)

 

 

259

 

 

 

650

 

 

 

(391

)

Depreciation

 

 

20

 

 

 

—

 

 

 

20

 

 

 

54

 

 

 

—

 

 

 

54

 

 

 

1

 

 

 

(12

)

 

 

13

 

 

 

4

 

 

 

34

 

 

 

(30

)

Total

 

 

1,589

 

 

 

1,808

 

 

 

(219

)

 

 

5,187

 

 

 

7,441

 

 

 

(2,254

)

 

 

1,589

 

 

 

1,680

 

 

 

(91

)

 

 

3,352

 

 

 

3,599

 

 

 

(247

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 General and administrative sub-total expenses isare calculated before stock-based compensation and depreciation. Because there is no standard method endorsed by U.S. GAAP, the results may not be comparable to similar measurements presented by other public companies.

 

General and administrative expenses totaled $1,289$1,389 and $4,203$3,089 before stock-based compensation and depreciation expense for the three and ninesix months ended December 31, 2022, a decreaseSeptember 30, 2023, respectively, an increase of $238$65 and $2,778, respectively,$174 from $1,527$1,324 and $6,981$2,915 for the three and ninesix months ended December 31, 2021.September 30, 2022, respectively. The decrease in both the three and nine months periodsincrease was primarily a result of decreasedincrease legal, tax, accounting and other professional fees related to the Grace merger. The decrease in professional fees was partiallyrestructuring offset by an increase indecreased salaries and benefits due to the renewed accrual fora reduction in general and administrative headcount due to our employee incentive bonus programrestructuring and reorganization of our management structure. Stock-based compensation of $199 and $259 for the ninethree and six months ended December 31, 2022.September 30, 2023, respectively, decreased by $169 and $391 compared to $368 and $650 for the three and six months ended September 30, 2022, respectively. The decrease relates to a reduction in general and administrative headcount due to our restructuring and reorganization of our management structure.

 

Sales and marketing expenses

Sales and marketing expenses consist primarily of salaries and benefits, including share-based compensation, related to our commercial functions.

 

Sales and marketing expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Nine months ended

 

 

Three months ended

 

 

Six months ended

 

 

December 31,
2022

 

 

December 31,
2021

 

 

Increase (Decrease)

 

 

December 31,
2022

 

 

December 31,
2021

 

 

Increase (Decrease)

 

 

September 30,
2023

 

 

September 30,
2022

 

 

Increase (Decrease)

 

 

September 30,
2023

 

 

September 30,
2022

 

 

Increase (Decrease)

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Salaries and benefits

 

 

109

 

 

 

123

 

 

 

(14

)

 

 

390

 

 

 

148

 

 

 

242

 

 

 

—

 

 

 

99

 

 

 

(99

)

 

 

15

 

 

 

281

 

 

 

(266

)

Professional fees

 

 

1

 

 

 

18

 

 

 

(17

)

 

 

10

 

 

 

18

 

 

 

(8

)

 

 

—

 

 

 

4

 

 

 

(4

)

 

 

20

 

 

 

9

 

 

 

11

 

Other

 

 

72

 

 

 

78

 

 

 

(6

)

 

 

85

 

 

 

78

 

 

 

7

 

 

 

43

 

 

 

3

 

 

 

40

 

 

 

103

 

 

 

13

 

 

 

90

 

Sub-total

 

 

182

 

 

 

219

 

 

 

(37

)

 

 

485

 

 

 

244

 

 

 

241

 

Sales and Marketing expenses before stock-based compensation1

 

 

43

 

 

 

106

 

 

 

(63

)

 

 

138

 

 

 

303

 

 

 

(165

)

Stock-based compensation

 

 

24

 

 

 

19

 

 

 

5

 

 

 

78

 

 

 

19

 

 

 

59

 

 

 

—

 

 

 

30

 

 

 

(30

)

 

 

16

 

 

 

54

 

 

 

(38

)

Total

 

 

206

 

 

 

238

 

 

 

(32

)

 

 

563

 

 

 

263

 

 

 

300

 

 

 

43

 

 

 

136

 

 

 

(93

)

 

 

154

 

 

 

357

 

 

 

(203

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Sales and marketing sub-total expenses isare calculated before stock-based compensation. Because there is no standard method endorsed by U.S. GAAP, the results may not be comparable to similar measurements presented by other public companies.

 

Sales and marketing expenses before stock-based compensation expense totaled $485$43 and $138 for the ninethree and six months ended December 31, 2022September 30, 2023, respectively, compared to $244$106 and $303 for the ninethree and six months ended December 31, 2021.September 30, 2022, respectively. The increasedecrease of $241,$63 and $165, was mostly due to an increase in salaries associated with added personnel.the reduction of headcount due to our restructuring and reorganization of our management structure.

 

Aggregate stock-based33

Stock-based compensation expense increased by $769 to $1,489of nil and $16 for the ninethree and six months ended December 31, 2022 asSeptember 30, 2023, decreased by $30 and $38, respectively, compared to $721$30 and $54 for the ninethree and six months ended December 31, 2021. This increase wasSeptember 30, 2022, respectively. The decrease relates to a reduction in sales and marketing headcount due to the timingour restructuring and reorganization of the stock options granted during the year ended March 31, 2022, and year ended March 31, 2021, as well as the new grants in the current fiscal period.our management structure.

 

Aggregate depreciation expense increased by $116 for the nine months ended December 31, 2022, from nil for the nine months ended December 31, 2021. This increase is due to the impact of certain equipment being reclassified from held for sale to held for use during the nine months ended December 31, 2022, resulting in additional depreciation being recognized.Restructuring Costs

 

34On May 8, 2023, we announced our decision to terminate a substantial amount of our workforce as part of a plan that intended to align our organizational and management cost structure to prioritize resources to GTX-104 and reduce losses to improve cash flow and extend available cash resources. We incurred $1,485 of cost primarily consisting of employee severance costs.

Change in fair value of warrant liabilities

Change in fair value of warrant liabilities for the three and six months ended September 30, 2023 increased by $1,826 mainly attributable to an increase in the fair value of derivative warrant liabilities.

Interest income and other expense

Interest income was $212 and $346 for the three and six months ended September 30, 2023, respectively, compared to $36 and $68 for the three and six months ended September 30, 2022, respectively. The increase in our interest income was due to higher interest rates earned on average balances of cash, cash equivalents and short-term investments.

 

Liquidity and Capital Resources

Share capital structure

Our authorized share capital consists of an unlimited number of Class A, Class B, Class C, Class D and Class E common shares, without par value. Issued and outstanding fully paid shares, stock options, and warrants, were as follows for the periods indicated (after giving effect to our 8:1 share consolidation,the Reverse Stock Split, which became effective on August 31, 2021)July 10, 2023):

 

 

December 31,
2022

 

 

March 31,
2022

 

 

 

Number
outstanding

 

 

Number
outstanding

 

Class A shares, voting, participating and without par value

 

 

44,612,831

 

 

 

44,288,183

 

Stock options granted and outstanding

 

 

4,445,844

 

 

 

2,989,381

 

May 2018 Canadian public offering of warrants exercisable at CAD$10.48 until May 9, 2023

 

 

824,218

 

 

 

824,218

 

December 2017 U.S. public offering of warrants exercisable at US$10.08 expired December 19, 2022

 

 

—

 

 

 

884,120

 

December 2017 U.S. public offering broker warrants exercisable at US$10.10 expired December 27, 2022

 

 

—

 

 

 

32,390

 

 

 

 

 

 

 

 

Total fully diluted shares

 

 

49,882,893

 

 

 

49,018,292

 

 

September 30,
2023

 

 

March 31,
2023

 

 

 

Number
outstanding

 

 

Number
outstanding

 

Class A common shares, voting, participating and without par value

 

 

9,399,404

 

 

 

7,435,533

 

Stock options granted and outstanding

 

 

561,365

 

 

 

740,957

 

September 2023 US private offering pre-funded warrants

 

 

2,106,853

 

 

 

—

 

September 2023 US private offering warrants

 

 

2,536,391

 

 

 

—

 

May 2018 Canadian public offering of warrants exercisable at CAD$62.88 until May 9, 2023

 

 

—

 

 

 

137,370

 

 

 

 

 

 

 

 

Total fully diluted shares

 

 

14,604,013

 

 

 

8,313,860

 

Cash flows and financial condition for the ninesix months ended December 31,September 30, 2023 and 2022 and 2021

Summary

 

We do not expect to generate revenue from product sales unless and until we successfully complete drug development and obtain regulatory approval, which we expect will take several years and is subject to significant uncertainty. To date, we have financed our operations primarily through public offerings and private placements of our Common Shares, warrants and convertible debt and with the proceeds from research tax credits. Until such time that we can generate significant revenue from drug product sales, if ever, we will require additional financing, which we expect to be sourced from a combination of public or private equity offerings or debt financings or other non-dilutive sources, which may include fees, milestone payments and royalties from collaborations with third parties.

As at December 31, 2022,of September 30, 2023, cash and cash equivalents totaled $26,241,$26,991, a decrease of $4,098$884 compared to cash and cash equivalents totaling $30,339$27,875 at March 31, 2022.2023 primarily due to ongoing research and development activities, and funding the restructuring expense offset by the proceeds of our September 2023 Offering.

34

 

Net cash used in operationoperating activities

 

Net cash used in operating activities for the ninesix months ended December 31, 2022September 30, 2023 was $12,587,$8,353, compared to $14,089$8,865 for the same period in 2021,six months ended September 30, 2022, a decrease of $1,502.$512. Cash used in operating activities during the six months ended September 30, 2023 primarily related to our net loss of $7,296, adjusted for non-cash items such as stock-based compensation of $358, change in fair value of warrant liabilities of $1,826, income tax recovery of $(735) and changes in our operating assets and liabilities of $(2,489). Net cash used in operating activities for the six months ended September 30, 2022, was $8,865. Cash used in operating activities during 2022 primarily related to our net loss of $13,342,$9,453, adjusted for non-cash items such as stock-based compensation of $1,489,$1,046, income tax recovery of $671$397 and changes in our operating assets and liabilities of $172. Cash used in operating activities during 2021 primarily related to our net loss of $5,915, adjusted for non-cash items such as change in fair value of warrant liabilities of $4,908, unrealized foreign exchange gain of $418 and changes in our operating assets and liabilities of $3,818.$(137).

Net cash used inprovided by investing activities

Net cash provided by investing activities for the six months ended September 30, 2023, was $110 related to our sale of equipment. For the ninesix months ended December 31,September 30, 2022, our investing activities generated cash of $8,161 compared to cash used of $3,533 for the nine months ended December 31, 2021. The increase in cash generated$13,162, which was a function of an increase in proceeds from maturity of short-term investments.

Net cash used inprovided by financing activities

Net cash provided by financing activities for the ninesix months ended December 31, 2022,September 30, 2023, totaled $304$7,359 compared to cash generated of nil$304 during the ninesix months ended December 31, 2021September 30, 2022 due to net proceeds from the saleour September 2023 Offering of common shares under our ATM program.$7,338.

 

ATM programPrivate Placement

 

On September 24, 2023, we entered into the Purchase Agreement with certain institutional and accredited investors in connection with the Offering. Pursuant to the Purchase Agreement, we agreed to offer and sell in the Offering 1,951,371 Common Shares, at a purchase price of $1.848 per Common Share and Pre-funded Warrants to purchase up to 2,106,853 Pre-funded Warrant Shares at a purchase price equal to the purchase price per Common Share less $0.0001. Each Pre-funded Warrant is exercisable for one Pre-funded Warrant Share at an exercise price of $0.0001 per Pre-funded Warrant Share, is immediately exercisable and will expire once exercised in full. Pursuant to the Purchase Agreement, we also issued to such institutional and accredited Common Warrants to purchase Common Shares, exercisable for an aggregate of 2,536,391 Common Warrant Shares. Under the terms of the Purchase Agreement, for each Common Share and each Pre-funded Warrant issued in the Offering, an accompanying five-eighths (0.625) of a Common Warrant was issued to the purchaser thereof. Each whole Common Warrant is exercisable for one Common Warrant Share at an exercise price of $3.003 per Common Warrant Share, is immediately exercisable and will expire on the earlier of (i) the 60th day after the date of the acceptance by the U.S. Food and Drug Administration of a New Drug Application for our product candidate GTX-104 or (ii) five years from the date of issuance. The Common Warrants were offered and sold at a purchase price of $0.125 per whole underlying Common Warrant Share, which purchase price was included in the offering price per Common Share and Pre-funded Warrant issued in the Offering.

The Offering closed on September 25, 2023. The net proceeds to us from the Offering was approximately $7.3 million, after deducting fees and expenses.

At-the-Market (“ATM”) program

On June 29, 2020, we entered into an amended and restated sales agreement (the “Sales Agreement”) with B. Riley, Oppenheimer & Co. Inc. and H.C. Wainwright & Co., LLC (collectively, the “Agents”). Under the terms of the Sales Agreement, which hashad a three-year term, we maycould issue and sell from time-to-time common sharesCommon Shares having an aggregate offering price of up to $75,000,000$75 million through the Agents. Subject to the terms and conditions of the Sales Agreement, the Agents willwould use their commercially reasonable efforts to sell the common sharesCommon Shares from time to time, based upon our instructions. We havehad no obligation to sell any of the common sharesCommon Shares and maycould, at any time, suspend sales under the Sales Agreement. We and the Agents maycould terminate the Sales Agreement in accordance with its terms. Under the terms of the Sales Agreement, we have provided the Agents with customary indemnification rights and the Agents will bewere entitled to compensation at a commission rate equal to 3.0% of the gross proceeds from each sale of the common shares.

On November 10, 2021, we filedCommon Shares. The Sales Agreement expired pursuant to its terms on June 29, 2023. We intend to examine our financing strategies on a prospectus supplement relating to ourgo-forward basis and may consider entering into a new ATM program to restore available capacity to $75,000,000, with B. Riley, Oppenheimer & Co. Inc. and H.C. Wainwright & Co., LLC continuing to act as Agents. Underin the terms of the Sales Agreement and the prospectus supplement, we may issue and sell from time-to-time common shares having an aggregate offering price of up to $75,000,000 through the Agents. The common shares will be distributed at market prices prevailing at the time of the sale and, as a result, prices may vary between purchasers and during the period of distribution. The volume and timing of sales under the ATM program, if any, will be determined at the sole discretion of our board of directors and management.future.

 

During the ninesix months ended December 31, 2022, 324,648 common sharesSeptember 30, 2023, no Common Shares were sold under the ATM Programprogram. During the six months ended September 30, 2022, 54,108 Common Shares were sold for total grossnet proceeds of approximately $314.$304 with commissions, legal expenses and costs related to the share sale amounting to $10. The common sharesCommon Shares were sold at the prevailing market prices, which resulted in an average price of approximately $0.95$5.70 per share.

 

35

 

Financial position

The following table details the significant changes to the statementsour consolidated balance sheets as of financial position as at December 31, 2022,September 30, 2023, compared to the prior fiscal year end at March 31, 2022:2023:

Accounts

 

Increase
(Decrease) $

 

 

Comments

Cash and cash equivalents

 

 

(4,098884

)

 

See cash flow statement

Investments

(8,307

)

Maturity of investments

Receivables

 

 

23035

 

 

Timing of reimbursement of sales taxes

Prepaid expenses

 

 

322446

 

 

Renewal of insurance contract and other prepaid expenses (advances to US vendors)

Right of use asset

 

 

172(416

)

 

Adjustment to the net present value of lease contract for Sherbrooke due to lease modification

Equipment

 

 

(13894

)

 

Depreciation of equipment put back in useand write off of equipment

Trade and other payables

 

 

204(1,985

)

 

Timing of payments net of accruals

Lease liability

 

 

208(439

)

 

Future obligations offset by paymentAdjustment to the net present value of lease liabilitycontract for Sherbrooke due to lease modification

Derivative warrant liabilities

 

 

(10

)3,457

 

Change

Issuance of warrants in relation to Purchase Agreement and change in fair value of derivative warrantswarrant liabilities

Deferred tax liability

 

 

(671736

)

 

Related to acquisition of Gracerecovery expense

See the statementconsolidated statements of changes inshareholders' equity in our financial statements for details of changes to theour equity accounts during the three and ninesix months ended December 31, 2022September 30, 2023 and 2021.2022.

Treasury Operations

Our treasury policy is to invest cash that is not required immediately into instruments with an investment strategy based on capital preservation. Cash equivalents and marketable securities are primarily made in guaranteed investment certificates, term deposits and high-interest savings accounts, which are issued and held with Canadian chartered banks, highly rated promissory notes issued by government bodies and commercial paper. We hold cash denominated in both U.S. and CADCanadian dollars. Funds received in U.S. dollars from equity financings are invested as per our treasury policy in U.S. dollar investments and converted to CADCanadian dollars as appropriate to fulfill operational requirements and funding.

Intangible Assets

 

On August 27, 2021, we completed the Grace merger.

In connection with the share-for-share noncash transaction, Grace was merged with a new wholly owned subsidiary of Acasti and became a subsidiary of Acasti. As a result, we acquired Grace’s entire therapeutic pipeline consisting of three unique clinical stage and multiple pre-clinical stage assets supported by an intellectual property portfolio consisting of various granted and pending patents in various jurisdictions worldwide. Under the terms of the acquisition, each issued and outstanding share of Grace common stock was automatically converted into the right to receive Acasti common sharesCommon Shares equal to the equity exchange ratio set forth in the merger agreement.

Intangible assets of $69,810 relate to the value of in-process research and development (“IPR&D,&D”), related to Grace’s therapeutic pipeline, consisting of three unique clinical stage programs/assets supported by intellectual property, the value of which has been attributed as follows:

 

 

$

$

$

$

 

 

GTX-104

GTX-102

GTX-101

Total

Intangible assets – in-process research and development

 

 

 

 

 

Balance, April 1, 2022

 

27,595

31,908

10,307

69,810

Impairment

 

—

(22,712)

(5,970)

(28,682)

Balance, March 31, 2023

 

27,595

9,196

4,337

41,128

 

 

 

$

$

$

$

 

 

GTX-104

GTX-102

GTX-101

Total

Intangible assets – in-process research and development

 

 

 

 

 

Balance, April 1, 2023

 

27,595

9,196

4,337

41,128

Impairment

 

—

—

—

—

Balance, September 30, 2023

 

27,595

9,196

4,337

41,128

 

$

Intangible assets – in-process research and development

GTX-104

27,595

GTX-102

31,908

GTX-101

10,307

Total

69,810

Assets Held for Sale

We determined to actively market for sale Other assets and Production equipment and have met the criteria for classification of assets held for sale:

 

 

December 31,
2022

 

 

March 31,
2022

 

 

 

 

 

 

Reclassed as explained below

 

 

 

$

 

 

$

 

Other assets (a)

 

 

195

 

 

 

195

 

Production equipment (b)

 

 

157

 

 

 

157

 

 

 

 

352

 

 

 

352

 

Other assets

Other assets represent krill oil (“RKO”) held by us that was expected to be used in commercial inventory scale up related to the development and commercialization of our CaPre former drug candidate. Given that the development of CaPre will no longer be pursued by us, we expect to sell this reserve. The Other assets is being recorded at the fair value less cost to sell. Management’s estimate of the fair value of the RKO less cost to sell was based primarily on estimated market prices obtained from an appraiser specializing in the krill oil market. These projections are based on Level 3 inputs of the fair value hierarchy and reflect management’s best estimate of market participants’ pricing of the assets as well as the general condition of the asset.

36

 

Production equipment

December 31, 2022

 

Cost, net of
impairment

 

 

Accumulated
depreciation

 

 

Net book
value

 

 

 

$

 

 

$

 

 

$

 

Production equipment

 

 

1,179

 

 

 

(1,022

)

 

 

157

 

 

 

 

1,179

 

 

 

(1,022

)

 

 

157

 

The announcementIn April 2023, we announced the strategic decision to prioritize development of GTX-104 with a goal to advance to commercialization, while conserving resources as much as possible to complete development efficiently. We estimate that the deferral of the discontinuationGTX-102 and GTX-101 clinical programs could be at least three years given the timeline to complete the development and potential commercial launch of GTX-104. Further development of GTX-102 and GTX-101 will occur at such time as we obtain additional funding or enter into strategic partnerships for license or sale with third parties. The decision to defer further development triggered a comprehensive impairment review of our intangible assets in March 2023. Given the extended timeline, we increased the discount rates used to value the assets in order to recognize additional risks related to prioritizing one asset over the others, financing the projects given limited available resources and the need to preserve cash to advance GTX-104 as far as possible, potential competitor advances that could arise over three years, and the general market depression affecting small cap development companies like us and the prohibitively high dilution and expense of available funding in the capital markets. Increasing the discount rates significantly reduced the discounted cash flow values for each of the CaPre programprograms deferred. Accordingly, an impairment of intangible assets of $28,682 resulted in the year ended March 31, 2023. In addition, an impairment trigger forof $4,826 of goodwill resulted in the related laboratory and production equipment. The impairment loss is based on management’s estimate ofyear ended March 31, 2023. We determined there was no triggering event in the fair value of the equipment less cost to sell, which is based primarily on estimated market prices obtained from brokers specialized in selling used equipment. These projections are based on Level 3 inputs of the fair value hierarchy and reflect our best estimate of market participants’ pricing of the assets as well as the general condition of the assets.

During the ninesix months ended December 31, 2022, we reclassed the following assets from assets held for sale as they no longer met the criteria of such classification.

 

 

Cost, net of
impairment

 

 

Accumulated
depreciation

 

 

Net
book
value reclassed from held for sale

 

 

 

$

 

 

$

 

 

$

 

Furniture and office equipment

 

 

17

 

 

 

(5

)

 

 

12

 

Computer equipment

 

 

94

 

 

 

(6

)

 

 

88

 

Laboratory equipment

 

 

585

 

 

 

(435

)

 

 

150

 

 

 

 

696

 

 

 

(446

)

 

 

250

 

In addition depreciation expense of $116 was recognized relatedSeptember 30, 2023 that would have required us to the period from the date that the assets were classified as held for sale until the end of the current period. The reclassification from held for sale to equipment was reflected on the comparative balance sheet.perform a quantitative impairment test.

 

Contractual Obligations and Commitments

 

Our contractual obligations and commitments include trade payables, operating lease obligations, CMO and CRO agreements, and the RKOraw krill oil supply agreement.agreement, as described below.

 

Research and development contracts and contract research organizations agreements:

 

We utilize contract manufacturing organizations,CMOs, for the development and production of clinical materials and contract research organizationsCROs to perform services related to our clinical trials. Pursuant to the agreements with these contract manufacturing organizationsCMOs and contract research organizations,CROs, we have either the right to terminate the agreements without penalties or under certain penalty conditions. As of September 30, 2023, we have no commitments from CMOs and approximately $8,500 of commitments for the next twelve months to CROs.

RKORaw krill oil supply agreementcontract

On October 25, 2019, we signed a supply agreement with Aker Biomarine Antarctic.BioMarine Antarctic AS. (“Aker”AKBM”) to purchase raw krill oil product for a committed volume of commercial starting material for CaPre, one of our former drug candidates, for a total fixed value of $3.1 million.million based on the value of krill oil at that time. As at Decemberof March 31, 2022, the remaining balance of the commitment with Aker amountsamounted to $2.8 million. During the second calendar quarter of 2022, AkerAKBM informed the Companyus that AkerAKBM believed it had satisfied the terms of the supply agreement as to their abilityobligation to deliver the remaining balance of raw krill oil product, and that the Company waswe were therefore required to accept the remaining product commitment and to pay Aker the $2.8 million balance.commitment. We disagreedisagreed with Aker’sAKBM’s position and believebelieved that Aker isAKBM was not entitled to further payment under the supply agreement. Accordingly, no liability has been recorded.was recorded by us. The dispute wasremained unresolved as of Decemberboth March 31, 20222023 and remains unresolved. There is uncertainty as2022. On October 18, 2023, we entered into a settlement agreement with AKBM to whethersettle any and all potential claims regarding amounts due under the Company will be requiredsupply agreement. Pursuant to make further paymentthe terms of the settlement agreement, in exchange for a release and waiver of claims arising out of the supply agreement by AKBM and any of AKBM’s affiliates, we agreed to Akerthe following: (a) AKBM retained ownership of all raw krill oil product, including amounts previously delivered to us, (b) AKBM acquired and took ownership of all production equipment related to the production of CaPre, (c) AKBM acquired and took ownership of all data from research, clinical trials and pre-clinical studies with respect to CaPre, and (d) AKBM acquired and took ownership over all rights, title and interest in and to all intellectual property rights related to CaPre owned by us, including all patents and trademarks. Pursuant to the terms of the settlement agreement, AKBM acknowledged that the CaPre assets were transferred on an “as is” basis, and in connection therewith we disclaimed all representations and warranties in connection with the dispute. Additionally, in the event the Company is requiredCaPre assets, including any representations with respect to accept delivery from Akerperformance or sufficiency. The value of the remaining balance ofraw krill oil product underpreviously delivered to us, the supply agreement, there is uncertaintyproduction equipment and the intellectual property rights related to CaPre were fully impaired in prior reporting periods and had a carrying value of nil as to whether the Company can recover value from the product, which may result in the Company incurring a loss on the supply agreement in the near term.of March 31, 2023. As of September 30, 2023, no liability was recorded.

 

Contingencies

We evaluate contingencies on an ongoing basis and establish loss provisions for matters in which losses are probable and the amount of the loss can be reasonably estimated.

37

 

Use of Estimates and Measurement of Uncertainty

The preparation of ourthese financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

Estimates are based on management’s best knowledge of current events and actions that management may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

37

Estimates and assumptions include the measurement of stock-based compensation, derivative warrant liabilities, stock-based compensation, assets heldaccruals for sale,research and development contracts and contract organization agreements, and valuation of intangibles acquired from Grace, goodwill and RKO supply agreement.goodwill. Estimates and assumptions are also involved in measuring the accrual of services rendered with respect to research and development expenditures at each reporting date and determining which research and development expenses qualify for research and development tax credits and in what amounts. We recognizeThe Corporation recognizes the tax credits once we haveit has reasonable assurance that they will be realized. Recorded tax credits are subject to review and approval by tax authorities and, therefore, could be different from the amounts recorded. Estimates and assumptions are also utilized in the assessment of impairment of deferred financing costs, equipment, and intangibles.

 

Critical Accounting Policies

 

Valuation of Intangible Assets and GoodwillDuring the six months ended September 30, 2023, there were no material changes to our critical accounting policies from those described in our Annual Report for the year ended March 31, 2023.

In a business combination, the fair value of IPR&D acquired is capitalized and accounted for as indefinite-lived intangible assets, and not amortized until the underlying project receives regulatory approval, at which point the intangible assets will be accounted for as definite-lived intangible assets or discontinued. If discontinued, the intangible assets will be written off. R&D costs incurred after the acquisition are expensed as incurred.

Our IPR&D and Goodwill was $82.8 million as of December 31, 2022, which represents 71% of total assets. Goodwill and indefinite-lived assets are not amortized but are subject to an impairment review annually and more frequently when indicators of impairment exist. An impairment of goodwill could occur if the carrying amount of a reporting unit exceeds the fair value of that reporting unit. An impairment of indefinite-lived intangible assets would occur if the fair value of the intangible asset is less than the carrying value.

The nature of the assumptions in the intangible asset's impairment tests are considered critical due to a high level of subjectivity and judgment necessary to account for highly uncertain matters, and the impact of the assumptions on our financial condition and our operating performance could be material.

We test goodwill for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value is less than its carrying amount. If we conclude it is more likely than not that fair value of the reporting unit is less than its carrying amount, a quantitative impairment test is performed. We test indefinite lived intangible assets for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value is less than its carrying amount. Events that could result in an impairment, or trigger an interim impairment assessment, include the decision to discontinue the development of a drug, the receipt of additional clinical or nonclinical data regarding our drug candidates or a potentially competitive drug candidates, changes in the clinical development program for a drug candidate, or new information regarding potential sales for the drug candidates and increases in our weighted average cost of capital.

If we conclude it is more likely than not that the fair value is less than its carrying amount, a quantitative impairment test is performed. We reviewed Goodwill and our IPR&D assets for impairment on the anniversary of acquisition of August 27, 2022. Our annual test date of intangibles and Goodwill is the fourth quarter. We performed a quantitative assessment of our three individual projects. The estimated fair values of identifiable intangible assets were determined using the multi-period excess earnings method, which is a valuation methodology that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. The projected discounted cash flow models used to estimate the fair value of assets of our IPR&D reflect significant assumptions and are Level 3 unobservable data regarding the estimates a market participant would make in order to evaluate a drug development asset, including the following:

•
Probability of clinical success of research and development and obtaining regulatory approval. This estimate was based on various publicly available studies conducted by third parties;
•
Forecasted net sales from up-front and milestone payments, royalties and product sales. Comparable market transactions were used to estimate milestone and royalty revenues. The addressable market and patient acquisition rates were estimated based on studies we commissioned a third party to conduct. The estimated sales prices of our technologies are based on competitors with similar drug products. We have made estimates related to deductions expected to be provided based on conventional commercial models to access the market; and
•
A discount rate reflecting our weighted average cost of capital and specific risk inherent in the underlying assets.

The projected discounted cash flow model used to estimate the fair value of our reporting unit and intangible assets as of August 27, 2022 includes a significant assumption related to each project's probability of clinical success, which is reflected in the cash flows. Based on our fair value assessment, an impairment loss of the intangibles would result if the probability of success assumptions decreased more than approximately 4.3%, 1.4% and 8.5%, respectively for GTX-101, GTX-102 and GTX-104, for each year, all other assumptions remaining constant.

The projected discounted cash flow model used to estimate the fair value of our reporting unit and the intangibles as of August 27, 2022 includes a significant assumption related to each project's projected net sales levels, which is reflected in the cash flows. Based on our fair value assessment, an impairment loss would result if the net sales assumptions decreased more than approximately 15%, 2% and 10%, respectively for GTX-101, GTX, 102 and GTX-104 for each year, all other assumptions remaining constant. We believe that the net sales assumptions developed were applied with a conservative framework such as the exclusion of addressable markets outside the United States, which markets we expect to provide revenue upside if and when GTX-101, GTX-102 and GTX-104 are approved by the FDA.

The following table depicts as at the impairment assessment date of August 27, 2022, the discount rate used in the fair value model and the discount rate in which an impairment loss would occur.

Discount assumption

 

GTX 101

GTX 104

GTX 102

 

 

 

 

 

Discount rate used in fair value model

 

22.8%

24.8%

21.5%

Discount rate that results in an impairment

 

> 24%

> 26.6%

> 21.7%

38

The valuation of our IPR&D has significant measurement uncertainty given the risks and uncertainties associated with the timely and successful completion of the development and commercialization of drug candidates. We engaged a third party valuation firm to assist us with the valuation of the IPR&D and goodwill. Assumptions are difficult to make accurately and were mainly derived from life science studies, industry data, and peer company information that our management believes represent appropriate comparable data. Estimates of value are required to be discounted to account for risks related to the inherent uncertainties of the overall development and commercialization processes.

The summation of our Goodwill and IPR&D fair values, as indicated by our discounted cash flow calculations, were compared to our consolidated fair value, as indicated by our market capitalization, to evaluate the reasonableness of our calculations. Our determination of a reasonable control premium that an investor would pay, over and above market capitalization for a control position, included a number of factors:

•
Market control premium; The identification of recent public market information of comparable peer acquisition transactions. The selection of comparable peer acquisition transactions is subject to judgment and uncertainty.
•
Impact of low public float and limited trading activity on market capitalization: A significant portion of our common shares are owned by a concentrated number of investors. The public float of our common shares, calculated as the percentage of common shares freely traded by public investors divided by our total shares outstanding, is significantly lower than that of our publicly traded peers. Based on our evaluation of third-party market data, we believe there is an inherent discount impacting our share price due to the low public float and limited trading volume, thus impacting our market capitalization.

Given the limited amount by which the IPR&D fair value exceeds the carrying value, the impairment assessment is sensitive to changes in forecasted cash flows, our selected discount rates as well as the implied control premiums. Management has identified that a reasonably possible change in these assumptions could cause the carrying value to exceed fair value. Changes to our assumptions, in particular changes in technological feasibility or changes in the regulatory approval process could materially affect the estimation of the fair value and could result in impairment charges in future quarters.

The result of our quantitative assessment as of August 27, 2022 indicated that there is no impairment. We determined there was no triggering event in the third quarter that would have required us to perform a quantitative impairment test.

Measurement of Assets Held for Sale and RKO Supply Agreement

Assets that are classified as held for sale are measured at the lower of their carrying amount or fair value less expected selling costs (“estimated selling price”) with a loss recognized to the extent that the carrying amount exceeds the estimated selling price. The classification is applicable at the date upon which the sale of assets is probable, and the assets are available for immediate sale in their present condition. Assets, once classified as held for sale, are not subject to depreciation or amortization and both the assets and any liabilities directly associated with the assets held for sale are classified as current in our consolidated balance sheets. Subsequent changes to the estimated selling price of assets held for sale are recorded as gains or losses to the consolidated statements of income wherein the recognition of subsequent gains is limited to the cumulative loss previously recognized.

In addition, there is judgement and potential for loss regarding the recognition and measurement of our RKO supply agreement with Aker to purchase raw krill oil product for a committed volume of commercial starting material for CaPre for a total fixed value of $3.1 million, which is described in more detail in note 12 of our financial statements found elsewhere in this quarterly report.

Financial Instruments

Credit risk

Credit risk is the risk of a loss if a customer or counterparty to a financial asset fails to meet its contractual obligations. We have credit risk relating to cash, cash equivalents and short term investments, which we manage by dealing only with highly rated financial institutions. The carrying amount of financial assets, as disclosed in the statements of financial position, represents our credit exposure at the reporting date.

Currency risk

We are exposed to the financial risk related to the fluctuation of foreign exchange rates and the degrees of volatility of those rates. Foreign currency risk is limited to the portion of our business transactions denominated in currencies other than our functional currency. On April 1, 2022, our functional currency was changed from the Canadian dollar to the US dollar. This change is reflected prospectively in our financial statements.

Fluctuations related to foreign exchange rates could cause unforeseen fluctuations in our operating results.

Since April 1, 2022, a portion of our expenses, mainly related to research contracts is incurred in Canadian dollars and in Euros, for which no financial hedging is in place.

There is a financial risk related to the fluctuation in the value of the Canadian dollar and the Euro in relation to the U.S. dollar. In order to minimize the financial risk related to the fluctuation in the value of the Canadian dollar in relation to the U.S. dollar, certain funds continue to be invested as cash and cash equivalents and short-term investments in the Canadian dollar.

The following table provides an indication of our significant foreign exchange currency exposures from functional currency at the following dates:

39

 

 

December 31, 2022

December 31, 2021

 

 

 

US
$

 

Euro

 

 

CAD
$

 

Euro

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

1,372

 

 

—

 

 

 

37,341

 

 

—

 

Investments

 

 

15

 

 

—

 

 

 

15,055

 

 

—

 

Trade and other payables

 

 

(679

)

 

(48

)

 

 

(2,015

)

 

—

 

 

 

 

708

 

 

(48

)

 

 

50,381

 

 

—

 

The following exchange rates are those applicable to the following periods and dates:

 

 

December 31, 2022

 

 

December 31, 2021

 

 

 

Average

 

 

Reporting

 

 

Average

 

 

Reporting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US$ per CAD (2021 - CAD per US $)

 

 

0.7368

 

 

 

0.7378

 

 

 

1.2493

 

 

 

1.2637

 

USD$ per Euro

 

 

1.0310

 

 

 

1.0705

 

 

 

 

 

 

 

Based on our foreign currency exposures noted above, varying the above foreign exchange rates to reflect a 5% strengthening of the Canadian dollar and Euro would have an increase (decrease) in net loss as follows, assuming that all other variables remain constant:

December 31, 2022

$

Increase (decrease) in net loss

24

Based on our foreign currency exposures noted above, varying the above foreign exchange rates to reflect a 5% strengthening of the U.S. dollar and Euro would have an increase (decrease) in net loss as follows, assuming that all other variables remain constant:

December 31, 2021

$

Increase (decrease) in net loss

3,183

An assumed 5% weakening of the foreign currencies would have an equal but opposite effect on the basis that all other variables remained constant.

Interest Rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market rates. Our exposure to interest rate risk as at December 31, 2022 and 2021 was as follows:

Cash and cash equivalents

Short-term fixed interest rate

Investments

Short-term fixed interest rate

Our capacity to reinvest the short-term amounts with equivalent return will be impacted by variations in short-term fixed interest rates available on the market. Management believes the risk we will realize a loss as a result of the decline in the fair value of our short-term investments is limited because these investments have short-term maturities and are held to maturity.

Liquidity risk

Liquidity risk is the risk that we will not be able to meet our financial obligations as they fall due. We manage liquidity risk through the management of our capital structure and financial leverage. We also manage liquidity risk by continuously monitoring actual and projected cash flows. The Board of Directors reviews and approves our operating budgets and reviews material transactions outside the normal course of business.

Our contractual obligations related to financial instruments and other obligations and liquidity resources are presented in the liquidity and capital resources of this MD&A and note 1, of our financial statements found elsewhere in this quarterly report.

We have incurred operating losses and negative cash flows from operations in each year since our inception. We expect to incur significant expenses and continued operating losses for the foreseeable future. We expect our expenses will increase substantially in connection with our ongoing activities, particularly as we advance clinical development for our first three drug candidates in our pipeline; continue to engage contract manufacturing organizations (“CMO's”) to manufacture our clinical study materials and to ultimately develop large-scale manufacturing capabilities in preparation for commercial launch; seek regulatory approval for our drug candidates; and add personnel to support our drug product development and future drug product launch and commercialization.

We do not expect to generate revenue from product sales unless and until we successfully complete drug development and obtain regulatory approval, which we expect will take several years and is subject to significant uncertainty. To date, we have financed our operations primarily through public offerings and private placements of our common shares, warrants and convertible debt and with the proceeds from research tax credits. Until such time that we can generate significant revenue from drug product sales, if ever, it will require additional financing, which we expect to be sourced from a combination of public or private equity or debt financing's or other non-dilutive sources, which may include fees, milestone payments and royalties from collaborations

40

with third parties. Arrangements with collaborators or others may require us to relinquish certain rights related to our technologies or drug product candidates. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategy.

We expect to have sufficient cash resources to satisfy our objectives into the second quarter of calendar 2024, which is 13 to 16 months from the issuance date of the financial statements included elsewhere in this quarterly report. We require additional capital to fund our daily operating needs beyond that time. We plan to raise additional capital prior to that time in order to maintain adequate liquidity. Negative results from studies, if any, and depressed prices of our stock could impact our ability to raise additional financing. Raising additional equity capital is subject to market conditions not within our control. If we do not raise additional funds in this time period, we may not be able to realize our assets and discharge our liabilities in the normal course of business.

Future Accounting Changes

We have considered recent accounting pronouncements and concluded that they are either not applicable to our business or that the effect is not expected to be material to our consolidated financial statements as a result of future adoption.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, our management, with the participation of our CEOChief Executive Officer and CFO,Chief Financial Officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures within the meaning of Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon this evaluation, our management has concluded that, as of December 31, 2022,September 30, 2023, our existing disclosure controls and procedures were effective. It should be noted that while our CEOChief Executive Officer and CFOChief Financial Officer believe that our disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect the disclosure controls and procedures to be capable of preventing all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, but not absolute, assurance that the objectives of the control system are met.

Changes in Internal Control over Financial Reporting

No changes were made to our internal controls over financial reporting that occurred during the quarter ended December 31, 2022September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we are at times subject to various legal proceedings and disputes. We assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of loss is not estimable, we do not accrue legal reserves. While the outcome of legal proceedings is inherently uncertain, based on information currently available and available insurance coverage, our management believes that it has established appropriate legal reserves. Any incremental liabilities arising from pending legal proceedings are not expected to have a material adverse effect on our financial position, results of operations, or cash flows. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to our financial position, results of operations, or cash flows. We are not currently a party to any legal proceedings that, in the opinion of management, are likely to have a material adverse effect on our business.

38

 

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in our most recently filed annual report on Form 10-K.Annual Report.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

 

Item 5. Other Information

None.

41

 

Item 6. Exhibits

Exhibit No.

Description

3.1

Articles of Incorporation, as amended (incorporated by reference to Exhibit 4.1 from Form S-8S-3 (File No. 333-191383)333-274899) filed with the Commission on September 25, 2013)October 6, 2023)

3.2

 

Amended and Restated General By-Law (incorporated by reference to Exhibit 99.13.4 from Form 6-K10-Q (File No. 001-35776) filed with the Commission on February 21, 2017)August 11, 2023)

 

 

 

3.3

 

Advance Notice bylaw No. 2013-1 (incorporated by reference to Exhibit 4.3 from Form S-8 (File No. 333-191383) filed with the Commission on September 25, 2013)

 

 

 

4.1

Specimen Certificate forForm of Common Shares of Acasti Pharma Inc.Warrant, dated September 25, 2023 (incorporated by reference to Exhibit 2.14.1 from Form 20-F8-K (File No. 001-35776) filed with the Commission on June 6, 2014)September 26, 2023)

4.54.2

Amended and RestatedForm of Pre-Funded Warrant, Indenture dated May 10, 2018, between Acasti Pharma Inc. and Computershare Trust Company of CanadaSeptember 25, 2023 (incorporated by reference to Exhibit 2.54.2 from Form 20-F8-K (File No. 001-35776) filed with the Commission on June 29, 2018)September 26, 2023)

 

 

31.110.1

 

Form of Securities Purchase Agreement, dated September 24, 2023, by and between the Company and each of the Purchasers signatory thereto (incorporated by reference to Exhibit 10.1 from Form 8-K (File No. 001-35776) filed with the Commission on September 26, 2023)

10.2

Settlement Agreement, dated October 18, 2023, by and between the Company and Aker BioMarine Antarctic AS. (incorporated by reference to Exhibit 10.1 from Form 8-K (File No. 001-35776) filed with the Commission on October 23, 2023)

31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

31.231.2*

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

32.132.1*

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.232.2*

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

39

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed or furnished herewith

 

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.

Dated: February 14,November 13, 2023

ACASTI PHARMA INC.

By:

/s/ Janelle D’AlvisePrashant Kohli

Name: Janelle D’AlvisePrashant Kohli

Title: President and Chief Executive Officer and Director

(Principal Executive Officer)

By:

/s/ Brian Ford

Name: Brian Ford

Title: Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

4240