UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________

_____________________________

FORM 20-F
_________________

_____________________________

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED FEBRUARY 29, 2016

For the fiscal year ended March 31, 2019

OR

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

OR

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

Commission file number: 001-35776


______________________

_____________________________

Acasti Pharma Inc.

Inc.

(Exact name of Registrant as specified in its charter)
______________________

_____________________________

N/A

(Translation of Registrant'sRegistrant’s name into English)

Québec, Canada

(Jurisdiction of incorporation or organization)

545, Promenade du Centropolis, Suite 100, Laval, Québec H7T 0A3

(Address of principal executive office)

Mario Paradis, Chief Financial Officer

Jean-François Boily, Vice President, Finance, Acasti Pharma Inc.

545, Promenade du Centropolis, Suite 100

Laval, Québec H7T 0A3

Tel: 450-687-2262

Fax: 450-687-2272

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be 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 valueACSTThe NASDAQ Capital Market

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Not applicable

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None
________________


_____________________________

Indicate the number of outstanding shares of each of the issuer'sissuer’s classes of capital or common stock as of the close of the period covered by the annual report.

10,712,038

78,132,734 Common Shares issued and outstanding as of February 29, 2016.

March 31, 2019.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes No

Indicate by check mark whether the 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated“accelerated filer and large accelerated filer"filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerAccelerated filer ☐Non-accelerated filer ☒Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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                 Accelerated filer  .                Non-accelerated filer  

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP
International Financial Reporting Standards as
Other ☐
issued by the International Accounting Standards Board
Other  

If "Other"“Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No


TABLE OF CONTENTS


INTRODUCTION AND USE OF CERTAIN TERMS1
  
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS21
  
PART I 5
PART I3
Item 1.Identity of Directors, Senior Management and Advisers35
Item 2.Offer Statistics and Expected Timetable35
Item 3.Key Information35
Item 4.Information on the Company1923
Item 4A.Unresolved Staff Comments3646
Item 5.Operating and Financial Review and Prospects3646
Item 6. 
SELECTED QUARTERLY FINANCIAL DATA39
        Item  6.Directors, Senior Management and Employees4660
Item 7.Major Shareholders and Related Party Transactions6272
Item 8.Financial Statements6273
Item 9.The Offer and Listing6373
Item 10.Additional Information6473
Item 11.Quantitative and Qualitative Disclosure about Market Risk7384
Item 12.Description of Securities other than Equity Securities7484
PART II  86
Item 13. 
PART II74
        Item  13.Defaults, Dividend Arrearages and Delinquencies7486
Item 14.Material Modification to the Rights of Security Holdings and Use of Proceeds7486
Item 15.Controls and Procedures7486
Item 16.Reserved75Reserved86
Item 16A.Audit Committee Financial Expert7586
Item 16B.Code of Ethics7586
Item 16C.Principal Accountant Fees and Services7587
Item 16D.Exemptions from the Listing Standards for Audit Committees7687
Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers7687
Item 16F.Change in Registrant'sRegistrant’s Certifying Accountant7687
Item 16G.Corporation Governance7688
Item 16H.Mining Safety Disclosure7688
PART III  88
Item 17. Financial Statements88
PART III76
        Item  17.Financial Statements76
Item 18.Financial Statements76
        Item 19.Exhibits76
 Financial Statements88
EXHIBITS INDEXItem 19.113Exhibits88
EXHIBITS INDEX89
SIGNATURES11491





INTRODUCTION AND USE OF CERTAIN TERMS

As used in this annual report on Form 20-F, or the Annual Report,this annual report, unless the context otherwise requires, references to "Acasti"“we”, "Acasti Pharma"“our”, "Corporation"“us”, "it"“Acasti”, "its"“Acasti Pharma”, "we"“Corporation”, "our"“it”, "us"“its” or similar terms refer to Acasti Pharma Inc.,  and references to "Neptune" refer to Acasti's parent company, Neptune Technologies & Bioressources Inc.,

Market data and certain industry data and forecasts included in this Annual Reportannual report were obtained from internal company surveys, market research, and publicly available information, reports of governmental agencies and industry publications and 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 contained thereinthey contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of suchthat information is not guaranteed. We have not independently verified any of the data from third-party sources nor have we ascertainedor the underlying economic assumptions relied upon therein.they made. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based upon management'sour management’s knowledge of theour industry, have not been independently verified. Our estimates involve risks and uncertainties, including assumptions that may prove not to be true,accurate, and these estimates and certain industry data are subject to change based on various factors, including those discussed under "Risk Factors"“Risk Factors” in this Annual Report.annual report. While we believe our internal business research is reliable and the market definitions we use in this annual report are appropriate, neither suchour business research nor the definitions we use have been verified by any independent source. This Annual Report may only be used

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. In addition, our name, logo and website names and addresses are our service marks or trademarks. CaPre® is our registered trademark. The other trademarks, trade names and service marks appearing in this annual report are the property of their respective owners. Solely for convenience, the purpose for which it has been published.

trademarks, service marks, tradenames and copyrights referred to in this annual report are listed without the ©, ® and TM symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and tradenames.

Financial Information

All financial information in this annual report is presented in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB, other than certain non-IFRSunless otherwise specified.

We use multiple financial measures whichfor the review of our operating performance. These measures are defined under "Non-IFRSgenerally IFRS financial measures, but one adjusted financial measure, “Non-IFRS operating loss” (adding to net loss, (loss from operating activities before interest, taxes,finance expenses, depreciation and amortization (Non-IFRSand impairment loss, litigation settlement expected to be paid via common shares, change in fair value of derivative warrant liabilities, stock-based compensation and by subtracting finance income and deferred income tax recovery), is also used to assess our operating loss)",performance. This non-IFRS financial measure is derived from our financial statements and is presented in a consistent manner. We use this measure, in addition to the IFRS financial measures, for the purposes of evaluating our Management's Analysishistorical and prospective financial performance, as well as our performance relative to competitors. All of these measures also help us to plan and forecast future periods as well as to make operational and strategic decisions. We believe that providing this Non-IFRS information to investors, in addition to IFRS measures, allows them to see our results through the eyes of our management, and to better understand our historical and future financial situationperformance. See “Item 5. Operating and Operating Results, or MD&A below.

Financial Review and Prospects” for a reconciliation to net loss.

In this Annual Report,annual report, all references to "CAD"“CA$” or "$"“$” are to Canadian Dollarsdollars, unless expressly otherwise stated.

Exchange Rate Table
The following table sets forth the average exchange rate for one All amounts related to our financial results are presented in thousands of Canadian dollar expressed in terms of one U.S. dollar for each of the last five fiscal years. The average rate is calculated using the average of the exchange rates on the last day of each month during the period.
    
  Average 
2011 
 1.0151 
2012 
 1.0008 
2013 
 0.9903 
2014 
 0.9555 
2015 
 0.8003 
2016 
 0.7645 
The following table sets forth the highdollars, except where noted and low exchange rates for each month during the previous six months.
       
  Low  High 
November 2015 
 0.7485  0.7637 
December 2015 
 0.7148  0.7485 
January 2016 
 0.6854  0.7159 
February 2016 
 0.7123  0.7395 
March 2016 
 0.7425  0.7715 
April 2016 
 0.7593  0.7972 
May 2016 
 0.7613  0.7969 
The exchange rates are based upon the noon buying rate as quoted by the Bank of Canada. At May 27, 2016, the exchange rate for one Canadian dollar expressed in terms of one U.S. dollar, as quoted by The Bank of Canada Eastern Time, equaled $0.7691.
1



per share amounts.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Reportannual report contains certain information that may constitutebe forward-looking information within the meaning of Canadian securities laws and forward-looking statements within the meaning of U.S. federal securities laws, both of which we refer to in this Annual Reportannual report as forward-looking information. Forward-looking information can be identified by the use of terms such as "may"“may”, "will"“will”, "should"“should”, "expect"“expect”, "plan"“plan”, "anticipate"“anticipate”, "believe"“believe”, "intend"“intend”, "estimate"“estimate”, "predict"“predict”, "potential"“potential”, "continue"“continue” or other similar expressions concerning matters that are not statements about the present or historical facts. Forward-looking information in this Annual Reportannual report includes, but is not limited to,among other things, information or statements about:

·Acasti'sour ability to conduct all required clinical and nonclinical trials for CaPre®,CaPre, including the timing and results of those clinical trials;

·Acasti's ability to commercialize and distribute CaPre® and ONEMIA® in the United States and elsewhere;
·Acasti's estimates of the size of the potential markets for CaPre® and ONEMIA®our strategy, future operations, prospects and the rate and degreeplans of market acceptance of CaPre® and ONEMIA®;our management;

·the design, regulatory plan, timeline, costs and results of our clinical and nonclinical trials for CaPre;

·the timing and outcome of our meetings and discussions with the U.S. Food and Drug Administration, or FDA;

·our planned regulatory filings for CaPre, and their timing;
- 1 -

·our expectation that our Bridging Study (as defined below) results will support our plan to get authorization from the FDA to use the 505(b)(2) pathway with new chemical entity, or NCE, status towards a New Drug Application, or NDA, approval in the United States;

·the timing and results from the STRENGTH study (conducted by Astra Zeneca with their omega-3 (OM3) drug EPANOVA) in patients with high triglycerides, or TGs (blood levels between 200-499 mg/dL) and concomitantly taking a statin;

·the potential benefits and risks of CaPre® and ONEMIA®CaPre as compared to other products in the pharmaceutical, medical food and natural health products markets, respectively;markets;

·Acasti'sour estimates of the size of the potential market for CaPre, unmet medical needs in that market, the potential for market expansion, and the rate and degree of market acceptance of CaPre if it reaches commercialization, and our ability to maintain and defend its intellectual property rights;serve that market;

·Acasti'sour anticipated marketing advantages and product differentiation of CaPre and its potential to become a best-in-class OM3 compound for the treatment of HTG;

·the potential to expand CaPre’s indication for the treatment of high TGs (200-499 mg/dL);

·the degree to which physicians would switch their patients to a product with CaPre’s target product profile;

·our strategy and ability to maintain its supplydevelop, commercialize and distribute CaPre in the United States and elsewhere;

·the manufacturing scale-up of CaPre beyond 20 tons per year and the related timing;

·our ability to strengthen our patent portfolio and other means of protecting our intellectual property rights, including our ability to obtain additional patent protection for CaPre;

·our expectation that following expiration of the license agreement with Neptune Technologies & Bioressources Inc. (“Neptune”) we will not require any license from third parties to support the commercialization of CaPre;

·the availability, consistency and sources of our raw materials, including krill oil, from its parent company;oil;

·Acasti's abilityour expectation to secure a third-party supplierbe able to provide Acasti, as needed, with raw materials to supplement its operations, including raw krill oil ("RKO"), usedrely on third parties to manufacture CaPre® and ONEMIA®;
·Acasti's ability to secure and maintain a third-party to manufacture CaPre®CaPre whose manufacturing processes and facilities are in compliance with current good manufacturing practices, ("cGMP");or cGMP;
·Acasti's ability to obtain and maintain regulatory approval of CaPre®, and the labeling requirements that would apply under any approval Acasti may obtain;
·regulatory developments affecting the pharmaceutical, medical food and  natural health products markets in the United States and elsewhere;

·the size and growth of the potential markets for CaPre® and ONEMIA® and Acasti's ability to serve those markets;Omega-3 therapeutics, or OM3s in other cardiometabolic medicine indications;

·our intention and ability to build a U.S. commercial organization and to successfully launch CaPre and compete in the rate and degree of market acceptance of CaPre®, if it reaches commercialization;U.S. market;

·our intention and ability to complete development and/or distribution partnerships to support the successcommercialization of competing products that are or become available;CaPre outside of the United States, and to pursue strategic opportunities to provide capital and market access;

·Acasti's expectationsour need for additional financing and our estimates regarding itsour future financing and capital requirements;

·our expectation regarding our financial performance, including itsour revenues, profitability, research and development, costs and expenses, gross margins, liquidity, capital resources, and capital expenditures; and

·our projected capital requirements to fund our anticipated expenses, including our research and development and general and administrative expenses, and capital expenditures.

Although the forward-looking information in this Annual Reportannual report is based upon what Acasti believeswe believe are reasonable assumptions, no personyou should not place undue reliance on suchthat forward-looking information since actual results may vary materially from theit. Important assumptions made by us when making forward-looking information.statements include, among other things, assumptions by us that:

·we are able to obtain the additional capital and financing we require;

·we successfully and timely complete all required clinical and nonclinical trials necessary for regulatory approval of CaPre;

·the timeline and costs for our clinical and nonclinical programs are not materially underestimated or affected by unforeseen circumstances;

·CaPre is safe and effective;

·outcome study data from the STRENGTH study is positive;

·we obtain and maintain regulatory approval for CaPre on a timely basis;

·we are able to attract, hire and retain key management and skilled scientific and commercial personnel;
- 2 -

·third parties provide their services to us on a timely and effective basis;

·we are able to maintain our required supply of raw materials, including krill oil;

·we are able to find and retain a third-party to manufacture CaPre in compliance with cGMP;

·we are able to successfully build a commercial organization, launch CaPre in the United States, and compete in the U.S. market;

·we are able to secure distribution arrangements for CaPre outside of the United States, if it reaches commercialization;

·we are able to manage our future growth effectively;

·we are able to gain acceptance of CaPre in its markets and we are able to serve those markets;

·our patent portfolio is sufficient and valid;

·we are able to secure and defend our intellectual property rights and to avoid infringing upon the intellectual property rights of third parties;

·we are able to take advantage of business opportunities in the pharmaceutical industry and receive strategic partner support;

·we are able to continue as a going concern;

·there is no significant increase in competition for CaPre from other companies in the pharmaceutical, medical food and natural health product industries;

·CaPre would be viewed favorably by payers at launch and receive appropriate healthcare reimbursement;

·market data and reports reviewed by us are accurate;

·there are no adverse changes in relevant laws or regulations; and

·we face no product liability lawsuits and other proceedings or any such matters, if they arise, are satisfactorily resolved.

In addition, the forward-looking information in this Annual Reportannual report is subject to a number of known and unknown risks, uncertainties and other factors, including those described in this Annual Reportannual report under the heading "Risk Factors"“Item 3.D. Risk Factors”, many of which are beyond the Corporation'sour control, that could cause the Corporation'sour actual results and developments to differ materially from those that are disclosed in or implied by the forward-looking information, including, without limitation:

among others:

·whether the currentrisks related to timing and future clinical trials by the Corporation will be successful;possible difficulties, delays or failures in our ongoing TRILOGY Phase 3 program for CaPre;

·whether CaPre®nonclinical and ONEMIA® canclinical trials may be successfully commercialized;more costly or take longer to complete than anticipated, and may never be initiated or completed, or may not generate results that warrant future development of CaPre;

·CaPre may not prove to be as safe and effective or as potent as we currently believe;

·our planned TRILOGY Phase 3 program may not produce positive results;

·our anticipated studies and submissions to the FDA may not occur as currently anticipated, or at all;

·the Corporation's relianceFDA could reject our 505(b)(2) regulatory pathway;

·while the REDUCE-IT results (a Cardiovascular outcome study conducted by Amarin with their OM3 drug VASCEPA) were positive, the cardiovascular outcome study data from the STRENGTH study could be negative, which could also negatively affect the market perception of CaPre;

·we may encounter difficulties, delays or failures in obtaining regulatory approvals for the initiation of clinical trials or to market CaPre, or the FDA may refuse to approve CaPre, or place restrictions on our ability to commercialize CaPre;

·we may need to conduct additional future clinical trials for CaPre, the occurrence and success of which cannot be assured;

·CaPre may have unknown side effects;

·CaPre could be subject to extensive post-market obligations and continued regulatory review, which may result in significant additional expense and affect sales, marketing and profitability;

·we may fail to achieve our publicly announced milestones on time;

·we may encounter difficulties in completing the development and commercialization of CaPre;
- 3 -

·third parties we will rely upon to conduct our TRILOGY Phase 3 program for CaPre may not effectively fulfill their obligations to us, including complying with FDA requirements;

·there may be difficulties, delays, or failures in obtaining health care reimbursements for CaPre;

·recently enacted and future laws may increase the difficulty and cost for us to obtain marketing approval of and commercialize CaPre and affect the prices we can charge;

·new laws, regulatory requirements, and the continuing efforts of governmental and third-party payors to contain or reduce the costs of healthcare through various means could adversely affect our business;

·the market opportunity for, and demand and market acceptance of, CaPre may not be as strong as we anticipate;

·third parties that we will rely upon to manufacture, supply and distribution of its products and for thedistribute CaPre may not effectively fulfill their obligations to us, including complying with FDA requirements;

·there may not be an adequate supply of raw materials, including the ability to find a third party to supply RKOkrill oil, in sufficient quantities and quality and to produce CaPre® under cGMP standards;

·we may not be able to meet applicable regulatory standards for the Corporation's reliance on a limited numbermanufacture of distributors for ONEMIA® and its ability to secure distribution arrangements for CaPre® if it reaches commercialization; or scale-up our manufacturing successfully;

·the Corporation's ability to manage future growth effectively;as a development stage company, we have limited sales, marketing and distribution personnel and resources;

·the Corporation's abilityour patent applications may not result in issued patents, our issued patents may be circumvented or challenged and ultimately struck down, and we may not be able to achieve profitability;successfully protect our trade secrets or other confidential proprietary information;

·the Corporation's ability to secure future financing from Neptune or otherwe may face claims of infringement of third party sources on favorable terms or at all;intellectual property and other proprietary rights;
2

·the Corporation's ability to gain acceptance of its products in its markets;we may face product liability claims and product recalls;

·the Corporation's ability to attract, hire and retain key management and scientific personnel;
·the Corporation's ability to achieve its publicly announced milestones on time;
·the Corporation's ability to successfully defend any product liability lawsuits thatwe may be brought against it;
·face intense competition from other companies in the pharmaceutical, medical food and natural health product industries;

·the Corporation's abilitywe have a history of negative operating cash flow and may never become profitable or be able to secure and defend its intellectual property rights and to avoid infringing upon the intellectual property rights of third parties; andsustain profitability;

·we have significant additional future capital needs and may not be able to raise additional financing required to fund further research and development, clinical studies, obtain regulatory approvals, build a commercial organization in the Corporation's status as a foreign private issuer/emerging growth company.United States, and meet ongoing capital requirements to continue our current operations on commercially acceptable terms or at all;
Consequently, all

·we may not be able to successfully compete in the U.S. market with competitors who are larger and have more resources than we do;

·we may acquire businesses or products or form strategic partnerships in the future that may not be successful;

·we may be unable to secure development and/or distribution partnerships to support the development and commercialization of CaPre outside the United States, provide development capital, or market access;

·we rely on the retention of key management and skilled scientific, manufacturing, regulatory and commercial personnel; and

·general changes in economic and capital market conditions could adversely affect us.

All of the forward-looking information in this Annual Reportannual report is qualified by this cautionary statement and therestatement. There can be no guarantee that the results or developments that the Corporation anticipateswe anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on the Corporation'sour business, financial condition or results of operations. Accordingly,operations that we anticipate. As a result, you should not place undue reliance on the forward-looking information. Except as required by applicable law, Acasti doeswe do not undertake to update or amend any forward-looking information, whether as a result of new information, future events or otherwise. All forward-looking information is made as of the date of this Annual Report.annual report.

- 4 -

PART I

Item 1.Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2.Offer Statistics and Expected Timetable

Not applicable.

Item 3.Key Information

A.Selected Financial Data

The following information should be read in conjunction with our MD&A“Item 5. Operating and Financial Review and Prospects” and our audited financial statements and the related notes for our fiscal years ended March 31, 2019 and 2018 and the yearthirteen-month period ended February 29, 2016,March 31, 2017 which are prepared in accordance with IFRS as issued by the IASB.IASB and are included in this annual report. The selected financial information below includes financial information derived from theour audited financial statements. Our historical results from any prior period are not necessarily indicative of results to be expected for any future period.

The following table is a summary of our selected consolidated financial information of the Corporation for each of the five most recently completed fiscal years in accordance with IFRS as issued by the IASB.
                
  February 29, 2016  February 28, 2015  February 28, 2014  February 28, 2013  February 29, 2012 
Revenue from sales 
 $37,656  $270,615  $500,875  $724,196  $10,415 
Loss from operating activities  
 $(9,611,418) $(12,394,461) $(10,799,706) $(6,979,733) $(6,512,842)
Net loss and total comprehensive loss  
 $(6,316,731) $(1,654,724) $(11,611,649) $(6,892,360) $(6,500,933)
Basic and diluted loss per share 
 $(0.59) $(0.16) $(1.38) $(0.95) $(0.97)
Total assets 
 $28,517,322  $37,208,105  $45,631,803  $12,170,048  $15,728,860 
Total liabilities 
 $1,297,290  $3,979,786  $12,352,303  $2,446,372  $1,259,518 
Share capital 
  61,972,841   61,627,743   61,027,307   28,922,710   28,614,550 
Warrants and rights 
        406,687   406,687   313,315 
Weighted average number of shares outstanding  10,659,936   10,617,704   8,436,893   7,275,444   6,723,164 
Dividends declared per share 
               
IASB for each of our five most recently completed fiscal years.

  For the fiscal year ended 
  March 31, 2019  March 31, 2018  March 31, 2017(1)  February 29, 2016  February 28, 2015 
Revenue from sales $nil  $nil  $nil  $nil  $nil 
Loss from operating activities $(45,015) $(19,696) $(11,210) $(9,612) $(12,395)
Net loss and total comprehensive loss $(51,566) $(21,504) $(11,247) $(6,317) $(1,655)
Basic and diluted loss per share $(0.95) $(1.23) $(1.01) $(0.59) $(0.16)
Total assets $48,471  $22,959  $25,456  $28,517  $37,208 
Total liabilities $34,509  $14,735  $3,753  $1,297  $3,980 
Share capital $129,318  $73,338  $66,576  $61,973  $61,628 
Equity - Classified Warrants and rights $998  $715  $453  $-  $- 
Weighted average number of shares outstanding  54,290,295   17,486,515   11, 094,512   10,659,936   10,617,704 
Dividends declared per share  -   -   -   -   - 

Note:

(1)For the thirteen-month period ended March 31, 2017.

B.Capitalization and Indebtedness

Not applicable.

3

C.Reasons for the Offer and Use of Proceeds

Not applicable.

D.Risk Factors

Investing in the Common Sharesour securities involves a high degree of risk.risk due to, among other things, the nature of our business and the present stage of our development. Prospective and current investors should carefully consider the following risks and uncertainties, together with all other information in this Annual Report,annual report, as well as the Corporation'sour financial statements included in this annual report and related notes“Item 5. Operating and MD&A. AnyFinancial Review and Prospects.” If any of the risk factors described below could adversely affect Acasti'sthese risks actually occur, our business, financial condition, orprospects, results of operations or cash flow could be materially and adversely affected and you could lose all or a part of the value of your investment. Additional risks or uncertainties not currently known to us, or that we deem immaterial, may also negatively affect our business operations.”

General Risks Related to the Corporation

We may not be able to maintain our operations and advance our research and development of CaPre without additional funding.

We have incurred operating losses and negative cash flows from operations since our inception. To date, we have financed our operations through public offerings and private placements of securities, proceeds from exercises of warrants, rights and options, and receipt of research tax credits and research grant programs. Our cash and cash equivalents (including restricted investments) were $ 34.4 million as of March 31, 2019 and $8.2 million as of March 31, 2018.

- 5 -

Our current assets, as of March 31, 2019, are projected to support our current liabilities as at that date when combined with the projected level of our expenses for the next twelve months, including fully funding the completion of our Phase 3 program for CaPre. We expect that additional time and capital will be required by us to file an NDA to obtain FDA approval for CaPre in the United States, to further scale up our manufacturing capabilities, and to complete marketing and other pre-commercialization activities. Consequently, we expect to require additional capital to fund our daily operating needs beyond the next twelve months. Based on a conservative estimate, we believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements beyond the completion of our Phase 3 trials. To fully execute our business plan, we plan to raise the necessary capital primarily through additional securities offerings and multiple sources of non-dilutive capital such as grants or loans and strategic alliances. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay the commercial launch of CaPre. Unexpected negative results in our TRILOGY Phase 3 program for CaPre may affect our ability to raise additional capital and/or complete strategic development and/or distribution partnerships to support the commercial launch of CaPre. Additional funding from third parties may not be available on acceptable terms or at all to enable us to continue with the commercialization of CaPre.

If we do not raise additional funds, we may not be able to realize our assets and discharge our liabilities in the normal course of business. As a result, there exists a material uncertainty that casts substantial doubt about our ability to continue as a going concern and, therefore, realize our assets and discharge our liabilities in the normal course of business. Our financial statements have been prepared on a going-concern basis, which assumes we will continue our operations in the foreseeable future and will be able to realize our assets and discharge our liabilities and commitments in the ordinary course of business. If we are unable to continue as a going concern, material write-downs to the carrying value of our assets, including intangible assets, could be required. If we fail to obtain additional financing, we may not be able to continue as a going concern.

We may never become profitable or be able to sustain profitability.

We are a clinical-stage biopharmaceutical company with a limited operating history. The likelihood of the success of our business plan must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered when developing and expanding early-stage businesses and the marketregulatory and competitive environment in which we operate. Biopharmaceutical product development is a highly speculative undertaking, involves a substantial degree of risk and is a capital- intensive business. We expect to incur expenses without any meaningful corresponding revenues unless and until we are able to obtain regulatory approval for and begin selling CaPre in significant quantities. We filed our investigational new drug application, or IND, for CaPre in late 2013, which allowed us to initiate clinical development in the United States towards FDA approval for CaPre. To date, we have not generated any revenue from CaPre, and we may never be able to obtain regulatory approval for marketing CaPre in any indication. Even if we are able to commercialize CaPre, we may still not generate significant revenues or achieve profitability. Additionally, we may not be able to attain our targeted cost of goods sold, and levels of insurance reimbursement for CaPre may not be commercially viable in all global markets. We incurred net losses for the fiscal year ended March 31, 2019 of $ 51.6 million, $21.5 million for the year ended March 31, 2018 and $11.2 million for the thirteen-month period ended March 31, 2017, respectively. As of March 31, 2019, we had an accumulated deficit of $ 123.9 million.

We expect that our expenses will increase in the future as we prepare to seek FDA approval for the commercial launch of CaPre. However, our research and development expenses could increase in the future if we decide to develop CaPre for other indications. As a result, we expect to continue to incur substantial losses for the foreseeable future, and these losses may be increasing. We are uncertain about when or if we will be able to achieve or sustain profitability. If we fail to become and remain profitable, our ability to sustain our operations and to raise capital could be impaired and the price of our common shares could decline.

If outcome studies being conducted by our competitors testing the Common Sharesimpact of OM3 on treating patients with high TGs are negative, there could declinealso be an adverse impact for CaPre.

Top-line results from the cardiovascular outcome trial (CVOT) sponsored by Amarin (the REDUCE-IT trial) were recently released. A second CVOT sponsored by AstraZeneca (the STRENGTH trial) is expected to be reported in 2020. While the REDUCE-IT trial provided positive top line results, there can be no assurance that further detailed or subsequent results will be positive. If those studies show or continue to show that OM3 therapeutic drugs effectively treat patients with high TGs and improve cardiovascular, morbidity and mortality outcomes, we believe that the potential to expand CaPre’s indication in the future to include the treatment of high TGs would be significantly advanced. Conversely, if outcome study data from Astra Zeneca’s STRENGTH trial is negative, or if it fails to be completed, our potential target market for CaPre could be limited to patients with severe HTG (for which the total U.S. market was estimated based on audited prescription data by Symphony Health Analytics to be approximately $1.4 billion in 2018) and our ability to realize greater market potential of CaPre could be harmed.

- 6 -

We rely on third parties to conduct our TRILOGY Phase 3 program for CaPre.

We rely on contract research organizations, or CROs, to monitor and manage data for our TRILOGY Phase 3 program for CaPre. While we will only control certain aspects of the CRO’s activities, we nevertheless are responsible for ensuring that our clinical trials are conducted in accordance with applicable protocols, and legal, regulatory and scientific standards, and our reliance on the CRO does not relieve us from those responsibilities. We and the CRO are required to comply with current good clinical practices, or cGCPs, which are regulations and guidelines enforced by the FDA, Health Canada and comparable foreign regulatory authorities for any products in clinical development.

The FDA enforces these cGCP regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If we or the CRO fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, Health Canada or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications for CaPre. Upon inspection, the FDA could determine that our clinical trials do not comply with cGCPs. In addition, our clinical trials must be conducted with products produced under current good manufacturing practice, or cGMP, regulations and require a large number of test subjects. If we or the CRO fail to comply with these regulations, we may have to repeat preclinical studies or clinical trials for CaPre, which would delay the regulatory approval process and could also subject us to enforcement action up to and including civil and criminal penalties.

If our relationship with a CRO terminates, we may not be able to enter into arrangements with alternative CROs. If the CRO does not successfully carry out its duties or obligations or meet expected deadlines, if it needs to be replaced or if the quality or accuracy of the clinical data it obtains is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, we may have to extend, delay or terminate our preclinical studies or clinical trials, and we may not be able to obtain regulatory approval for or successfully commercialize CaPre.

The third parties that are conducting our TRILOGY Phase 3 program for CaPre will not be our employees and, except for remedies available to us under our agreements with the CROs, we cannot control whether or not they devote sufficient time and resources to our preclinical, clinical and nonclinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies or other drug development activities, which could affect their performance on our behalf.

We rely on third parties to manufacture, produce and supply CaPre and we may be adversely affected if those third parties are unable or unwilling to fulfill their obligations, including complying with FDA requirements.

Producing pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Currently, while we do own our manufacturing and encapsulation equipment, we outsource the production of CaPre, and do not own or operate the manufacturing facilities. Accordingly, we need to rely on one or more third party contract manufacturers to produce and supply our required drug product for our nonclinical research and clinical trials for CaPre.

Although we are currently working with CordenPharma at its Chenôve facility in Dijon, France to scale up our manufacturing processes for CaPre, doing so is a difficult and uncertain task, and there are risks associated with scaling to the level required for full commercialization, including, among others, pricing, cost overruns, potential problems with process scale up, process reproducibility, stability issues, lot consistency and timely availability of reagents or raw materials. Consequently, we may not be able to attain our targeted cost of goods sold for CaPre. Any of these riskschallenges could delay the commercial launch of CaPre, require bridging or uncertainties actually occur. Unknown risksrepetition of studies or riskstrials, increase development costs, delay approval of CaPre, impair our commercialization efforts, and increase our costs. We may have to delay or suspend the production of CaPre if a third-party manufacturer:

·becomes unavailable for any reason, including as a result of the failure to comply with cGMP regulations;

·experiences manufacturing problems or other operational failures, such as equipment failures or unplanned facility shutdowns required to comply with cGMP or damage from any event, including fire, flood, earthquake, business restructuring or insolvency; or

·fails or refuses to perform its contractual obligations under its agreement with us, such as failing or refusing to deliver the quantities of CaPre requested by us on a timely basis.

If our third-party contract manufacturers fail to achieve and maintain high manufacturing standards in compliance with cGMP regulations, we may be subject to sanctions, including fines, product recalls or seizures, injunctions, delays or suspensions of our clinical trials for CaPre, total or partial suspension of production of CaPre, civil penalties, withdrawals of previously granted regulatory approvals, and criminal prosecution. We do not currently have arrangements in place for redundant supply. If any one of our current contract manufacturers cannot perform as agreed, we may be required to replace that Acasti currently believesmanufacturer. Although we believe that there are several potential alternative contract manufacturers who could manufacture CaPre, we may incur added costs and delays in identifying and qualifying any such replacement.

- 7 -

We have historically had no marketing and sales organization and, as a company, have no experience in marketing products. If we are unable to properly establish marketing and sales capabilities or enter into agreements with a strategic partner to market and sell CaPre, we may not be immaterialable to generate revenue.

We have historically had no sales, marketing or distribution capabilities and, as a company, we have also historically had no experience in marketing products. If CaPre or another of our future product candidates is approved for commercialization, unless we find a strategic partner to assist us with sales, marketing and distribution, we will be required to develop in-house marketing and sales force capability, which would require significant capital expenditures, management resources and time. Also, we would have to compete with other biotechnology and pharmaceutical companies to recruit, hire, train and retain marketing and sales personnel. We face competition in our search for strategic partners to assist us with sales, marketing and distribution, and we may not be able to establish or maintain any such arrangements. If we do find a strategic partner, any revenue we receive from CaPre would partly depend upon the efforts of that strategic partner, which may not be successful. We may have little or no control over the marketing and sales efforts by any strategic partner we find for CaPre and our revenue may be lower than if we had commercialized CaPre independently.

If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

Our ability to compete in the highly competitive pharmaceuticals industry largely depends upon our ability to attract and retain highly qualified managerial, scientific, medical, and commercial personnel. Competition for skilled personnel in our market is intense and competition may limit our ability to hire and retain highly qualified personnel on acceptable terms. We are highly dependent on our management, financial, commercial, and scientific personnel. Despite our efforts to retain valuable employees, members of our management, financial, commercial, scientific and medical teams may terminate their employment with us on short notice or, potentially, without any notice at all. The loss of the services of any of our executive officers or other key employees could potentially harm our business, operating results or financial condition. Our success may also impair its business,depend on our ability to attract, retain and motivate highly skilled junior, mid-level, and senior managers and scientific personnel. In addition, we do not maintain “key person” insurance policies on the lives of our executives or those of any of our other employees. Other pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we can offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can develop and commercialize CaPre and any other future product candidates would be limited.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations, and those of our suppliers, third party manufacturers and other contractors and consultants could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or resultsman-made disasters or business interruptions, for which we are predominantly self- insured. The occurrence of operations. Certain statements belowany of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely on third-party manufacturers to manufacture CaPre. Our ability to obtain supplies of CaPre could be disrupted if the operations of our manufacturers and suppliers are forward-looking information. See "Special Note Regarding Forward-Looking Statements".

Risks Related to Product Development, Regulatory Approval and Commercialization
The Corporation'saffected by a man-made or natural disaster or other business interruption.

Our prospects currently depend entirely on the success of CaPre®,CaPre, which is still in clinical development, and the Corporationwe may not be able to generate revenues from CaPre®.

The Corporation hasCaPre.

We have no prescription drug products that have been reviewed or approved by the FDA, Health Canada or any similar regulatory authority. The Corporation'sOur only prescription drug candidate is CaPre®,CaPre, for which the Corporation haswe have not yet filed an NDA, and for which we must complete the Corporation must conduct additional clinical trials, undergo further development activitiesTRILOGY Phase 3 program and seek and receive regulatory approval prior to commercial launch, which the Corporation doeswe do not anticipate will occur until the Corporation's fiscal year 2021 at the earliest. The Corporation doesWe have invested significant effort and financial resources in researching and developing CaPre. Further development of CaPre will require substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from sales of CaPre, if it is ever approved for commercialization.

We do not have any other prescription drug candidates in development and therefore, the Corporation'sso our business prospects currently depend entirely on the successful development, regulatory approval and commercialization of CaPre®,CaPre, which may never occur. Most prescription drug candidates never reach the clinical development stage and even those that do reach clinical development have only a small chance of successfully completing clinical development and gaining regulatory approval. If the Corporation iswe are unable to successfully commercialize CaPre® for the treatment of severe hypertriglyceridemia, itCaPre, we may never generate meaningful revenues. In addition, if CaPre®CaPre reaches commercialization and there is low market demand for CaPre®CaPre or the market for CaPre®CaPre develops less rapidly than the Corporation anticipates, the Corporationwe anticipate, we may not have the ability to shift itsour resources to the development of alternative products.

- 8 -
The Corporation

We may not be able to obtain required regulatory approvals for CaPre®.

CaPre.

We have limited experience in obtaining regulatory approvals, including approval by the FDA and, as a company, we have no experience in obtaining approval of any product candidates. The research, testing, manufacturing, labeling, packaging, storage, approval, sale, marketing, advertising and promotion, pricing, export, import and distribution of prescription drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries and those regulations differ from country to country. Acasti isWe are not permitted to market CaPre®CaPre in the United States until it receiveswe receive approval of an NDA from the FDA and similar restrictions apply in other countries. In the United States, the FDA generally requires the completion of preclinical testing and clinical trials of each drug to establish its safety and efficacy and extensive pharmaceutical development to ensure its quality before an NDA is approved. Regulatory authorities in other jurisdictions impose similar requirements. Of the large number of drugs in development, only a small percentage result in the submission of an NDA to the FDA and even fewer are approved for commercialization. To date, the Corporation haswe have not submitted an NDA for CaPre®CaPre to the FDA or comparable applications to other regulatory authorities. If the Corporation's development efforts for CaPre®, including its planned additional clinical trials, are not successful for the treatment of severe hypertriglyceridemia, and regulatory approval is not obtained in a timely fashion or at all, the Corporation's business will be materially adversely affected.

The

Our receipt of required regulatory approvals for CaPre®CaPre is uncertain and subject to a number of risks, including the following:

including:

·the FDA or comparable foreign regulatory authorities or independent institutional review boards, or IRBs, may disagree with the design or implementation of the Corporation'sour clinical trials;

·the Corporationwe may not be able to provide acceptable evidence of the safety and efficacy of CaPre®;CaPre;

·the results of the Corporation'sour clinical trials may not meet the level of statistical or clinical significance required by the FDA or other regulatory agencies for marketing approval;

·the dosing of CaPre®CaPre in a particular clinical trial may not be at an optimal level;

·patients in the Corporation'sour clinical trials may suffer adverse effects for reasons that may or may not be related to CaPre®;CaPre;
4

·we may be unable to demonstrate that CaPre’s clinical and other benefits outweigh its safety risks;

·the data collected from the Corporation'sour clinical trials may not be sufficient to support the submission of an NDA for CaPre®CaPre or to obtain regulatory approval for CaPre®CaPre in the United States or elsewhere;

·the FDA or comparable foreign regulatory authorities may not approve the manufacturing processes or facilities of third-partythird party manufacturers with which the Corporation contractswe contract for clinical and commercial supplies;supplies of CaPre; and

·the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering the Corporation'sour clinical data insufficient for approval.

The FDA and other similar regulators have substantial discretion in the approval process and may refuse to accept anyour application or may decide that the Corporation'sour data is insufficient for approval and require additional clinical trials, or preclinical or other studies. In addition, varying interpretations of the data obtained from preclinical studies and clinical trials could delay, limit or preventfor CaPre. If regulatory approval of CaPre®. In addition, the process of obtaining regulatory approvals is expensive, often takes many years, if approval is obtained at all, and can vary substantially based upon, among other things, the type, complexity and novelty of the prescription drug candidates involved, the jurisdiction in which regulatory approval is sought and the substantial discretion of the regulatory authorities. Changes in the regulatory approval policy during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for a submitted product application may cause delays in the approval or rejection of an application. If regulatory approvalCaPre is obtained in one jurisdiction that does not necessarily mean that CaPre®CaPre will receive regulatory approval in all jurisdictions in which the Corporation maywe seek approval. The failureIf we fail to obtain approval for CaPre®CaPre in one or more jurisdictions, may negatively impact the Corporation'sour ability to obtain approval in a different jurisdiction. A failurejurisdiction may be negatively affected.

Even if we receive regulatory approval for CaPre, it may just be for a limited indication.

If we obtain regulatory approval for CaPre, we will only be permitted to market it for the indication(s) approved by the FDA, and any such approval may put limits on the indicated uses or promotional claims we may make for it, or otherwise not permit labeling that sufficiently differentiates CaPre from competitive products with comparable therapeutic profiles. For example, while our initial objective is to seek regulatory approval for the treatment of severe HTG, afterwards obtaining approval for CaPre to address mild to moderate HTG could greatly expand our potential market for CaPre. However, even if CaPre is approved for severe HTG, it may never be approved for the treatment of mild to moderate HTG. In addition, any approval we receive for CaPre could contain significant use restrictions for specified age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements. If any regulatory approval for CaPre contains significant limits, we may not be able to obtain regulatorysufficient funding or generate meaningful revenue from CaPre or be able to continue developing, marketing approvalor commercializing CaPre.

We may be unable to find successful strategic partnerships to develop and commercialize CaPre.

We are currently engaged in strategic partnership discussions with several pharmaceutical companies for CaPre®the development and commercialization of CaPre. We intend to seek co-development, licensing and/or marketing partnership opportunities with third parties that we believe will complement or augment our development and commercialization efforts for CaPre. Entering into partnership relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing shareholders or disrupt our management and business. Entering into partnership relationships could also delay the development of CaPre and our other future product candidates if we become dependent upon a strategic partner and that strategic partner does not prioritize the development of CaPre relative to its other development activities. In addition, we face significant competition in any indication would prevent the Corporation from commercializing CaPre®,seeking strategic partners and the Corporation's abilitynegotiation process is time-consuming and complex. We may not be successful in our efforts to generate revenue wouldestablish a strategic partnership or other alternative arrangements for CaPre on our anticipated timeline, or at all, because CaPre may be materially impaired.deemed to be at too early of a stage for collaborative effort and third parties may not view CaPre as having the requisite potential to demonstrate safety and efficacy. Even if we do enter into strategic partnerships, those partnerships may not achieve our objectives.

- 9 -
The Corporation

We may be unable to develop alternative product candidates.

To date, the Corporation haswe have not commercialized any prescription drug candidates and, doesother than CaPre, we do not have any other compounds in clinical trials, nonclinical testing, lead optimization or lead identification stages besides CaPre®. The Corporation cannot be certain that CaPre® will provestages. If we fail to be sufficiently effectiveobtain regulatory approval for and safe to meet applicable regulatory standards for any indication. If the Corporation fails to successfully commercialize CaPre®CaPre as a treatment for severe hypertriglyceridemia,HTG or any other indication, whether as a stand-alone therapy or in combination with other treatments, the Corporationwe would have to develop, acquire or license alternative product candidates or drug compounds to expand itsour product candidate pipeline beyond CaPre®.CaPre. In such a scenario, the Corporationwe may not be able to identify and develop or acquire product candidates that prove to be successful products, or to develop or acquire them on terms that are acceptable to the Corporation.

Even if the Corporation receives regulatory approval for CaPre®, the Corporation still may not be able to successfully commercialize it and the revenue that the Corporation generates from its sales, if any, may be limited.
The commercial success of CaPre® in any indication for which the Corporation obtains marketing approval from the FDA or other regulatory authorities will depend upon its acceptance by the medical community, including physicians, patients and health insurance providers. The degree of market acceptance of CaPre® will depend on a number of factors, including:
·demonstration of clinical safety and efficacy of prescription omega-3 products generally;
·relative convenience, pill burden and ease of administration;
·the prevalence and severity of any adverse side effects;
·the willingness of physicians to prescribe CaPre® and of the target patient population to try new therapies;
·efficacy of CaPre® compared to competing products, including omega-3 dietary supplements;
·the introduction of any new products, including generic prescription omega-3 products, that may in the future become available to treat indications for which CaPre® may be approved;
·new procedures or methods of treatment that may reduce the incidences of any of the indications for which CaPre® shows utility;
·effective pricing of CaPre®;
·the inclusion of prescription omega-3 products in applicable treatment guidelines;
·the effectiveness of the Corporation's or any future collaborators' sales and marketing strategies;
·negative perception of market regarding limitations or warnings contained in FDA-approved labeling;
5

·the Corporation's ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including Medicare and Medicaid, private health insurers and other third-party payors; and
·the willingness of patients to pay out-of-pocket in the absence of third-party coverage or reimbursement.
In addition, even if the Corporation obtains regulatory approvals, the timing or scope or conditions of any approvals may prohibit or reduce the Corporation's ability to commercialize CaPre® successfully. For example, if the approval process takes too long, the Corporation may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Any regulatory approval the Corporation ultimately obtains may be limited or subject to restrictions or post-approval commitments that render CaPre® not commercially viable. For example, regulatory authorities may not approve the price the Corporation intends to charge for CaPre®, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve CaPre® with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that indication. Any of the foregoing scenarios could have a material adverse effect on the commercial prospects for CaPre®.  If CaPre® is approved, but does not achieve an adequate level of acceptance by physicians, health insurance providers and patients, the Corporation may not generate sufficient revenue and the Corporation may not be able to ever achieve profitability.
us.

We may not be able to compete effectively against our competitors'competitors’ pharmaceutical products.

The biotechnology and pharmaceutical industries are highly competitive. There are many pharmaceutical companies, biotechnology companies, public and private universities and research organizations actively engaged in the research and development of products that may be similar to our products.CaPre. It is probable that the number of companies seeking to develop products and therapies similar to our productsCaPre will increase. Many of these and other existing or potential competitors have substantially greater financial, technical and human resources than we do and may be better equipped to develop, manufacture and market products. These companies may develop and introduce products and processes competitive with or superior to ours.CaPre. In addition, other technologies or products may be developed that have an entirely different approach or means of accomplishing the intended purposes of our products,CaPre, which might render our technology and productsCaPre non-competitive or obsolete.

Our competitors both in the United States and globally include large, well-established pharmaceutical companies, specialty pharmaceutical sales and marketing companies, and specialized cardiovascular treatment companies. GlaxoSmithKline plc, which currently sells Lovaza ®,LOVAZA, a prescription-only omega-3OM3 fatty acid indicated for patients with severe hypertriglyceridemiaHTG, was approved by the FDA in 2004 and has been on the market in the United States since 2005. As described below, multipleMultiple generic versions of LovazaLOVAZA are now available in the United States. Amarin launched its prescription-only OM3 drug VASCEPA in 2013, and reached a market share of approximately 20% by the end of 2015. In addition, EPANOVA (OM3-carboxylic acids) capsules, a free fatty acid form of OM3 (comprised of 55% EPA and 20% DHA), is FDA-approved for patients with severe HTG. Omtryg, another OM3 fatty acid composition developed by Trygg Pharma AS, received FDA approval for severe HTG. Neither EPANOVA nor Omtryg have yet been commercially launched, but could launch at any time. Other large companies with competitive products competing indirectly with CaPre include AbbVie, Inc., which currently sells Tricor ®TRICOR and Trilipix ®TRILIPIX for the treatment of severe hypertriglyceridemiaHTG, and Niaspan ®,NIASPAN, which is primarily used to raise HDL-C but is also used to lower triglycerides.TGs. Generic versions of Tricor, Trilipix,TRICOR, TRILIPIX and NiaspanNIASPAN are also now available in the United States. In addition, in May 2014, Epanova ® (omega-3-carboxylic acids) capsules, a free fatty acid form of omega-3 (comprised of 55% EPA and 20% DHA), was approved by the FDA for patients with severe hypertriglyceridemia. Epanova was developed by Omthera Pharmaceuticals, Inc., and is now owned by AstraZeneca Pharmaceuticals LP (AstraZeneca). Also, in April 2014, Omtryg, another omega-3-acid fatty acid composition developed by Trygg Pharma AS, received FDA approval for severe hypertriglyceridemia. Neither Epanova nor Omtryg have been commercially launched, but could launch at any time. Each of these competitors, other than potentially Trygg, has greater resources than we do, including financial, product development, marketing, personnel and other resources.

In addition, we are aware of a number of other pharmaceutical companies that arein earlier stages of developing products that, if approved and marketed, wouldcould compete with CaPre®. We believe Catabasis Pharmaceuticals, or Catabasis, and Sancilio & Company, or Sancilio, are also developing potential treatments for hypertriglyceridemia based on omega-3 fatty acids. To our knowledge, Catabasis initiated a Phase 2 clinical trial in October 2015 to evaluate the safety and efficacy of its product in combination with atorvastatin in patients with hypercholesterolemia, and Sancilio also is pursuing aCaPre.

Even if it receives regulatory pathway under section 505(b)(2) of the FDCA for its product and submitted an IND in July 2015. Sancilio completed two pivotal pharmacokinetic studies, and we expect the company to initiate a pivotal clinical endpoint study as the next step in development. In addition, we are aware that Matinas BioPharma, Inc. is developing an omega-3-based therapeutic for the treatment of severe hypertriglyceridemia and mixed dyslipidemia. Matinas BioPharma, Inc. has filed an Investigational New Drug Application with the FDA to conduct a human study in the treatment of severe hypertriglyceridemia. Akcea Therapeutics/Ionis Pharmaceuticals (formerly Isis Pharmaceuticals) announced favorable Phase 2 results of volanesorsen (formerly ISIS-APOCIII  Rx), a drug candidate administered through weekly subcutaneous injections, in patients with high triglycerides and type 2 diabetes and in patients with moderate to severe high triglycerides. Finally, Madrigal Pharmaceuticals has completed Phase 1 clinical testing of MGL-3196 for the treatment of high triglycerides and various lipid parameters in patients.

CaPre®approval, CaPre may need to demonstrate compelling comparative advantages in efficacy, convenience, tolerability and safety to be commercially successful. Other competitive factors, including generic drug competition, could force the Corporationus to lower prices or could result in reduced sales.sales of CaPre. In addition, new products developed by others could emerge as competitors to CaPre®.CaPre. If the Corporation iswe are not able to compete effectively against itsour current and future competitors, itsour business will not grow and itsour financial condition and operations will suffer.
6

CaPre®, if approved, would be subject to

CaPre could face competition from products for which no prescription is required.

If approved by applicableit receives regulatory authorities, CaPre®approval, CaPre will be a prescription-only omega-3.OM3. Mixtures of omega-3OM3 fatty acids are naturally occurring substances in various foods, including fatty fish. Omega-3Lower potency and lower purity forms of OM3 fatty acids are also marketed by othersother companies as dietary supplements or natural health products. Dietary supplements may generally be marketed without a lengthy FDA premarket review and approval process and aredo not subject torequire a prescription. However, unlike prescription drug products, manufacturers of dietary supplements may not make therapeutic claims for their products; dietary supplements may be marketed with claims describing how the product affects the structure or function of the body without premarket approval, but may not expressly or implicitly represent that the dietary supplement will diagnose, cure, mitigate, treat, or prevent disease. The Corporation believes the pharmaceutical-grade purity of CaPre® has a superior therapeutic profile to naturally occurring omega-3 fatty acids and the omega-3 in commercially available dietary supplements. However, the CorporationWe cannot be certain that physicians or consumers will view CaPre®CaPre as superior. Tosuperior to these alternatives or that physicians will be more likely to prescribe CaPre. If CaPre is not broadly covered by insurance, or the extent the price of CaPre®patient co-pay is significantly higher than the prices of commercially available omega-3OM3 fatty acids marketed by other companies as dietary supplements or natural health products, physicians may recommend these commercial alternatives instead of CaPre®CaPre or patients may elect on their own to take commercially available non-prescription omega-3OM3 fatty acids. Either of these outcomes may adversely impact the Corporation's results of operations by limitingcould limit how the Corporation prices CaPre®we price CaPre and limiting the revenue the Corporation receives from the sale of CaPre®.

Even if the Corporation obtains marketing approval for CaPre®, the Corporation will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense.
Even if the Corporation obtains U.S. regulatory approval for CaPre® for the treatment of severe hypertriglyceridemia, which would not occur until the Corporation successfully completes Phase III clinical trials, the FDA may still impose significant restrictions on its indicated uses or marketing or the conditions of approval, or impose ongoing requirements for potentially costly and time-consuming post-approval studies, including Phase IV clinical trials or clinical outcome studies, and post-market surveillance to monitor the safety and efficacy of CaPre®. Even if the Corporation secures U.S. regulatory approval, the Corporation would continue to be subject to ongoing regulatory requirements related to CaPre® governing manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of adverse events and other post-market information. These requirements include registration with the FDA, as well as continued compliance with cGCPs, for any clinical trials that the Corporation conducts post-approval. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP, requirements relating to quality control, quality assurance and corresponding maintenance of records and documents.
If the Corporation or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, problems with the facility where the product is manufactured, or the Corporation or its manufacturers fail to comply with applicable regulatory requirements, the Corporation may be subject to the following administrative or judicial sanctions:
negatively affect our revenues.

·- 10 -restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls;
·issuance of warning letters or untitled letters;

·clinical holds;
·injunctions or the imposition of civil or criminal penalties or monetary fines;
·suspension or withdrawal of regulatory approval;
·suspension of any ongoing clinical trials;
·refusal to approve pending applications or supplements to approved applications filed by the Corporation, or suspension or revocation of product license approvals;
·suspension or imposition of restrictions on operations, including costly new manufacturing requirements; or
·product seizure or detention or refusal to permit the import or export of product.
The occurrence of any event or penalty described above may inhibit the Corporation's ability to commercialize CaPre® and generate revenue. Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability claims and increase the Corporation's product liability exposure.
7

Recently enacted

Recent and future legislation may increase the difficultylegal developments could make it more difficult and costcostly for the Corporationus to obtain marketing approval ofregulatory approvals for CaPre and commercialize CaPre® andnegatively affect the prices the Corporationwe may obtain.

charge.

In the United States and some foreign jurisdictions, there have been a number of legislativeelsewhere, recent and proposed legal and regulatory changes and proposed changes regarding theto healthcare system thatsystems could prevent or delay marketingour receipt of regulatory approval for CaPre®,CaPre, restrict or regulate our post-approval marketing activities, and adversely affect the Corporation'sour ability to profitably sell CaPre®. Legislative and regulatory proposalsCaPre. Proposals have also been made to expand post-approval requirements and to restrict sales and promotional activities for pharmaceutical products. The Corporation doesWe do not know whether additional legislative changes will be enacted, or whether the FDAFDA’s regulations, guidance or interpretations will be changed, or what the impact ofany such changes on the marketing approvals of CaPre®,will have, if any, may be. In addition,on our ability to obtain regulatory approvals for CaPre. Further, the Centers for Medicare and Medicaid Services, or CMS, frequently changes product descriptors, coverage policies, product and service codes, payment methodologies and reimbursement values. Also, increased scrutiny by the U.S. Congress of the FDA'sFDA’s approval process maycould significantly delay or prevent marketingour receipt of regulatory approval as well asfor CaPre and subject the Corporationus to more stringent product labeling and post-marketing testing and other requirements.

Furthermore, for market approval in EU countries, a CVOT outcome trial is currently required. These types of trials are large and follow patients for at least 5 years. There can be no guarantee that we will ever conduct an outcome trial to meet these requirements to market in the EU.

In the United States, the Medicare Modernization Act, or the MMA, changed the way Medicare covers and pays for pharmaceutical products. The legislationMMA expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for drugs. In addition, this legislationthe MMA authorized Medicare Part D prescription drug plans to use formularies where they can limit the number of drugs that will be covered in any therapeutic class. As a result of this legislationthe MMA and the expansion of federal coverage of drug products, the Corporation expects thatwe expect there will be additional pressure to contain and reduce healthcare costs. These healthcare cost reduction initiatives and other provisions of this legislationthe MMA could decrease the coverage and price that the Corporation receiveswe would receive for CaPre® and could seriously harm its business.CaPre. While the MMA applies only to drug benefits for Medicare beneficiaries, private health insurance companies often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private health insurance companies.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 or, collectively, the(the Health Care Reform Law,Law), has broadened access to health insurance, reduced or constrained the growth of healthcare spending, enhanced remedies against fraud and abuse, added new transparency requirements for the healthcare and health insurance industries, imposed new taxes and fees on the health industry and imposed additional health policy reforms. TheProvisions of the Health Care Reform Law revisedaffecting pharmaceutical companies include requirements to offer discounts on brand-name drugs to patients who fall within the definitionMedicare Part D coverage gap, commonly referred to as the “donut hole”, and to pay an annual non-tax deductible fee to the federal government based on each company’s market share of "average manufacturer price" for reporting purposes, which couldprior year total sales of branded products to certain federal healthcare programs, such as Medicare, Medicaid, Department of Veterans Affairs and Department of Defense. The Healthcare Reform Law also includes significant provisions that encourage state and federal law enforcement agencies to increase the amount ofactivities related to preventing, detecting and prosecuting those who commit fraud, waste and abuse in federal healthcare programs, including Medicare, Medicaid drug rebates to states. Further, the new law imposed a significant annual fee on companies that manufacture or import branded prescription drug products. Substantial new provisions affecting compliance have also been enacted, which may possibly require the Corporation to modify its business practices with healthcare practitioners.

and Tricare.

Despite initiatives to invalidate the Health Care Reform Law, the U.S. Supreme Court has upheld certain key aspects of it. There is still uncertainty with respect to the legislation, includingimpact the requirement that all individuals maintain health insurance coveragecurrent U.S. presidential administration and the U.S. Congress may have, if any, and the effects of any changes will likely take time to unfold. As judicial challenges and legislative initiatives to modify, limit, or pay a penalty, referredrepeal the Healthcare Reform Law continue to asevolve, the individual mandate. AlthoughHealth Care Reform Law may be significantly changed and we do not know whether any such changes could have significant negative financial impact on the development or potential profitability of CaPre. At this time, it remains unclear whether there are legal challengeswill be any changes made to the Health Care Reform Law, in lower courts on other grounds, at this time it appears the implementation of thewhether to certain provisions or its entirety. The Health Care Reform Law will continue. The Corporation will not know the full effectsor any replacement of the Health Care Reform Law until applicable federal and state agencies issue regulations or guidance under the new law. Although it is too earlycould continue to determine the effect of the Health Care Reform Law, the new law appears likely to continue theapply downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase the Corporation'sour regulatory burdens and operating costs. The Corporation expects that additionalAdditional federal healthcare reform measures willcould be adopted in the future any of which could limitlimiting the amounts that federal and state governments will pay for healthcare products and services, and in turnwhich could significantly reducenegatively affect the projected value of certain development projectsCaPre and reduce the Corporation'sour ability to achieve profitability.

In Canada, most new patented drug prices are limited so that the cost of therapy is in the range of the cost of therapy for existing drugs sold in Canada used to treat the same disease. As a result:

·prices of moderate and substantial improvement drugs and breakthrough drugs are also restricted by a variety of tests;

·existing patented drug prices cannot increase by more than the Canadian Consumer Price Index; and

·the Canadian prices of patented medicines can never be the highest in the world.

If CaPre receives regulatory approval in Canada, restrictions on the price we can charge there for CaPre could reduce the value of CaPre and our ability to generate revenue and achieve profitability.

In many jurisdictions outside the United States, a product candidate must be approved for health care reimbursement before it can be approved for sale. In some cases, the price that we intend to charge for CaPre will also be subject to approval. If we fail to comply with the regulatory requirements in our target international markets or to receive required marketing approvals, our potential market for CaPre will be reduced and our ability to realize the full market potential for CaPre will be harmed.

- 11 -

Reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance. If there is not sufficient reimbursement for CaPre, it is less likely that it will be widely used.

Even if CaPre is approved for sale by the Corporationappropriate regulatory authorities, market acceptance and sales of CaPre will depend on reimbursement policies and may be affected by future healthcare reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs they will reimburse and establish payment levels. We cannot be certain that reimbursement will be available for CaPre. If reimbursement is not available or is available on a limited basis, we may not be able to successfully commercialize CaPre.

There may be significant delays in obtaining coverage and reimbursement for newly-approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or other regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also be insufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of a drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Our inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for CaPre could have a material adverse effect on our operating results and our overall financial condition.

Even if we obtain FDA approval of CaPre, we may never obtain approval or commercialize it outside of the United States, which would limit our ability to realize CaPre’s full market potential.

In order to market CaPre outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties and costs for us and may require additional preclinical studies or clinical trials, which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of CaPre in those countries. In addition, our failure to obtain regulatory approval in any country may delay or have negative effects on the process for regulatory approval in other countries. If we fail to comply with regulatory requirements in international markets CaPre® in a manner that violatesor to obtain and maintain required approvals, our target market will be reduced and our ability to realize the full market potential of CaPre will be harmed.

If we or our third-party service providers fail to comply with healthcare fraudlaws and abuse laws,regulations or if the Corporation violates government price reporting laws, the Corporation maywe could be subject to civil or criminal penalties.

In addition to FDAthe FDA’s restrictions on marketing of pharmaceutical products, several other types of federal and state healthcare fraud and abuse laws have been applied in recent years to restrict certain marketing practices in the pharmaceutical industry. These laws include the U.S. Anti-Kickback Statute, U.S. False Claims Act and similar state laws. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of the Corporation's business activities could be subject to challenge under one or more of these laws.

The U.S. Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order ofordering any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. A person or entity does not need to have actual knowledge of the U.S.  Anti-Kickback Statute or special intent to violate the law in order to have committed a violation. This statute has been interpreted broadly to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, dispensers, purchasers and formulary managers on the other. Although there are several statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, themanagers. The exemptions and safe harbors from prosecution are drawn narrowly and practices that involve remuneration intendedwe may fail to induce prescribing, purchasing or recommending drugs reimbursable under federal healthcare programs may be subject to scrutiny if they do not qualify for an exemption or safe harbor. The Corporation's practices may not, in all cases, meet all of the criteria for safe harbor protection from anti-kickback liability. Moreover, recent health care reform legislation has strengthened these laws. For example, the Health Care Reform Law, among other things, amends the intent requirement of the U.S. Anti-Kickback Statute and criminal health care fraud statutes; a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it.

In addition, the Health Care Reform Law provides that the government may assert that a claim including items or services resulting from a violation of the U.S. Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the U.S. False Claims Act. Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, or causing to be made, a false statement to get a false claim paid. The “qui tam” provisions of the False Claims Act allow a private individual to bring civil actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government. These individuals, sometimes known as “relators” or, more commonly, as “whistleblowers”, may share in any amounts paid by the entity to the government in fines or settlement. The number of filings of qui tam actions has increased significantly in recent years, causing more healthcare companies to have to defend a case brought under the federal False Claim Act. If an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus attorneys’ fees and costs, and civil penalties of up to US$21,563 for each separate false claim. Certain administrative sanctions, up to and including exclusion of an entity from participation in the federal healthcare programs, may also ensue.

- 12 -

8

Additional laws and regulations include:

·the federal Anti-Inducement Law (also known as the Civil Monetary Penalties Law), which prohibits a person from offering or transferring remuneration to a Medicare or State healthcare program beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of any item or service for which payment may be made, in whole or in part, by Medicare or a State healthcare program;

·the Ethics in Patient Referrals Act of 1989, commonly referred to as the Stark Law, which prohibits physicians from referring Medicare or Medicaid patients for certain designated health services where that physician or family member has a financial relationship with the entity providing the designated health service, unless an exception applies;

·the U.S. federal Health Insurance Portability and Accountability Act (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), which created additional federal criminal statutes that prohibit, among other things, schemes to defraud healthcare programs and imposes requirements on certain types of people and entities relating to the privacy, security, and transmission of individually identifiable health information, and requires notification to affected individuals and regulatory authorities of breaches of security of individually identifiable health information;

·the federal Physician Payment Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, to report annually to the CMS information related to payments and other transfers of value to physicians, other healthcare providers and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members, which is published in a searchable form on an annual basis;

·federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

·analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies report or disclose pricing or other financial information and to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; and

·the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. Violations of these laws, or allegations of such violations, could result in fines, penalties or prosecution and have a negative impact on our business, results of operations and reputation.

Over the past few years, a number of pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of alleged prohibited promotional and marketing activities, such as: allegedlyas providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-label promotion that caused claims to be submitted to Medicaid for non-covered, off-label uses; and submitting inflated best price information to the Medicaid Rebate Program to reduce liability for Medicaid rebates. Most states also have statutes or regulations similar to the U.S. Anti-Kickback Statute and the U.S. False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer'smanufacturer’s products from reimbursement under government programs, criminal fines and imprisonment. Settlements of U.S. government litigation may include Corporate Integrity Agreements with commitments for monitoring, training, and reporting designed to prevent future violations.

Third-party coverage

Any action against us for an alleged or suspected violation of these laws could cause us to incur significant legal expenses and reimbursementcould divert our management’s attention from the operation of our business, even if our defense is successful. In addition, achieving and health care cost containment initiativessustaining compliance with these laws and treatment guidelinesregulations may constrain the Corporation's future revenues.

The Corporation's abilitybe costly to successfully market CaPre® will dependus in part on the levelterms of reimbursement that government health administration authorities, private health coverage insurersmoney, time and other organizations provide for the cost of the Corporation's products and related treatments. Countries in which CaPre® may in the futureresources. If we or any strategic partners, manufacturers or service providers fail to comply with these laws, we could be sold through reimbursement schemes under national health insurance programs frequently require that manufacturers and sellers of pharmaceutical products obtain governmental approval of initial prices and any subsequent price increases. In certain countries, including the United States, government-funded and private medical care plans can exert significant indirect pressure on prices. The Corporation may not be ablesubject to sell CaPre® profitably if its prices are not approved or coverage and reimbursement is unavailable or limited in scope. Increasingly, third-party payors attempt to contain health care costs in ways that are likely to impact the Corporation's development of productsenforcement actions, including:

·not approving the prices charged for health care products;adverse regulatory inspection findings;

·limiting both coverage and the amount of reimbursement for new therapeutic products;warning letters;

·denyingvoluntary or limiting coverage for products that are approved by the regulatory agencies but are consideredmandatory product recalls or public notification or medical product safety alerts to be experimental or investigational by third-party payors; andhealthcare professionals;

·refusing to provide coverage when an approved product is used in a way that has not received regulatoryrestrictions on, or prohibitions against, marketing approval.our products;
Termination or suspension of, or delays in the commencement or completion of, any necessary future studies of CaPre® for any indications could occur.
The commencement and completion of clinical and non-clinical studies for CaPre® can be delayed for a number of reasons, including delays related to:

·the FDA, Health Canadarestrictions on, or similar regulatory authorities not granting permission to proceed and placing the clinical study on hold;prohibitions against, importation or exportation of our products;

·subjects failingsuspension of review or refusal to enrollapprove pending applications or remain in the Corporation's trials at the rate the Corporation expects;supplements to approved applications;

·a facility manufacturing CaPre® being ordered by the FDA or other government or regulatory authorities to temporarily or permanently shut down due to violations of cGMP requirements or other applicable requirements, or cross-contaminations of product candidatesexclusion from participation in the manufacturing process;government-funded healthcare programs;
- 13 -

·any changes toexclusion from eligibility for the Corporation's manufacturing process that may be necessary or desired;award of government contracts for our products;

·subjects choosing an alternative treatment for the indications for which the Corporation is developing CaPre®,suspension or participating in competing clinical studies;withdrawal of product approvals;

·subjects experiencing severe or unexpected drug-related adverse effects;product seizures;

·reports from clinical testing on similar technologiesinjunctions; and products raising safety and/or efficacy concerns;
9

·third-party clinical investigators losing their license or permits necessary to perform the Corporation's clinical trials, not performing the Corporation's clinical trials on their anticipated schedule or employing methods not consistent with the clinical trial protocol, cGMP requirements, or other third parties not performing data collectioncivil and analysis in a timely or accurate manner;criminal penalties and fines.
·inspections of clinical study sites by the FDA, Health Canada or similar regulatory authorities or IRBs finding regulatory violations that require the Corporation to undertake corrective action, result in suspension or termination of one or more sites or the imposition of a clinical hold on the entire study, or that prohibit the Corporation from using some or all of the data in support of its marketing applications;
·third-party contractors becoming debarred or suspended or otherwise penalized by the FDA, Health Canada or other government or regulatory authorities for violations of regulatory requirements, in which case the Corporation may need to find a substitute contractor, and the Corporation may not be able to use some or any of the data produced by such contractors in support of its marketing applications;
·one or more IRBs refusing to approve, suspending or terminating the study at an investigational site, precluding enrollment of additional subjects, or withdrawing its approval of the trial; reaching agreement on acceptable terms with prospective CRO and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
·deviations of the clinical sites from trial protocols or dropping out of a trial;
·the addition of new clinical trial sites; and
·the inability of the CRO to execute any clinical trials for any reason.
Product development costs for CaPre® will increase if the Corporation has delays in testing or approval or if the Corporation needs to perform more or larger clinical studies than planned. Additionally, changes in regulatory requirements and policies may occur and the Corporation may need to amend study protocols to reflect these changes. Amendments may require the Corporation to resubmit its study protocols to the FDA, Health Canada or similar regulatory authorities or IRBs for re-examination, which may impact the costs, timing or successful completion of that study. Any delays in completing the Corporation's clinical trials will increase its costs, slow down its development and approval process and jeopardize its ability to commence sales of CaPre® and generate revenues. Any of these occurrences may have a material adverse effect on the Corporation's business, financial condition and prospects.
Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials may not be predictive of the results of later-stage clinical trials. The Corporation cannot assure you that the FDA will view the results as the Corporation does or that any future trials of CaPre® for other indications will achieve positive results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Any future clinical trial results for CaPre® may not be successful.
A number of factors could contribute to a lack of favorable safety and efficacy results for CaPre® for other indications. For example, such trials could result in increased variability due to varying site characteristics, such as local standards of care, differences in evaluation period, and due to varying patient characteristics including demographic factors and health status. There can be no assurance that the Corporation's clinical trials will demonstrate sufficient safety and efficacy for the FDA to approve CaPre® for the treatment of severe hypertriglyceridemia, or any other indication that the Corporation may consider in any additional NDA submissions for CaPre®.
In addition, clinical trials and nonclinical studies performed by research organizations and other independent third parties may yield negative results regarding the effect of omega-3 fatty acids on cardiometabolic disorders and specifically hypertriglyceridemia and severe hypertriglyceridemia. For example, in May 2013, the New England Journal of Medicine published results on a study in which it concluded that a daily treatment of omega-3 fatty acids did not reduce the risk of cardiovascular events.  The clinical trial consisted of the enrollment of 12,513 patients who were followed by a network of 860 general practitioners in Italy. Patients were randomly assigned to omega-3 fatty acids (1g daily) or placebo. Researchers reported that omega-3 fatty acid supplements did not reduce death from heart disease or heart attacks or strokes in the group and concluded that the intake of omega-3 fatty acids does not have any specific advantage in a population that is considered at high risk of cardiovascular disease. The New England Journal of Medicine study along with other future studies yielding similar results could have a negative impact on consumer perception and market acceptance of the efficacy of omega-3 fatty acids on cardiometabolic disorders, specifically the beneficial effect on triglyceride and cholesterol levels, and such impact may a material adverse effect on the Corporation's business.
10

The Corporation relies

We rely on third parties to conduct itsour clinical trials for CaPre®.

The Corporation has entered into agreements with a CROCaPre.

We rely heavily on contract research organizations, or CROs, to provide monitors formonitor and to manage data for its ongoingour preclinical studies and clinical trials. The Corporation relies heavily on these partiestrials for execution of clinical studies for CaPre® and controlsCaPre. While we only control certain aspects of their activities. Nevertheless, the Corporation isCRO’s activities, we nevertheless are responsible for ensuring that each of its studies isour clinical trials are conducted in accordance with the applicable protocol,protocols, legal, regulatory and scientific standards, and the Corporation'sour reliance on CROs wouldthe CRO does not relieve it of its regulatoryus from those responsibilities. The CorporationWe and its CROsthe CRO are required to comply with cGCPs, which are regulations and guidelines enforced by the FDA, Health Canada and comparable foreign regulatory authorities for any products in clinical development.

The FDA enforces these cGCP regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If we or the Corporation or its CROsCRO fail to comply with applicable cGCPs, the clinical data generated in the Corporation'sour clinical trials may be deemed unreliable and the FDA, Health Canada or comparable foreign regulatory authorities may require the Corporationus to perform additional clinical trials before approving the Corporation'sour marketing applications. The Corporation cannot assure you that, uponapplications for CaPre. Upon inspection, the FDA willcould determine that any of the Corporation'sour clinical trials do not comply with cGCPs. In addition, the Corporation'sour clinical trials must be conducted with products produced under cGMP regulations and require a large number of test subjects. The Corporation's failureIf we or the failure of its CROsCRO fail to comply with these regulations, we may require the Corporationhave to repeat preclinical studies or clinical trials for CaPre, which would delay the regulatory approval process and could also subject the Corporationus to enforcement action up to and including civil and criminal penalties.

If any of the Corporation's relationshipsour relationship with these third-party CROs terminate, the Corporationa CRO terminates, we may not be able to enter into arrangements with alternative CROs. If CROs dothe CRO does not successfully carry out their contractualits duties or obligations or meet expected deadlines, if they needit needs to be replaced or if the quality or accuracy of the clinical data they obtainit obtains is compromised due to the failure to adhere to the Corporation'sour clinical protocols, regulatory requirements or for other reasons, any suchwe may have to extend, delay or terminate our preclinical studies or clinical trials, may be extended, delayed or terminated, and the Corporationwe may not be able to obtain regulatory approval for or successfully commercialize CaPre®.

CaPre.

The Corporation's supply of krill oil for commercial supplythird parties conducting our preclinical studies and clinical trials is dependent uponat CROs will not be our employees and, except for remedies available to us under our agreements with the CROs, we cannot control whether or not they devote sufficient time and resources to our preclinical, clinical and nonclinical programs. These third parties may also have relationships with Neptuneother commercial entities, including our competitors, for whom they may also be conducting clinical studies or other drug development activities, which could affect their performance on our behalf.

The research, development and manufacture of CaPre involves using potentially hazardous materials.

Our research and development activities relating to CaPre involve the controlled use of potentially hazardous substances, including chemical materials such as acetone. Our manufacturers for CaPre will be subject to federal, provincial, state and local laws and regulations in Canada, the United States and in other third party manufacturersjurisdictions governing laboratory procedures and key suppliers

The Corporation depends on krill oil sourcedthe use, manufacture, storage, handling and disposal of medical and hazardous materials. Although we believe that our manufacturers’ procedures for using, handling, storing and disposing of these materials comply with legally prescribed standards, we cannot completely eliminate the risk of contamination or injury resulting from third parties formedical or hazardous materials. If any such contamination or injury were to occur, we may incur liability or local, city, provincial, state or federal authorities may curtail the use of these materials and interrupt our business operations and the production of ONEMIA™ and CaPre®. The Corporation's reliance on third party suppliersCaPre. In the event of krill oil involves several risks, including potential fluctuations in supply and reduced control over production costs, delivery schedulesan accident, we could be held liable for damages or penalized with fines, and the qualityliability could exceed our resources. We do not have any insurance for liabilities arising from medical or hazardous materials. Complying with environmental, health and safety laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts relating to CaPre, which could harm our business, prospects, financial condition or results of available krill oil. Until November 2012, Acasti purchased alloperations. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of its supply of krill oil from its parent company, Neptune. Acasti is currently acquiring its krill oil from Neptune and through purchases in the open market in order to meet production requirements for ONEMIA™, and is also relying on a third party to provide manufacturing services for the production of CaPre® in accordance with cGMP regulations imposed by the FDA. Furthermore, the Corporation may have to source additional quantities of krill oil for the continued production of ONEMIA™ and its planned Phase III clinical program for CaPre®, and, if regulatory approval is obtained, larger quantities for the commercialization and distribution of CaPre® may be needed by the Corporation.
Acastihazardous materials, this insurance may not be able to acquire krill oil in sufficient quantities from Neptune, in which case, Acasti may need to seek alternative suppliers of krill oil and may be required to pay higher pricesprovide adequate coverage against potential liabilities. We do not maintain insurance for krill oil (in comparison to what it currently pays to Neptune). Further, any alternative supply of krill oil may not be of comparable quality to that previously provided by Neptune which may impact the efficacy,environmental liability or the markets' perception of the efficacy, of ONEMIA™ and CaPre®. Disruption to the Corporation's required quantities and quality of krill oil supplies would have a material adverse effect on Acasti's business and results of operations.
The Corporation relies on third parties for the manufacturing, production and supply of CaPre® and ONEMIA® and may be adversely affected if those third parties are unable or unwilling to fulfill their obligations.
The production of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Acasti does not own or operate manufacturing facilities for the production of CaPre® and ONEMIA®, nor does it have plans to develop its own manufacturing operations in the foreseeable future. Accordingly, the Corporation needs to rely on one or more third party manufacturers to produce and supply its required drug product for its nonclinical research and clinical trials for CaPre® and its commercial sales of ONEMIA®. The Corporation's reliance on third-parties to produce CaPre® and ONEMIA® exposes Acasti to a number of risks. For example, Acasti may be subject to delays in or suspension of the production of CaPre® and ONEMIA® if a third-party manufacturer:
·becomes unavailable for any reason, including as a result of the failure to comply with current good manufacturing practices, or cGMP regulations;
11

·experiences manufacturing problems or other operational failures, such as equipment failures or unplanned facility shutdowns required to comply with cGMP or damage from any event, including fire, flood, earthquake, business restructuring or insolvency; or
·fails or refuses to perform its contractual obligations under its agreement with the Corporation, such as failing or refusing to deliver the quantities requested on a timely basis.
If the Corporation's third-party manufacturers fail to achieve and maintain high manufacturing standards in compliance with cGMP regulations, Acasti may be subject to sanctions, including fines, product recalls or seizures, injunctions, total or partial suspension of production, civil penalties, withdrawals of previously granted regulatory approvals, and criminal prosecution. Any of these penalties could delay the initiation of the Corporation's planned Phase III clinical trial for CaPre®, which could have a material adverse effect on Acasti's business prospects and result of operations.
The FDA could challenge Onemia®'s classification as a "medical food".
Our offering of Onemia® as "medical food" could be challenged by the FDA. The FDA has previously issued warning letters to other companies challenging the classification of their products as "medical food" and may be applying a more narrow interpretation of what qualifies as "medical food." Given this enhanced focus on medical food companies, we cannot provide any assurance that Acasti will not receive such a letter and the FDA could prohibit the sale of one or more of our potential future "medical food" products in the United States .If the FDA challenges our classification of Onemia® or other potential "medical food" products, Acasti would likely incur significant costs responding to such a claim and defending our product's status as a medical food.  The re-position of our product as a "dietary supplement" would require new labels, labeling and revised claims for the products, and would impose other regulatory requirements on Acasti that would be costly and time consuming and could divert management attention, all of which could have a negative impact on our business and results of operations.
The Corporation may be subject to Product Liability Claims and Recalls of its Products.
Drug development involves the testing of experimental drugs on human subjects. These studies subject the Corporation to liability risks relating to personal injury or, in extreme cases, death to participants as a result of an unexpected adverse reaction to the tested drug. Furthermore, the administration of these experimental drugs to humans after marketing clearance is obtained can result in product liability claims which may result from claims made directly by consumers or by regulatory agencies, pharmaceutical companies or others. There can be no assurance that insurance will be adequate or will continue to be available on terms acceptable to the Corporation. Insurance will generally not protect the Corporation against negligence.
The obligation to pay any product liability claim in excess of whatever insurance the Corporation is able to acquire, or the recall of any of its products, could have a material adverse effect on the business, financial condition and future prospects of the Corporation.
Risks Relating to the Corporation's Intellectual Property Rights
It is difficult and costly to protect Acasti's intellectual property rights, and Acasti cannot ensure the protection of these rights.
The Corporation's activities depend, in part, on its ability to (i) obtain and maintain patents, trade secret protection and operate without infringing the intellectual proprietary rights of third parties, (ii) successfully defend these patents (including patents owned by or licensed to the Corporation) against third-party challenges, and (iii) successfully enforce these patents against third party competitors. There is no assurance that the Corporation will be granted such patents and/or proprietary technology or that such granted patents and/or proprietary technology will not be circumvented through the adoption of a competitive, though non-infringing, process or product. The patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions for which important legal principles remain unresolved. Changes in either the patent laws or in interpretations of patent laws may diminish the value of the Corporation's intellectual property. Accordingly, the Corporation cannot predict the breadth oftoxic tort claims that may be allowableasserted against us in connection with our storage or enforceable in its patents (including patents owned by or licensed to the Corporation). Failure to protect the Corporation's existing and future intellectual property rights could seriously harm its business and prospects anddisposal of potentially hazardous materials. In addition, we may result in the loss of its ability to exclude others from using the Corporation's technology or its own right to use the technologies. If the Corporation does not adequately ensure the right to use certain technologies, it may have to pay others for the right to use their intellectual property, pay damages for infringement or misappropriation and/or be enjoined from using such intellectual property. The Corporation's patents do not guarantee the right to use the technologies if other parties own intellectual property rights that are necessaryincur substantial costs in order to use such technologies. The Corporation'scomply with current or future environmental, health and Neptune's patent position is subjectsafety laws and regulations. These laws and regulations may make it more difficult for us to complex factual and legal issues that may give rise to uncertainty as to the validity, scope and enforceability of a particular patent.
In any case, there can be no assurance that:
·any rights under Canadian, U.S. or foreign patents owned by the Corporation or other patents that Neptune and other third parties license to the Corporation will not be curtailed;
12

·the Corporation was the first inventor of inventions covered by its issued patents or pending applications or that the Corporation was the first to file patent applications for such inventions;
·the Corporation's pending or future patent applications will be issued with the breadth of claim coverage sought by the Corporation, or be issued at all;
·the Corporation's competitors will not independently develop or patent technologies that are substantially equivalent or superior to the Corporation's technologies;
·any of the Corporation's trade secrets will not be learned independently by its competitors; or
·the steps the Corporation takes to protect its intellectual property will be adequate.
In addition, effective patent, trademark, copyright and trade secret protection may be unavailable, limitedconduct our research, development or not sought in certain foreign countries.
The Corporation also seeks to protect its proprietary intellectual property, including intellectual property that may not be patented or patentable, in part by confidentiality agreements and, if applicable, inventors' rights agreements with its strategic partners and employees. There can be no assurance that these agreements will not be breached, that the Corporation will have adequate remedies for any breach or that such persons or institutions will not assert rights to intellectual property arising out of these relationships. The cost of enforcing the Corporation's patent rights or defending rights against infringement charges by other patent holders may be significant and could limit operations. The Corporation intends to vigorously enforce and protect its intellectual property.
The degree of future protection for the Corporation's proprietary rights is uncertain, because legal means afford only limited protection and may not adequately protect the Corporation's rights, permit it to gain or keep its competitive advantage, or provide it with any competitive advantage at all. The Corporation cannot be certain that any patent application owned by a third party will not have priority over patent applications filed or in-licensed by the Corporation, or that the Corporation or its licensor will not be involved in interference, opposition or invalidity proceedings before U.S., Canadian or foreign patent offices.
The Corporation depends on Neptune to protect a significant portion of its proprietary rights that derive from the Corporation's license agreement with Neptune. Neptune may be primarily or wholly responsible for the maintenance of patents and prosecution of the licensed patent applications relating to important areas of the Corporation's business. If Neptune fails to adequately maintain, prosecute or protect these patents or patent applications, the Corporation may have the right to take further action on its own to protect its technology. However, the Corporation may not be successful or have adequate resources to do so. Any failure by Neptune or by the Corporation to protect its intellectual property rights could significantly harm the Corporation's business and prospects.
The Corporation also relies on trade secrets to protect its technology, especially in cases when the Corporation believes patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect. If the Corporation cannot maintain the confidentiality of its proprietary and licensed technology and other confidential information, the Corporation's ability and that of its licensor to receive patent protection and its ability to protect valuable information owned or licensed by the Corporation may be imperiled. Enforcing a claim that a third-party entity illegally obtained and is using any of the Corporation's trade secrets is expensive and time consuming, and the outcome is unpredictable. Moreover, the Corporation's competitors may independently develop equivalent knowledge, methods and know-how. If the Corporation fails to obtain or maintain patent protection or trade secret protection for CaPre®, ONEMIA® or the Corporation's technologies, third parties could use the Corporation's proprietary information, which could impair its ability to compete in the market and adversely affect its ability to generate future revenues and attain profitability.
CaPre® is covered by patents that are not owned by the Corporation but are instead licensed to the Corporation by Neptune.
In addition to its proprietary patent applications, the Corporation has an exclusive worldwide license under certain patents and know-how to develop and commercialize CaPre® within a specified field of use pursuant to a license agreement with Neptune. The limitation on the Corporation's field of use may prevent it from developing and commercializing CaPre® in other fields. Additionally, the Corporation's license is subject to termination for breach of its terms, and therefore its rights may only be available to it for as long as Neptune agrees that the Corporation's development and commercialization activities are sufficient to meet the terms of the license. If this license is terminated for any reason and the Corporation is not able to negotiate another agreement with Neptune for use of its patents and know-how, the Corporation will not be able to manufacture and market CaPre®, which would have a material adverse effect on its business and financial condition. See "Acasti's Products – Intellectual Property".
13

CaPre® may infringe the intellectual property rights of others, which could increase the Corporation's costs and delay or prevent the Corporation's development and commercialization efforts.
The Corporation's success depends in part on avoiding infringement of the proprietary technologies of others. The pharmaceutical industry has been characterized by frequent litigation regarding patent and other intellectual property rights. Identification of third party patent rights that may be relevant to the Corporation's proprietary or licensed technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. Additionally, because patent applications are maintained in secrecy until the application is published, the Corporation may be unaware of third-party patents that may be infringed by the development and commercialization of CaPre® or any other future prescription drug candidate. There may be certain issued patents and patent applications claiming subject matter that the Corporation's licensor or the Corporation may be required to license in order to research, develop or commercialize CaPre®, and the Corporation cannot be certain whether such patents and patent applications would be available to license on commercially reasonable terms, or at all. Any claims of patent infringement asserted by third parties would be time-consuming and may:
·result in costly litigation;
·divert the time and attention of the Corporation's technical personnel and management;
·cause product development or commercialization delays, including delays in clinical trials for CaPre®;
·prevent the Corporation from commercializing CaPre® until the asserted patent expires or is held finally invalid or not infringed in a court of law;
·require the Corporation to cease or modify its use of the technology and/or develop non-infringing technology; or
·require the Corporation to enter into royalty or licensing agreements.
Others may hold proprietary rights that could prevent CaPre® from being marketed. Any patent-related legal action against the Corporation claiming damages and seeking to enjoin commercialproduction activities relating to CaPre® or the Corporation's processesCaPre and if we fail to comply with them, we could subject the Corporation to potential liability for damages and require the Corporation to obtain a license to continue to manufacture or market CaPre® or any other future prescription drug candidates. The Corporation cannot predict whether the Corporation would prevail in any such actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. In addition, the Corporation cannot be sure that it could redesign CaPre® or any other future product candidates or processes to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses, could prevent the Corporation from developing and commercializing CaPre® or any other future product candidate, which could harm the Corporation's business, financial condition and operating results.
A number of companies, including several major pharmaceutical companies, have conducted research on pharmaceutical uses of omega-3 fatty acids, which has resulted in the filing of many patent applications related to this research. The Corporation is aware of third-party U.S., Canadiansubstantial fines, penalties or other foreign patents that contain broad claims related to methods of using these general types of compounds, which may be construed to include potential uses of CaPre® or any future product candidates. If the Corporation were to challenge the validity of these or any other issued U.S, Canadian or other foreign patents in court, the Corporation would need to overcome a statutory presumption of validity that attaches to every U.S. and Canadian patent. This means that, in order to prevail, the Corporation would have to present clear and convincing evidence as to the invalidity of the other party's patent's claims. If the Corporation were to challenge the validity of any issued U.S. patent in an administrative trial before the Patent Trial and Appeal Board in the USPTO, the Corporation would have to prove that the claims are unpatentable by a preponderance of the evidence. There is no assurance that a jury and/or court would find in the Corporation's favor on questions of infringement, validity or enforceability.sanctions imposed against us.

- 14 -
General Risks Related to the Corporation

The Corporation may never become profitable or be able to sustain profitability.
The Corporation is a clinical-stage biopharmaceutical company with a limited operating history. The likelihood of success of the Corporation's business plan must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with developing and expanding early-stage businesses and the regulatory and competitive environment in which the Corporation operates. Biopharmaceutical product development is a highly speculative undertaking, involves a substantial degree of risk and is a capital-intensive business. Therefore, the Corporation expects to incur expenses without any meaningful corresponding revenues unless and until it is able to obtain regulatory approval and subsequently sell CaPre® in significant quantities. The Corporation has been engaged in developing CaPre® since 2008. To date, the Corporation has not generated any revenue from CaPre®, and it may never be able to obtain regulatory approval for the marketing of CaPre® in any indication. Further, even if the Corporation is able to commercialize CaPre® or any other product candidate, there can be no assurance that the Corporation will generate significant revenues or ever achieve profitability. The Corporation's net loss for the fiscal year ended February 29, 2016 was approximately $6.32 million. As of February 29, 2016, the Corporation had an accumulated deficit of approximately $39.63 million.
14

If the Corporation obtains FDA approval, it expects that its expenses will increase as it prepares for the commercial launch of CaPre®. The Corporation also expects that its research and development expenses will continue to increase in the event it pursues FDA approval for CaPre® for other indications. As a result, the Corporation expects to continue to incur substantial losses for the foreseeable future, and these losses may be increasing. The Corporation is uncertain about when or if it will be able to achieve or sustain profitability. If the Corporation achieves profitability in the future, it may not be able to sustain profitability in subsequent periods. Failure to become and remain profitable would impair the Corporation's ability to sustain operations and adversely affect the price of the Common Shares and its ability to raise capital.
The Corporation may not be able to maintain its operations and research and development without additional funding.
The Corporation will require substantial additional funds to conduct further research and development, scheduled clinical testing, regulatory approvals and the commercialization of CaPre®. In addition to completing nonclinical and clinical trials, the Corporations expects that additional time and capital will be required to complete the filing of a NDA to obtain FDA approval for CaPre® in the United States and to complete marketing and other pre-commercialization activities. To date, the Corporation has financed its operations through public offering and private placement of Common Shares, proceeds from exercises of warrants, rights and options and research tax credits. The Corporation's cash and short term investments were approximately $10.47 million as of February 29, 2016. Depending on the status of regulatory approval or, if approved, commercialization of CaPre®, the Corporation will most likely require additional capital to fund its operating needs. To achieve the objectives of its business plan, the Corporation plans to establish strategic alliances and raise the necessary capital. The Corporation may also seek additional funding for these purposes through public or private equity or debt financing, joint venture arrangements, and collaborative arrangements with other pharmaceutical companies, and/or from other sources.
The Corporation has incurred operating losses and negative cash flows from operations since inception. If the Corporation is unable to secure sufficient capital to fund its operations, it may be forced to enter into strategic collaborations that could require the Corporation to share commercial rights to CaPre® with third parties in ways that the Corporation currently does not intend or on terms that may not be favorable to the Corporation. There can be no assurance that any additional funding from any other third party will be available on acceptable terms or at all to enable the Corporation to continue and complete the research and development of CaPre®. The failure to obtain additional financing on favourable terms, or at all, could have a material adverse effect on Acasti's business, financial condition and results of operations.
In order to establish the Corporation's sales and marketing infrastructure, the Corporation will need to expand the size of its organization, and the Corporation may experience difficulties in managing this growth.
As of February 29, 2016, the Corporation had eleven employees in Canada, ten of whom have biology, chemistry, biochemistry or microbiology credentials and one administrative staff with a pharmaceutical industry background. As the Corporation's development and commercialization plans and strategies develop, the Corporation expects that it will need to expand the size of its employee base for managerial, operational, sales, marketing, financial and other resources. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. In addition, the Corporation's management may have to divert a disproportionate amount of its attention away from the Corporation's day-to-day activities and devote a substantial amount of time to managing these growth activities. The Corporation's future financial performance and its ability to commercialize CaPre® and any other future product candidates and its ability to compete effectively will depend, in part, on the Corporation's ability to effectively manage any future growth.
If the Corporation is not successful in attracting and retaining highly qualified personnel, the Corporation may not be able to successfully implement its business strategy.
The Corporation's ability to compete in the highly competitive pharmaceuticals industry depends in large part upon its ability to attract and retain highly qualified managerial, scientific and medical personnel. Competition for skilled personnel in the Corporation's market is intense and competition for experienced scientists may limit the Corporation's ability to hire and retain highly qualified personnel on acceptable terms. The Corporation is highly dependent on its management, scientific and medical personnel. The Corporation's management team has substantial knowledge in many different aspects of drug development and commercialization. Despite the Corporation's efforts to retain valuable employees, members of its management, scientific and medical teams may terminate their employment with the Corporation on short notice or, potentially, without any notice at all. The loss of the services of any of the Corporation's executive officers or other key employees could potentially harm its business, operating results or financial condition. The Corporation's success may also depend on its ability to attract, retain and motivate highly skilled junior, mid-level, and senior managers and scientific personnel.
Other pharmaceutical companies with which the Corporation competes for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than the Corporation does. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what the Corporation has to offer. If the Corporation is unable to continue to attract and retain high-quality personnel, the rate and success at which the Corporation can develop and commercialize product candidates would be limited.
15

If product liability lawsuits are brought against the Corporation, itus, we may incur substantial liabilities and may be required to cease the sale, marketing and distribution of its products.

The Corporation facesCaPre.

We face a potential risk of product liability as a result of its sales, marketing and distribution activities relating to ONEMIA® andassociated with any future commercialization of CaPre®CaPre or any other future product.product candidate we develop. For example, the Corporationwe may be sued if any product it developsCaPre allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale.injury. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under U.S. state or Canadian provincial or other foreign consumer protection legislation. If the Corporationwe cannot successfully defend itself against product liability claims, itwe may incur substantial liabilities or may be required to cease the sale, marketing and distribution of its products.CaPre. Even successful defense against product liability claims would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

·decreased demand for ONEMIA®, CaPre®CaPre or any future products that the Corporationwe may develop;

·injury to the Corporation'sour reputation;
·withdrawal of clinical trial participants;

·costs to defend the related litigation;

·a diversion of management'smanagement’s time and the Corporation'sour resources;

·substantial monetary awards to consumers, trial participants or patients;

·product recalls, withdrawals or labeling, marketing or promotional restrictions;

·loss of revenue;

·thean inability to commercialize CaPre®;
·the inability to continue the sale, marketing and distribution of ONEMIA®;CaPre; and

·a decline in the price of the Common Shares.our common shares.

If the Corporation iswe are unable to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims, the commercialization of products it developsCaPre or any other product candidates we develop could be hindered or prevented. The CorporationWe currently carriescarry product liability insurance, shared with Neptune, in the amount of $10.0 million in the aggregate, which also covers its clinical trials. Although the Corporation maintains such insurance, anyaggregate. Any claim that may be brought against the Corporationus could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by the Corporation'sour insurance or that is in excess of the limits of the Corporation'sour insurance coverage. The Corporation'sOur insurance policies also have various exclusions, and the Corporationwe may be subject to a product liability claim for which it haswe have no coverage. In the event of a successful product liability claim against it, the Corporationus, we may have to pay from itsour own resources any amounts awarded by a court or negotiated in a settlement that exceed its coverage limitations or that is not covered by the Corporation'sour insurance, and the Corporationwe may not have, or be able to obtain, sufficient capitalfunds to pay such amounts.

The Corporation may acquire businesses or products or form strategic alliances in the future and the Corporation may not realize the benefits of such acquisitions.
The Corporation may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that the Corporation believes will complement or augment its existing business. If the Corporation acquires businesses with promising markets or technologies, it may not be able to realize the benefit of acquiring such businesses if the Corporation is unable to successfully integrate them with its existing operations and company culture. The Corporation may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent the Corporation from realizing their expected benefits.
The Corporation

We may not achieve itsour publicly announced milestones on time.

time, or at all.

From time to time, the Corporationwe may publicly announcesannounce the timing of certain events it expectswe expect to occur, such as the anticipated timing of results from itsour clinical trials. These statements are forward-looking and are based on the best estimate of management at the time relating to the occurrence of suchthe events. However, the actual timing of suchthese events may differ from what has been publicly disclosed. The timing of events such as completion of a clinical trial, discovery of a new product candidate, filing of an application to obtain regulatory approval, beginning of commercialization of certain products, or announcement of additional clinical trials for a product candidate may ultimately vary from what is publicly disclosed. For example, the Corporationwe cannot provide assurances that itwe will conduct acomplete our ongoing Phase III3 clinical trial for CaPre®,CaPre, that itwe will make regulatory submissions or receive regulatory approvals as planned, or that itwe will be able to adhere to plans for the scale-up of manufacturing and launch of any of its products.CaPre. These variations in timing may occur as a result of different events, including the nature of the results obtained during a clinical trial or during a research phase, problems with a supplier or a distribution partner or any other event having the effect of delaying the publicly announced timeline. The Corporation undertakesWe undertake no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as otherwise required by law. Any variation in the timing of previously announcedpreviously-announced milestones could have a material adverse effect on the Corporation'sour business, plan, financial condition or operating results and the trading price of our common shares.

We may be subject to foreign exchange rate fluctuations.

Our reporting currency is the Common Shares.Canadian dollar. However, many of our expenses, such as CaPre’s chief manufacturing organization’s production activities and certain CRO arrangements for our ongoing TRILOGY Phase 3 program, currently are and/or are expected to be, denominated in foreign currencies, including European euros and U.S. dollars. As we currently complete financings in both Canadian and U.S. dollars, both currencies are maintained and used to make required payments in the applicable currency. Though we plan to implement measures designed to reduce our foreign exchange rate exposure, the U.S. dollar/Canadian dollar and European euro/Canadian dollar exchange rates have fluctuated significantly in the recent past and may continue to do so, which could have a material adverse effect on our business, financial position and results of operations.

- 15 -

16

In the past, Neptune supplied us with the krill oil needed to produce CaPre for our clinical programs, including the krill oil needed for our TRILOGY Phase 3 program, and we are now evaluating alternative suppliers for commercial supply.

We sourced all of our krill oil from Neptune in the past to produce CaPre. We have sufficient krill oil inventories that we anticipate will be required to complete our TRILOGY Phase 3 program. However, in light of Neptune’s sale of its krill oil business and inventory to Aker in August 2017, we have been validating several alternative suppliers of krill oil. While we believe that these alternative supplies of krill oil can meet our specifications and will be readily available, we do not have enough experience with any one of them to guarantee that these alternative supplies of krill oil will be of comparable quality as compared to the krill oil provided by Neptune, which could lose its controlnegatively affect the cost of Acasti

Neptune currently owns approximately 47.28% of Acasti's outstanding Common Shares, two members of Neptune's Board of Directors are also members of Acasti's Board of Directors,CaPre. Our reliance on third-party suppliers for krill oil exposes us to risks such as potential fluctuations in supply and Neptune's Chief Financial Officer is also the Chief Financial Officer of Acasti. As a result, Neptune exercisesreduced control over Acasti asour production costs and delivery schedules for CaPre.

CaPre may cause or be perceived to cause undesirable side effects or have other properties that could delay or prevent its regulatory approval, limit the commercial profile of February 29, 2016. However,an approved label, or result in significant negative consequences following marketing approval, if all outstanding warrants, call options and restrictive share unitsany.

Many of Acasti werethe patients that we expect to enroll in our ongoing Phase 3 clinical trial may have pre-existing disorders. While such disorders may lead to serious adverse events during the clinical trial that may be found to be exercised, Neptune's ownership interestunrelated to CaPre, such events may create a negative safety perception and adversely impact market acceptance of CaPre following any approval.

If unacceptable side effects arise during the clinical trials for CaPre, we, the FDA or comparable foreign regulatory authorities, the Institutional Review Boards, or IRBs, or independent ethics committees at the institutions in Acasti's Common Shares would fallwhich our studies are conducted, could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to approximately 37%.cease clinical trials or deny approval of our product candidates for any or all targeted indications. Side effects, whether treatment-related or not, could also affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. Inadequate training in recognizing or managing the potential side effects of CaPre could result in patient injury. Any of these occurrences may harm our business, financial condition and prospects significantly.

Moreover, clinical trials of CaPre are conducted in carefully defined sets of patients who have agreed to enter into clinical trials. Consequently, it is possible that our clinical trials, or those of any future collaborator or third party researcher, may indicate an apparent positive effect of CaPre that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, Neptune's ownershipfollowing approval of Acasti's Common Shares declines, Neptune may lose its ability to elect membersa product candidate, we, or others, discover that the product is less effective than previously believed or causes undesirable side effects that were not previously identified during the clinical trial phase, any of its Board of Directors to Acasti's Board of Directors and to otherwise exercise control over Acasti. A loss of Neptune's control over Acasti,the following adverse events could among other things result in:

occur:

·investors and analysts placing a different, and possibly lower, value onregulatory authorities may withdraw their approval of the Common Shares to reflect a lower degree of exposure by Neptune to Acasti's krill oil-based pharmaceutical business;product or seize the product;

·Acasti making decisions in connectionwe, or any future collaborators or third party researcher, may need to recall the product, or be required to change the way the product is administered or conduct additional clinical trials;

·restrictions may be imposed on the marketing of, or the manufacturing processes for CaPre;

·we may be subject to fines, injunctions or the imposition of civil or criminal penalties;

·regulatory authorities may require the addition of labeling statements;

·we, or any future collaborators, may be required to issue a communication outlining the risks of the previously unidentified side effects for distribution to patients;

·we, or any future collaborators, could be sued and held liable for harm caused to patients;

·CaPre may become less competitive; and

·our reputation may suffer.

Any of these events could harm our business and operations and could negatively impact our share price.

Risks Related to Intellectual Property

In addition to our own patents, CaPre is covered by patents that are sublicensed to us by Neptune and Aker.

In addition to our proprietary patent applications, pursuant to a license agreement we entered into with Neptune in August 2008, which was later amended on February 9, 2009 and March 7, 2013 (the “License Agreement”), we have a license to use certain intellectual property developed by Neptune and now owned by Aker to develop and commercialize CaPre, and our novel and active pharmaceutical ingredients, or APIs, for use in pharmaceutical and medical food applications in the cardiovascular field.

- 16 -

Moreover, the intellectual property which was licensed to us has recently been acquired by Aker. Aker has granted to Neptune the right to sublicense to us certain intellectual property as necessary to allow us to maintain its license grant under the License Agreement. Accordingly, the license granted to us under the License Agreement remains in full force.

Disputes may arise between us and Neptune or Aker regarding the intellectual property that is subject to the License Agreement, including with respect to:

·the scope of rights granted under the License Agreement and other interpretation-related issues; and

·our right to sublicense patent and other rights to third parties under collaborative development relationships.

If our sublicense with Neptune is terminated due to a breach by us of its terms (or should the License Agreement otherwise terminate) and we are unable to enter into a direct license agreement with Aker, we may not be able to manufacture and market CaPre prior to the expiration of the licensed patents in 2022. Any such occurrence could delay our launch by 6 to 12 months, which would have a material adverse effect on our business and financial condition.

It is difficult and costly to protect our intellectual property rights.

The success of our business will largely depend on our ability to:

·obtain and maintain patents, trade secret protection and operate without infringing the intellectual proprietary rights of third parties;

·successfully defend our patents, including enforcing licensed patents through the licensor Neptune/Aker, against third-party challenges; and

·successfully enforce our patents against third party competitors.

Our patents and/or proprietary technologies could be circumvented through the adoption of competitive, though non-infringing, processes or products. The patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions for which important legal principles remain unresolved. Changes in either the patent laws or in interpretations of patent laws may diminish the value of our intellectual property. We cannot predict the breadth of claims that may be allowable or enforceable in our patents, including the patents licensed to us by Neptune.

We face risks that:

·our rights under our Canadian, U.S. or foreign patents or other patents that Neptune or other third parties license to us could be curtailed;

·we may not be the first inventor of inventions covered by our issued patents or pending applications or be the first to file patent applications for those inventions;

·our pending or future patent applications may not be issued with the development and commercializationbreadth of Acasti's products with lessclaim coverage sought by us, or no involvement and approval from Neptune;be issued at all;

·our competitors could independently develop or patent technologies that are substantially equivalent or superior to our technologies;

·our trade secrets could be learned independently by our competitors;

·the steps we take to protect our intellectual property may not be adequate; and

·effective patent, trademark, copyright and trade secret protection may be unavailable, limited or not sought by us in some foreign countries.

Further, patents have a limited lifespan. In the United States, a patent generally expires 20 years after it is filed (or 20 years after the filing date of the first non-provisional U.S. patent application to which it claims priority). While extensions may be available, the life of a patent, and the protection it affords, is limited. Without patent protection for CaPre or any other of our future product candidates, we may be open to competition from generic versions of CaPre or our other future product candidates. Further, the extensive period of time between patent filing and regulatory approval for a product candidate limits the time during which we can market that product candidate under patent protection. Patents owned by third parties could have priority over patent applications filed or in-licensed by us, or we or our licensors could become involved in interference, opposition or invalidity proceedings before U.S., Canadian or foreign patent offices. The cost of defending and enforcing our patent rights against infringement charges by other patent holders may be significant and could limit our operations.

- 17 -
Neptune

CaPre may infringe the intellectual property rights of others, which could increase our costs and delay or prevent our development and commercialization efforts.

Our success depends in part on avoiding infringement of the proprietary technologies of others. The pharmaceutical industry has been characterized by frequent litigation regarding patent and other intellectual property rights. Identification of third party patent rights that may be relevant to our proprietary or licensed technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. Additionally, because patent applications are maintained in secrecy until the application is published, we may be unaware of third-party patents that may be infringed by our development and commercialization of CaPre or any other future product candidate. There may be certain issued patents and patent applications claiming subject matter that we may be required to license in order to research, develop or commercialize CaPre, and any such patents and patent applications may not be available to license on commercially reasonable terms, or at all. If claims of patent infringement are asserted by third parties against us, they could be time-consuming and may:

·result in costly litigation;

·divert the time and attention of our technical personnel and management;

·delay our clinical trials for CaPre;

·prevent us from commercializing CaPre until the asserted patent expires or is held finally invalid or not infringed in court;

·require us to cease or to modify our use of the technology and/or develop non-infringing technology; or

·require us to enter into royalty or licensing agreements.

Others may hold proprietary rights that could prevent CaPre from being marketed. Any patent-related legal action against us claiming damages and seeking to enjoin commercial activities relating to CaPre or our processes could subject us to potential liability for damages and require us to obtain a license to continue to manufacture or market CaPre or any other future prescription drug candidates. We might not prevail in any such actions or if any license is required under any of these patents it may not be available on commercially acceptable terms, if at all.

Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give our competitors access to the same technology or intellectual property rights licensed to us. We could be forced to redesign CaPre or any other future product candidates or processes to avoid infringement.

In addition, we may find it necessary to pursue claims or initiate lawsuits to protect or enforce our patent or other intellectual property rights. The cost to us in defending or initiating any litigation or other proceeding relating to patent or other proprietary rights, even if resolved in our favor, could be substantial, and litigation would divert our management’s attention. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts and limit our ability to continue our operations.

A number of companies, including several major pharmaceutical companies, have conducted research on pharmaceutical uses of OM3 fatty acids, which has resulted in the filing of many patent applications related to this research. We are aware of third-party U.S., Canadian or other foreign patents that contain broad claims related to methods of using these general types of compounds, which may be construed to include potential uses of CaPre. If we were to challenge the validity of these or any other issued U.S., Canadian or other foreign patents in court, we would need to overcome a statutory presumption of validity that attaches to every U.S. and Canadian patent. This means that, in order to prevail, we would have to present clear and convincing evidence as to the invalidity of the other party’s patent’s claims. If we were to challenge the validity of any issued U.S. patent in an administrative trial before the Patent Trial and Appeal Board in the United States Patent and Trademark Office, or USPTO, we would have to prove that the claims are unpatentable by a preponderance of the evidence. If there are disputes over our intellectual property rights, a jury and/or court may not find in our favor on questions of infringement, validity or enforceability.

If we do not protect our trademark for CaPre, we may not be able to build name recognition in our markets of interest.

We have registered CaPre as a trademark in several jurisdictions. Our trademark may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to this trademark or may be forced to stop using this name, which we need for name recognition by potential strategic partners and customers. If we are unable to establish name recognition based on our trademark, we may not be able to compete effectively, and our business may be adversely affected.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time- consuming and unsuccessful.

Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. If we or our licensors were to initiate legal proceedings against a third party to enforce a patent covering CaPre or our technology, the defendant could counterclaim that our or our licensor’s patent is invalid or unenforceable. In patent litigation, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements; for example, lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the patent office, such as the USPTO, or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we or our licensors and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on CaPre or certain aspects of our platform technology. Such a loss of patent protection could have a material adverse impact on our business. Patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without legally infringing our patents or other intellectual property rights.

- 18 -

In addition, in an infringement proceeding, a court may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.

Interference proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our current patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not expectoffer us a license on commercially reasonable terms, or at all. Litigation or interference proceedings may result in a decision adverse to provide material capitalour interests and, even if we are successful, may result in substantial costs and distract our management and other employees. We may not be able to Acastiprevent, alone or with our licensors, misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in Canada and the United States. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common shares.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect CaPre and any of our other future product candidates.

Numerous recent changes to the patent laws and proposed changes to the rules of the various patent offices around the world may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. These changes may lead to increasing uncertainty with regard to the scope and value of our issued patents and to our ability to obtain patents in the short termfuture.

Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification derivation and therefore, itsopposition proceedings in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against the initial grant. In the course of any such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims attacked, or may lose the allowed or granted claims altogether. Depending on decisions by authorities in various jurisdictions, the laws and regulations governing patents could change in unpredictable ways that may weaken our and our licensors’ ability to obtain new patents or to enforce existing patents we and our licensors or partners may obtain in the future.

We may not be able to protect our intellectual property rights throughout the world.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of some countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

- 19 -

Risks Relating to Our Common Shares

The price of our common shares may be volatile.

Market prices for securities in general, and specifically that of pharmaceutical companies in particular, tend to fluctuate. Factors such as the announcement to the public or in various scientific or industry forums of technological innovations; new commercial products; patents or exclusive rights obtained by us or others; disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; the commencement, enrollment or results of future clinical trials we may conduct, or changes in the development status of our product candidates; results or delays of pre-clinical and clinical studies by us or others; any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings; a change of regulations; additions or departures of key scientific or management personnel; overall performance of the equity markets; general political and economic conditions; publications; failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; research reports or positive or negative recommendations or withdrawal of research coverage by securities analysts; actual or anticipated variations in quarterly operating results; announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; public concerns over the risks of pharmaceutical products and dietary supplements; unanticipated serious safety concerns related to the use of CaPre; the ability to finance, future sales of securities by us or our shareholders; and many other factors, many of which are beyond our control, could have considerable effects on the price of our securities. There can be no assurance that the market price of our common shares will not experience significant fluctuations in the future. As a result of any of these factors, the market price of our securities at any given point in time may not accurately reflect our value or the value of our securities.

In addition, the stock market in general, and pharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common shares, regardless of our actual operating performance. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of these securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results or financial condition.

Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our shareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our shareholders. The incurrence of indebtedness by us would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us.

The market price of our common shares could decline as a result of operating results falling below the expectations of investors or fluctuations in operating results each quarter.

Our net losses and expenses may fluctuate significantly and any failure to meet financial expectations may disappoint securities analysts or investors and result in a decline in the price of our common shares. Our net losses and expenses have fluctuated in the past and are likely to do so in the future. These fluctuations could cause the market price of our common shares to decline. Some of the factors that could cause the Corporation’s net losses and expenses to fluctuate include the following:

·results of preclinical studies and clinical trials, or the addition or termination of preclinical studies, clinical trials or funding support;

·the fluctuations in valuation of our derivative warrant liabilities;

·the timing of the release of results from any preclinical studies and clinical trials;

·the inability to complete product development in a timely manner that results in a failure or delay in receiving the required regulatory approvals or allowances to commercialize product candidates;

·the timing of regulatory submissions and approvals;

·the timing and willingness of any current or future collaborators to invest the resources necessary to commercialize our products;

·the outcome of any litigation;
- 20 -

·changes in foreign currency fluctuations;

·competition;

·the timing of achievement and the receipt of milestone payments from current or future third parties;

·failure to enter into new or the expiration or termination of current agreements with third parties;

·failure to introduce our products to the market in a manner that generates anticipated revenues;

·execution of any new collaboration, licensing or similar arrangement, and the timing of payments we may make or receive under such existing or future arrangements or the termination or modification of any such existing or future arrangements;

·any intellectual property infringement lawsuit or opposition, interference or cancellation proceeding in which we may become involved;

·additions and departures of key personnel;

·strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;

·if any of our product candidates receives regulatory approval, market acceptance and demand for such product candidates;

·regulatory developments affecting our product candidates or those of our competitors; and

·changes in general market and economic conditions.

If our quarterly operating results fall below the expectations of investors or securities analysts, the market price of our common shares could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the market price of the common shares to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

There can be no assurance that an active market for our common shares will be sustained.

There can be no assurance that an active market for our common shares will be sustained. Holders of common shares may be unable to sell their investments on satisfactory terms. As a result of any risk factor discussed herein, the market price of our common shares at any given point in time may not accurately reflect our long-term value. Furthermore, responding to these risk factors could result in substantial costs and divert management’s attention and resources. Substantial and potentially permanent declines in the value of our common shares may result and adversely affect the liquidity of the market for our common shares.

Other factors unrelated to our performance that may have an effect on the price and liquidity of our common shares include: extent of analyst coverage; lessening in trading volume and general market interest in Acastiour common shares; the size of our public float; and any event resulting in a delisting of our common shares.

A large number of common shares may continuebe issued and subsequently sold upon the exercise of existing warrants. The sale or availability for sale of existing warrants or other securities convertible into common shares may depress the price of our common shares.

To the extent that existing holders of warrants sell common shares issued upon the exercise of warrants, the market price of our common shares may decrease due to decline.the additional selling pressure in the market. The risk of dilution from issuances of common shares underlying existing warrants may cause shareholders to sell their common shares, which could further contribute to any decline in our common share market price.

Any downward pressure on the price of our common shares caused by the sale of common shares issued upon the exercise of existing warrants could encourage short sales by third parties. In a short sale, a prospective seller borrows common shares from a shareholder or broker and sells the borrowed common shares. The prospective seller anticipates that the common share price will decline, at which time the seller can purchase common shares at a lower price for delivery back to the lender. The seller profits when the common share price declines because it is purchasing common shares at a price lower than the sale price of the borrowed common shares. Such short sales of common shares could place downward pressure on the price of our common shares by increasing the number of common shares being sold, which could lead to a decline in the market price of our common shares.

- 21 -

We do not currently intend to pay any cash dividends on our common shares in the foreseeable future.

We have never paid any cash dividends on our common shares and we do not anticipate paying any cash dividends on our common shares in the foreseeable future because, among other reasons, we currently intend to retain any future earnings to finance our business. The future payment of cash dividends will be dependent on factors such as cash on hand and achieving profitability, the financial requirements to fund growth, our general financial condition and other factors our board of directors may consider appropriate in the circumstances. Until we pay cash dividends, which we may never do, our shareholders will not be able to receive a return on their common shares unless they sell them. See “Dividend Policy”.

If we fail to meet the applicable listing requirements, the NASDAQ Stock Market or the TSXV may delist our securitiescommon shares from trading, on its exchange in which case the liquidity and market price of our securitiescommon shares could decline.

Our common stock isshares are currently listed on the NASDAQ Stock Market and the TSXV, but we cannot assure you that our securities will continue to be listed on the NASDAQ Stock Market and the TSXV in the future. FollowingIn the resignationpast, we have received notices from the NASDAQ Stock Market that we have not been in compliance with its continued listing standards, and we have taken responsive actions and regained compliance.

On May 16, 2019, we received written notification from the NASDAQ Listing Qualifications Department for failing to maintain a minimum bid price of Jerald D. Wenker, Harlan W. Waksal, Adrian Montgomery, and Reed V. Tuckson's from our Board,U.S.$1.00 per share for the audit committee of our Board no longer had three independent memberslast 30 consecutive business days, as required by NASDAQ Listing Rule 5605(c)5550(a)(2) – bid price (the “Minimum Bid Price Rule”). On March 21, 2016, we notified NASDAQ's Listing Qualifications Department that we were not currently in compliance withThe NASDAQ notification has no immediate effect on the listing of our common shares. Under NASDAQ Listing Rule 5605(c)(2). On March 22, 2016,5810(c)(3)(A) – compliance period, we received a written notice from NASDAQ's Listing Qualifications Department that we had until: (i)have 180 calendar days, or until November 12, 2019, to regain compliance. If at any time over this period the earlierbid price of our next annual shareholders' meetingcommon shares closes at U.S.$1.00 per share or March 1, 2017; or (ii) ifmore for a minimum of ten (10) consecutive business days, NASDAQ will provide written confirmation of compliance and the next annual shareholders' meeting is held before August 29, 2016, then no later than August 29, 2016, in order to regain compliance with the audit committee composition requirement. In the eventmatter will be closed. If we do not regain compliance by this date,within the initial 180-day period, but otherwise meet the continued listing requirements for market value of publicly-held shares and all other initial listing standards for the NASDAQ will provide written notificationListing Rule 5505 – Capital Market criteria, except for the Minimum Bid Price Rule, we may be eligible for an additional 180 calendar days to us thatregain compliance. If we are not granted additional time, then our Common Sharescommon shares will be delisted, subject to an unsuccessfuldelisting, at which time we may appeal of the delisting determination to a NASDAQ Hearings Panel.

If we fail to comply with listing standards and the NASDAQ Stock Market or TSXV delists our securities from trading on its exchangecommon shares, we and we are not able to successfully appeal or list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, weshareholders could face significant material adverse consequences, including:

·a limited availability of market quotations for our securities;common shares;

·reduced liquidity for our securities;common shares;

·a determination that our common stock is a "penny stock"shares are “penny stock”, which willwould require brokers trading in our Common Sharescommon shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;common shares;

·a limited amount of news about us and analyst coverage;coverage of us; and

·a decreased ability for us to issue additional equity securities or obtain additional equity or debt financing in the future.

We may pursue opportunities or transactions that adversely affect our business and financial condition.

Our management, in the ordinary course of our business, regularly explores potential strategic opportunities and transactions. These opportunities and transactions may include strategic joint venture relationships, significant debt or equity investments in us by third parties, the acquisition or disposition of material assets, the licensing, acquisition or disposition of material intellectual property, the development of new product lines or new applications for our existing products, significant distribution arrangements, the sale of our common shares and other similar opportunities and transactions. The public announcement of any of these or similar strategic opportunities or transactions might have a significant effect on the price of our common shares. Our policy is to not publicly disclose the pursuit of a potential strategic opportunity or transaction unless we are required to do so by applicable law, including applicable securities laws relating to continuous disclosure obligations. There can be no assurance that investors who buy or sell securities are doing so at a time when we are not pursuing a particular strategic opportunity or transaction that, when announced, would have a significant effect on the price of our common shares.

In addition, any such future corporate development may be accompanied by certain risks, including exposure to unknown liabilities of the strategic opportunities and transactions, higher than anticipated transaction costs and expenses, the difficulty and expense of integrating operations and personnel of any acquired companies, disruption of our ongoing business, diversion of management’s time and attention, and possible dilution to shareholders. We may not be able to successfully overcome these risks and other problems associated with any future acquisitions and this may adversely affect our business and financial condition.

- 22 -
Risks Related to the Corporation's Status as a Foreign Private Issuer/Emerging Growth Company

As a foreign private issuer, the Corporation iswe are subject to different U.S. securities laws and regulations than a domestic U.S. issuer, which may limit the information publicly available to the Corporation'sour U.S. shareholders.

17

The Corporation is

We are a foreign private issuer under applicable U.S. federal securities laws, and therefore, it iswe are not required to comply with all the periodic disclosure and current reporting requirements of the U.S. Securities and Exchange Act of 1934, as amended (the "Exchange Act"Exchange Act). As a result, the Corporation doeswe do not file the same reports that a U.S. domestic issuer would file with the SEC, although the Corporation iswe are required to file with or furnish to the SEC the continuous disclosure documents that the Corporation iswe are required to file in Canada under Canadian securities laws. In addition, the Corporation'sour officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act. Therefore, the Corporation'sour shareholders may not know on as timely a basis when the Corporation'sour officers, directors and principal shareholders purchase or sell Common Sharescommon shares as the reporting periods under the corresponding Canadian insider reporting requirements are longer. In addition, as a foreign private issuer, the Corporation iswe are exempt from the proxy rules under the Exchange Act.

The Corporation may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses to the Corporation.
The Corporation may in the future lose its foreign private issuer status if a majority of the Common Shares are held in the United States and it fails to meet the additional requirements necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to the Corporation under U.S. federal securities laws

We cannot be certain that we will qualify as a U.S. domestic issuer would be significantly more than the costs the Corporation incurs as a Canadian foreign private issuer. If the Corporation is not a foreign private issuer it would not be eligible to use foreign issuer forms and would be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available tofor our next fiscal year. If we no longer qualify as a foreign private issuer. In addition, the Corporation may lose the ability to rely upon exemptions from NASDAQ corporate governance requirements that are available to foreign private issuers. If the Corporation loses foreign private issuer, status, compliance with more enhanced disclosure requirements and other U.S. securities laws may increase our legal and financial compliance costs, make some activities more difficult and time-consuming, increase demand on our systems and resources and divert management's attention from other business concerns, all of which could have a material adverse effect on our business, financial condition and results of operations.

Currently, the Corporation does not satisfy the eligibility criteria to use MJDS to conduct public securities offerings and to meet its periodic disclosure requirements in the United States. As a result, if the Company conducts future public securities offerings in the United States, it may have do so without the use of MJDS, which could involve additional time and cost.
As an "emerging growth company", Acasti iswe will no longer be exempt from the requirementmore stringent disclosure requirements applicable to U.S. companies.

As a non-accelerated filer, we are not required to comply with the auditor attestation requirements of the Sarbanes-Oxley Act.

Acasti is an "emerging growth company", as defined in

We are a non-accelerated filer under the U.S. Jumpstart Our Business Start-upsExchange Act and intendsnot required to avail itself of the exemption provided to emerging growth companies fromcomply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. Therefore, Acasti'sour internal controls over financial reporting will not receive the level of review provided by the process relating to the auditor attestation included in annual reports of issuers that are not using an exemption.subject to the auditor attestation requirements. In addition, Acastiwe cannot predict if investors will find the Common Sharesour common shares less attractive because it relies on this exemption.we are not required to comply with the auditor attestation requirements. If some investors find the Common Sharesour common shares less attractive as a result, there may be a less active trading market for the Common Sharesour common shares and trading price for the Common Sharesour common shares may be negatively affected.

U.S. investors may be unable to enforce certain judgments.

The Corporation is

We are a company existing under the Business Corporations Act(Québec). A majoritySome of the Corporation'sour directors and officers are residentresidents of Canada, and substantially all of the Corporation'sour assets are located outside the United States. As a result, it may be difficult to effect service within the United States upon the Corporationus or upon itssome of our directors and officers. Execution by U.S. courts of any judgment obtained against the Corporationus or any of itsour directors or officers in U.S. courts may be limited to the assets of such companies or such persons, as the case may be, located in the United States. It may also be difficult for holders of securities who reside in the United States to realize in the United States upon judgments of U.S. courts predicated upon civil liability of us and the civil liability of the Corporation'sour directors and executive officers under the U.S. federal securities laws. The Corporation has been advised that a judgment of a U.S. court predicated solely upon civil liability under U.S. federal securities laws or the securities or "blue sky" laws of any state within the United States, would likely be enforceable in Canada if the United States court in which the judgment was obtained has a basis for jurisdiction in the matter that would be recognized by a Canadian court for the same purposes. However, thereThere may be doubt as to the enforceability in Canada against these non-U.S. entities or their controlling persons, directors and officers who are not residents of the United States, in original actions or in actions for enforcement of judgments of U.S. courts, of liabilities predicated solely upon U.S. federal or state securities laws.

18

There is a significant risk that we may be classified as a PFIC for U.S. federal income tax purposes.

Current or potential investors in our common shares who are U.S. holders should be aware that, based on our most recent financial statements and projections and given uncertainty regarding the composition of our future income and assets, there is a significant risk that we may have been classified as a “passive foreign investment company” or “PFIC” for the 2019 taxable year and may be classified as a PFIC for our current taxable year and possibly subsequent years. If we are a PFIC for any year during a U.S. holder’s holding period of our common shares, then such U.S. taxpayer generally will be required to treat any gain realized upon a disposition of such common shares or any so-called “excess distribution” received on such common shares, as ordinary income (with a portion subject to tax at the highest rate in effect), and to pay an interest charge on a portion of such gain or excess distribution. In certain circumstances, the sum of the tax and the interest charge may exceed the total amount of proceeds realized on the disposition, or the amount of excess distribution received, by the U.S. holder. Subject to certain limitations, a timely and effective QEF Election under Section 1295 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, or a Mark-to-Market election under Section 1296 of the Code may be made with respect to the common shares. A U.S. holder who makes a timely and effective QEF Election generally must report on a current basis its share of our net capital gain and ordinary earnings for any year in which we are a PFIC, whether or not we distribute any amounts to our shareholders. A U.S. holder who makes the Mark-to-Market Election generally must include as ordinary income each year the excess of the fair market value of their common shares over the holder’s basis therein. This paragraph is qualified in its entirety by the discussion under the heading “Item 10.E. Taxation—U.S. Federal Income Tax Considerations of the Acquisition, Ownership, and Disposition of Common Shares—Passive Foreign Investment Company Rules”. Each current or potential investor who is a U.S. holder should consult its own tax advisor regarding the U.S. federal, U.S. state and local, and non-U.S. tax consequences of the acquisition, ownership, and disposition of our common shares, the U.S. federal tax consequences of the PFIC rules, and the availability of any election that may be available to the holder to mitigate adverse U.S. federal income tax consequences of holding shares in a PFIC.

Item 4.Information on the Company

A.History and Development of the Company
We were

Acasti was incorporated on February 1, 2002 under Part 1A of the Companies Act (Québec) under the name "9113-0310“9113-0310 Québec Inc"Inc.”. On February 14, 2011, the Business Corporations Act (Québec) (“QBCA”) came into effect and replaced the Companies Act (Québec). We are now governed by the QBCA. On August 7, 2008, pursuant to a Certificate of Amendment, we changed our name to "Acasti“Acasti Pharma Inc.", our share capital description, the provisions regarding the restrictionsrestriction on securities transfers and theour borrowing powers of the Corporation.powers. On November 7, 2008, pursuant to a Certificate of Amendment, we further revised ourchanged the provisions regarding our borrowing powers. We became a reporting issuer in the Province of Québec on November 17, 2008. On February 14, 2011, the Business Corporations Act (Québec) came into effect and replaced the Companies Act (Québec). We are now governed by the Business Corporations Act (Québec).

- 23 -
Our

Acasti’s head office and registered office is located at 545 Promenade du Centropolis, Suite 100, Laval, Québec H7T 0A3, and0A3. We currently employ 28 full-time employees with the phone numbermajority working out of our headheadquarters in Laval and registered office is (450) 687-2262.our laboratory in Sherbrooke. Our website address is http://www.acastipharma.com. We do not incorporate the information on or accessible through our website into this Annual Report,annual report, and you should not consider any information on, or that can be accessed through, our website as part of this Annual Report.annual report.

Intercorporate Relationships

We have no subsidiaries.

B.Our Business

We are a biopharmaceutical innovator focused on the research, development and commercialization of prescription drugs using omega-3 fatty acids, or OM3, delivered both as free fatty acids and bound-to-phospholipid esters, or PLs, derived from krill oil. OM3 fatty acids have extensive clinical evidence of safety and efficacy in lowering triglycerides, or TGs, in patients with hypertriglyceridemia, or HTG. Our registered agentlead product candidate is CaPre, an OM3 phospholipid therapeutic, which we are developing initially for the treatment of severe HTG, a condition characterized by very high or severe levels of TGs in the bloodstream (≥ 500 mg/dL). In accordance with a study published in 2009 in the Archives of Internal Medicine by Ford et al., it is estimated that three to four million people in the United States have severe HTG. In primary qualitative market research studies commissioned by Acasti in August 2016 and November of 2017 by DP Analytics, a division of Destum Partners, Key Opinion Leaders (KOLs), High Volume Prescribers (HVPs) and Pharmacy Benefit Managers who were interviewed indicated a significant unmet medical need exists for an effective, safe and well-absorbing OM3 therapeutic that can also demonstrate a positive impact on the major blood lipids associated with cardiovascular disease, or CVD, risk. We believe that CaPre will address this unmet medical need, if our Phase 3 results reproduce what we observed in our Phase 2 data. We initiated TRILOGY, our Phase 3 clinical program in North America, during the second half of 2017 and started clinical site activation as planned at the end of 2017. As of the date of this annual report, patient enrollment and randomization have been completed, and the two TRILOGY Phase 3 studies continue on schedule to report topline results by December 2019 for TRILOGY 1, and January 2020 for TRILOGY 2. We also believe the potential exists to expand CaPre’s initial indication to the roughly 36 million patients with high TGs in the mild to moderate range (e.g., blood levels between 200 - 499 mg/dL), although at least one additional clinical trial would likely be required to support FDA approval of a Supplemental New Drug Application (SNDA) to expand CaPre’s indication to this segment. Data from our Phase 2 studies indicated that CaPre may have a positive effect in diabetes and other inflammatory diseases; consequently, we may also seek to identify new potential indications for CaPre that may be appropriate for future studies and pipeline expansion. In addition, we may also seek to in-license other cardiometabolic drug candidates for drug development and commercialization.

In four clinical trials conducted to date, we saw the following consistent results with CaPre, and we are seeking to demonstrate similar safety and efficacy in our TRILOGY Phase 3 program:

·significant reduction of TGs and non-high density lipoprotein cholesterol (non-HDL-C) levels in the blood of patients with mild to severe HTG;

·no deleterious effect on low-density lipoprotein cholesterol (LDL-C), or “bad” cholesterol, with the potential to reduce LDL-C;

·potential to increase high-density lipoprotein cholesterol (HDL-C), or “good” cholesterol;

·potential to benefit diabetes patients by decreasing hemoglobin A1c (HbA1c), a marker of glucose control;

·good bioavailability (absorption by the body), even under fasting conditions;

·no significant food effect when taken with either low-fat or high-fat meals; and

·an overall safety profile similar to that demonstrated by currently marketed OM3s.

We believe that if we are able to reproduce these results in our TRILOGY Phase 3 program, we potentially could set CaPre apart from current FDA-approved fish oil-derived OM3 treatment options, and it could give us a significant clinical and marketing advantage.

About Hypertriglyceridemia (HTG)

According to the American Heart Association Scientific Statement on Triglycerides and Cardiovascular Disease from 2011, TG levels provide important information as a marker associated with the risk for heart disease and stroke, especially when an individual also has low levels of HDL-C and elevated levels of LDL-C. HTG can be caused by both genetic and environmental factors, including obesity, sedentary lifestyle and high-fat diets. HTG is CT Corporation System, 111 Eighth Avenue, New York, NY 10011.also associated with comorbid conditions such as chronic renal failure, pancreatitis, nephrotic syndrome, and diabetes. Multiple epidemiological, clinical, genetic studies suggest that patients with elevated TG levels (≥ 200 mg/dL) are at a greater risk of coronary artery disease, or CAD, and pancreatitis, a life-threatening condition, as compared to those with normal TG levels. The genes regulating TGs and LDL-C are equally strong predictors of CAD. Other studies suggest that lowering and managing TG levels may reduce these risks. In addition, the Japan EPA Lipid Intervention Study, or JELIS, demonstrated the long-term benefit of an OM3 eicosapentaenoic acid, or EPA, in preventing major coronary events in hypercholesterolemic patients receiving statin treatment. JELIS found a 19% relative risk reduction in major coronary events in patients with relatively normal TGs but a more pronounced 53% reduction in the subgroup of patients with TGs > 150mg/dL and HDL-C < 40mg/dL. Recently published meta-analyses by Alexander et al. (Mayo Clinic Proceedings, 2017) and Maki et al. (Journal of Clinical Lipidology, 2016) suggest that EPA and docosahexaenoic acid, or DHA, may be associated with reducing coronary heart disease risk to a greater extent in populations with elevated TG levels, and that drugs lowering TG and TG-rich lipoproteins may reduce cardiovascular event risk in patients with elevated TG levels, particularly if associated with low HDL-C. More recently in November of 2018, Amarin published the results of their REDUCE-IT cardiovascular outcome trial (CVOT), which showed that a therapeutic dose of VASCEPA at 4 grams per day, taken on top of a statin, reduced residual cardiovascular risk by 25%. Astra Zeneca is currently investigating the potential for EPANOVA, their therapeutic OM3 containing both EPA and DHA, taken with a statin to reduce cardiovascular risk in patients with elevated levels of TGs and low HDL-C in their ongoing STRENGTH CVOT, the results of which are expected to be published in 2020. A table summarizing the various outcome studies conducted over approximately the last decade is set forth below. The data from these trials support the conclusion that lowering TGs in an “at risk” patient population with the right dose of a therapeutic drug – independent of the drug class – significantly reduces CVD risk.

- 24 -
The following

About CaPre

CaPre is a summaryhighly purified, proprietary krill oil-derived mixture containing polyunsaturated fatty acids, or PUFAs, primarily composed of OM3 fatty acids, principally eicosapentaenoic acid, or EPA, and docosahexaenoic acid, or DHA, present as a combination of phospholipid esters and free fatty acids. EPA and DHA are well known to be complementary and beneficial for human health, and according to numerous recent clinical studies, may promote healthy heart, brain and visual function (Kwantes and Grundmann, Journal of Dietary Supplements, 2014), and may also contribute to reducing inflammation and blood levels of TGs (Ulven and Holven, Vascular health and risk management, 2015). Krill is a rich natural source of phospholipids and OM3 fatty acids. The EPA and DHA contained in CaPre are delivered as a combination of OM3s as free fatty acids and OM3s bound to phospholipid esters. Both forms allow these PUFAs to reach the small intestine where they undergo rapid absorption and transformation into complex fat molecules that are required for lipid transport in the bloodstream. We believe that EPA and DHA are more efficiently transported by phospholipids sourced from krill oil than the EPA and DHA contained in fish oil, which are transported either by TGs (as in dietary supplements) or as ethyl esters as in other prescription OM3 drugs (such as LOVAZA and VASCEPA). These OM3 ethyl ester prescription products must undergo additional digestion before they are ready for transport into the bloodstream. The digestion and absorption of OM3 ethyl ester drugs requires a particular enzymatic process that is highly dependent on the fat content of a meal – the higher the fat content, the better the OM3 ethyl ester absorption. High fat content meals are not recommended in patients with HTG. We believe that CaPre’s superior absorption profile could represent a significant events relatedclinical advantage, since taking it with a low-fat meal represents a healthier and more realistic regimen for patients with HTG who must follow a restricted low-fat diet. CaPre is intended to be used as a therapy combined with positive lifestyle changes, such as a healthy diet and exercise, and can be administered either alone or with other drug treatment regimens such as statins (a class of drug used to reduce LDL-C). CaPre is intended to be taken orally once or twice per day in capsule form.

- 25 -

Potential Market for CaPre

We believe a significant opportunity exists for OM3 market expansion because, among other things:

·Cardiovascular diseases, or CVD, and stroke are the leading causes of morbidity and mortality in the United States. The burden of CVD and stroke in terms of life-years lost, diminished quality of life, and direct and indirect medical costs also remains enormous. According to the American Heart Association, in 2016, CVD cost the American healthcare system $555 billion. By 2035, the cost is estimated to increase to $1.1 trillion;

·Evidence suggests potential for OM3s in other cardiometabolic indications, such as diabetes and high blood pressure;

·Subgroup analyses from outcome studies conducted since 2007 such as JELIS, ACCORD-Lipid and AIM-HIGH, have all shown that patients who entered these studies with high TGs (above 150 mg/dl) and low HDL (below 40 mg/dl) and received a TG-lowering medication (either an OM3, fibrate or niacin) saw a relative cardiovascular risk reduction of 31 – 53% by the end of the study when compared to placebo or standard of care;

·Based on the assumption that the REDUCE-IT trial sponsored by Amarin and the STRENGTH trial sponsored by Astra Zeneca, would be positive, key opinion leaders interviewed by DP Analytics in the market research study conducted in 2018 before the results of REDUCE-IT were announced and described further below, estimated that they would increase their own prescribing of OM3s by 43% in patients with high TGs (blood levels between 200 – 499 mg/dL) and by 35% in patients with severe HTG (based on qualitative market research with Key Opinion Leaders (KOLs) and High Volume Prescribers (HVPs) conducted for Acasti in November, 2017 by Destum Partners, an independent market research firm);

·In February 2019, following the release of the REDUCE-IT results in September 2018, Cantor Fitzgerald projected that based on their market research, prescriptions for OM3s are expected to grow in 2019 by 100%. The most recent (March 2019) audited prescription data from Symphony Health Analytics indicates that VASCEPA sales in March 2019 had increased by 77% over March 2018; and

·Some analysts who cover the HTG segment of the market are now projecting that this market could reach $10 billion or more in the US alone over the next few years.

According to the developmentAmerican Heart Association, the prevalence of our businessHTG in the United States and globally correlates to the aging of the population and the increasing incidence of obesity and diabetes. Market participants, including the American Heart Association, have estimated that one-third of adults (approximately 70 million people) in the United States have elevated levels of TGs ((TGs >150 mg/dL) (Ford, Archives of Internal Medicine, 2009; 169(6):572-578), including approximately 3 to 4 million people diagnosed with severe HTG (Miller et al. Circulation, 2011 and Maki et al. J. Clin. Lipid, 2012). Moreover, according to Ford, Archives of Internal Medicine in a study conducted between 1999 and 2004, 18% of adults in the United States, corresponding to approximately 40 million people, had elevated TG levels equal to or greater than 200 mg/dl, of which only 3.6% were treated specifically with TG-lowering medication (Ford, Archives of Internal Medicine, 2009; 169(6):572-578; Kapoor and Miller, ACC, 2016, Christian et al. Am. J. Cardiology, 2011). We believe this data indicates there is a large underserved market opportunity for CaPre.

CaPre’s target market in the United States for treatment of HTG was estimated by Symphony Health Analytics Audit data to be approximately US$1.4 billion in 2018, with approximately 4.5 million prescriptions written annually. The total global market for treatment of HTG was estimated by GOED Proprietary Research in 2015 to be approximately US$2.3 billion annually. Currently, all marketed OM3 products are approved by the FDA only for patients with severe HTG. We believe there is the potential to greatly expand the treatable market in the United States to the approximately 70 million people with TGs above 150 mg/dl, assuming the FDA approves expanded labeling for VASCEPA based on the recent positive REDUCE-IT outcome study results, and favorable results are reported from the STRENGTH outcome trial, which is currently ongoing and expected to report sometime in 2020. These CV studies were designed to evaluate the long-term benefit of lowering TGs on CVD risk with prescription drugs containing OM3 fatty acids in patients with mild to moderately elevated TGs, low HDL-C, and concurrently taking a statin. Additional clinical trials would likely be required for CaPre to also expand its label claims to this segment. Given the large portion of the adult population in the United States that have occurredelevated levels of TGs above 150 mg/dL but who go largely untreated, we believe there is the potential for a very significant increase in the last financial year.total number of patients eligible for treatment based on the positive REDUCE-IT results and provided the outcome of the STRENGTH trial is also positive.

CaPre currently has two FDA-approved and marketed branded competitors (LOVAZA and VASCEPA). In addition, Astra Zeneca has an FDA-approved product, EPANOVA, which has not yet been launched. Generic LOVAZA became available on the U.S. market in 2013. In spite of generic options, 2017 audited prescription data from IMS NSP indicates that approximately 70% of OM3 prescriptions are written for branded products (predominantly VASCEPA). According to the most recently available Symphony Health Analytics Audit data from April 2019, the U.S. OM3 market for HTG was valued at approximately $1.4 billion in 2018. However, the number of prescriptions written for OM3s is now increasing significantly since Amarin announced its REDUCE-IT results in late 2018. Some analysts are predicting that this trend will continue, driving substantial market growth. For example, in February 2019, Cantor Fitzgerald projected that based on their market research based on interviews with 50 physicians, they expect prescriptions for OM3s to grow in 2019 by 100%.

- 26 -
Fiscal Year Ended February 29, 2016

CaPre® - Clinical Trials Update
TRIFECTA Trial

We conduct market research at least annually with physicians and payers to monitor market developments and clinical practice. Except as otherwise indicated, all of the information that follows under this section has been derived from secondary sources, including audited U.S. prescribing data, and from qualitative U.S. primary market research with physicians and payers conducted for us by DP Analytics, a division of Destum Partners, Inc., or Destum, and other well-respected third party survey providers.

Destum utilized secondary market data and reports to develop market projections for us, and they also conducted primary qualitative market research with physicians and third-party payers, such as PBMs. One-on-one in-depth phone interviews conducted in November 2017 lasting on average 30-60 minutes were conducted with 22 physicians and 5 PBMs. Key insights and data were collected by Destum on current clinical practice for treating patients with HTG, and physician and payer perceptions of the current unmet medical and key economic needs in this space. All interviews were conducted by the same individual at Destum to ensure consistency in the collection of key information. Destum utilized OM3 prescription data from 2009 to 2017 to estimate the size of CaPre’s potential market. Based on its discussions with the PBMs, Destum also assumed CaPre would be viewed favorably by payers at launch (e.g., Tier 2 or 3, depending on payer plan, which is comparable to LOVAZA and VASCEPA). Upon completing the screening questionnaire and being approved for inclusion in Destum’s study, key opinion leaders (KOLs) and high volume prescribers (HVPs), were provided with a study questionnaire and were asked to comment on a target profile for a potential new OM3 “Product X” delivering a “trifecta” of cardio-metabolic benefits similar to the potential efficacy and safety benefits demonstrated by CaPre in our two Phase 1 pharmacokinetic studies and two Phase 2 clinical trials, which we refer to as the Target Product Profile. Respondents were told that the unidentified product was being prepared for a Phase 3 program designed to confirm with statistical significance the product’s safety and efficacy in patients with severe HTG. The TRIFECTA trial, a 12-week, randomized, placebo-controlled, double-blind, dose-ranging trial,Target Product Profile was designedused by Destum strictly for market research analysis purposes and should not be construed as an indication of future performance of CaPre and should not be read as an expectation or guarantee of future performance or results of CaPre, and will not necessarily be an accurate indication of whether or not such results will be achieved by CaPre in our Phase 3 program.

In the market research for us, KOLs and HVPs interviewed by Destum were asked to assess the safetylevel of unmet medical need associated with treating patients with severe HTG based on currently available treatment options. 91% of physicians interviewed by Destum in 2016 indicated that they believe that the current unmet medical need for treating HTG was moderate to high. That number increased to 100% in the subsequent December 2017 research. The reasons identified by these physicians for their dissatisfaction with the currently available OM3s included insufficient lowering of TGs (a complaint principally related to VASCEPA), negative LDL-C effects (a complaint principally related to LOVAZA), the “food effect” or reduced absorption of both LOVAZA and VASCEPA when taken with a low-fat meal (or the corollary to this concern which is that their patients had to take either drug with a fatty meal to get full efficacy benefit), gastrointestinal side effects, and the fishy taste from these fish oil-derived OM3s. Physicians reported that their patients have difficulty swallowing the large 1 gram softgel capsules of CaPre®VASCEPA and LOVAZA, and they worried about these issues contributing to patient non-compliance. Despite the availability of other drug classes to treat severe HTG, interviewed physicians indicated that they would welcome the introduction of new and improved OM3 products, particularly if they can address these perceived deficiencies.

Interviewed physicians responded favorably to the blinded Target Product Profile of CaPre in the Destum Market Research studies. In the most recent study conducted in December 2017, they indicated that they would prescribe a new OM3 drug with the Target Product Profile to approximately 82% of their patients in the severe HTG patient population and 68% of their patients in the high HTG segment within two years of the new OM3 drug’s approval. Approximately 60% of the interviewed physicians indicated that they would switch to a drug with the Target Product Profile primarily due to the “trifecta effect” of reducing TGs and LDL-C while elevating HDL-C, and the remaining 40% indicated they would switch primarily due to a drug with the Target Product Profile due to the effective reduction of TGs alone. In connection with their responses, the interviewed physicians were instructed to assume the drug with the Target Product Profile and all currently available OM3 products were not subject to any reimbursement or coverage hurdles (e.g., atall products were on an equal health care coverage playing field). This assumption was subsequently supported by our interviews with leading PBMs in the United States.

This market research was updated in March 2019 to reflect the current views of physicians and third party payers following the publication of the REDUCE-IT study results. This updated primary qualitative market research project was conducted by a dosewell-respected third party survey provider, and the design of 1 or 2 g,the study was similar to the Destum project, with one-on-one interviews lasting approximately 60 minutes in duration. These interviews were conducted with 10 physicians and 20 pharmacy directors, covering 179,913,005 commercial lives across the United States, consistent with the current payer mix for the OM3 market. CaPre was evaluated positively by physicians with particular value placed on fasting plasma triglyceridesits potential to lower TGs, LDL-C, and HbA1c (this was seen as unique, and especially valued), and to increase HDL-C, as well as its potentially superior tolerability features (e.g. easier to swallow when compared to athe ethyl ester fish oils, and no fishy taste or "burpiness"). Importantly, since this research was conducted after the REDUCE-IT trial outcome results, the lack of clinical outcomes data for CaPre at launch was generally not seen as problematic for the majority of the physicians interviewed. On average, physicians indicated that they would begin prescribing CaPre 3 months after launch and would evaluate its performance in their initial patients after 3 to 6 months of use. Depending on favorable experience in initial use, some physicians indicated peak use could begin as quickly as 12 to 18 months after launch. Physicians expect CaPre to be priced similar to VASCEPA, and to have an out-of-pocket cost of approximately $10-$50. Payers also viewed CaPre favorably and did not anticipate any major reimbursement restrictions, with likely coverage at Tier 2 or 3 depending on payer plan.

- 27 -

Based on both primary market research with pharmacy benefit managers, or PBMs, and audited prescription reports, the pricing for branded products currently averages between US$299 and US$355 per month. Amarin has raised prices for VASCEPA annually since its launch in late 2013. PBMs offer “Preferred Brand” status (Tier 2 or Tier 3), without significant restrictions (i.e., no prior authorization, step edits, or high co-payments) for these branded OM3s. By the end of 2018, VASCEPA had reached about 45% market share in the United States, in spite of generic competition from LOVAZA. Amarin continues to gain market share in the United States and, as of the date of this report has reached approximately 50% of the market share based on dollar. This growth is principally coming from market expansion rather than necessarily from an erosion of generic sales.

We plan to regularly conduct additional market research with KOLs, HVPs, primary care physicians and payers to further develop and refine our understanding of the potential market for CaPre ahead of commercial launch in the United States.

Our Clinical Data

CaPre is being developed by us for the treatment of patients with severe HTG. In two Phase 2 clinical trials conducted by us in Canada (our COLT and TRIFECTA trials), CaPre was well-tolerated at all doses tested, with no serious adverse events that were considered treatment-related. Among the reported adverse events with an occurrence of greater than 2% of subjects and greater than placebo, only diarrhea had an incidence of 2.2%.

In both Phase 2 clinical trials, CaPre significantly lowered TGs in patients with mild to severe hypertriglyceridemia. A total of 387 patients were randomized and 365 patients completed the 12-week study,HTG. Importantly, in line with the targeted number of evaluable patients. From this patient population, approximately 90% had mild to moderate hypertriglyceridemia with baseline triglycerides between 200 and 499 mg/dL (2.28 to 5.69 mmol/L). The remainder had very high baseline triglycerides between 500 and 877 mg/dL (> 5.7 and < 10 mmol/L). Approximately 30% of patients were on lipid lowering medications, such as statins, and approximately 10% were diabetic.

Similar to the COLT trial, the primary objective of the TRIFECTA trial was to evaluate the effect of CaPre® on fasting plasma triglycerides in patients with triglycerides between 2.28 and 10.0 mmol/L (200-877 mg/dL) and to assess the tolerability and safety of CaPre®. The secondary objectives of the TRIFECTA trial were to evaluate the effect of CaPre® on fasting plasma triglycerides in patients with triglycerides between 2.28 and 5.69 mmol/L (200-499 mg/dL); to evaluate the dose dependent effect on fasting plasma triglycerides in patients with triglycerides > 5.7 and <10 mmol/L (500-877 mg/dL); and to evaluate the effect of CaPre® in patients with mild to moderate hypertriglyceridemia and severe hypertriglyceridemia on fasting plasma levels of LDL-C (direct measurement), and on fasting plasma levels of HDL-C, non-HDL-C, hs-CRP and omega-3 index.
In Fiscal 2016, the Corporation received the full data for its TRIFECTA trial which confirmed and supported the positive Phase II TRIFECTA results announced in September 2014, on the safety and efficacy of CaPre® in the treatment of patients with hypertriglyceridemia. The TRIFECTA trial's primary endpoint was met, with patients on 1 g or 2 g of CaPre® achieving a statistically significant mean placebo-adjusted decrease in triglycerides from baseline. In addition, benefits in other key cholesterol markers were announced, including slight increases in HDL-C (good cholesterol),these studies, CaPre also demonstrated no deleterious effect on LDL-C (bad cholesterol)(unlike LOVAZA and EPANOVA, which have been shown to significantly increase LDL-C in patients with severe HTG). Further, our Phase 2 data indicated that unlike LOVAZA, CaPre may actually reduce LDL-C with a 4 gram per day dose (a dose equivalent to VASCEPA and LOVAZA). LDL-C is undesirable because it accumulates in the walls of blood vessels, where it can cause blockages (atherosclerosis). In the Phase 2 trials, CaPre also significantly reduced non-HDL-C (all cholesterol contained in the bloodstream except HDL-C), which is also considered to be a marker of cardiovascular disease. The COLT trial data showed a mean increase of 7.7% in HDL-C with CaPre at 4 grams per day (p=0.07). Further analysis of the data from our on-going TRILOGY Phase 3 program will be required to demonstrate CaPre’s statistical significance with respect to lowering LDL-C and increasing HDL-C. Finally, we saw a statistically significant reduction of HbA1c in the CaPre 4g treatment group in the COLT study after only 8 weeks on drug. This interesting and potentially differentiating effect will be investigated more thoroughly in our TRILOGY Phase 3 program, where a larger proportion of the patients are diabetic, and they will be followed for 6 months.

We believe that these multiple potential cardiometabolic benefits, if confirmed in our on-going TRILOGY Phase 3 program, could be significant differentiators for CaPre in the marketplace, as no currently approved OM3 drug has shown an ability to positively modulate all four of these important blood lipids (TGs, non-HDL-C, LDL-C and HDL-C) in the treatment of severe HTG. We also believe that if supported by additional clinical trials, CaPre has the potential to become the best-in-class OM3 compound for the treatment of mild to moderate HTG.

On September 14, 2016, we announced positive data from our completed comparative bioavailability study, or the “Bridging Study”. The Bridging Study was an open-label, randomized, four-way, cross-over, bioavailability study comparing CaPre, given as a single dose of 4 grams in fasting and fed (high-fat) states, as compared to the FDA-approved HTG drug LOVAZA (OM3-acid ethyl esters) in 56 healthy volunteers. The protocol was reviewed and approved by the FDA. The primary objective of the Bridging Study was to compare the bioavailability of CaPre to LOVAZA, each administered as a single 4-gram dose with a high-fat meal, which is the condition under which administration of OM3 drugs will yield the highest levels of EPA and DHA in the blood, and therefore has the highest potential for toxicity. For us to rely on the long-term safety concerns.data of LOVAZA to support a 505(b)(2) NDA for CaPre, our results had to show that the blood levels of EPA and DHA resulting from a single 4-gram dose of CaPre, are not significantly higher than that those from a single 4-gram dose of LOVAZA under fed (high-fat meal) conditions. The Bridging Study met all of its objectives and demonstrated that the levels of EPA and DHA following administration of CaPre did not exceed corresponding levels following administration of LOVAZA in subjects who were fed a high-fat meal. We expect that these results will support a claim by us that CaPre and LOVAZA have a comparable safety profile. Also, among subjects in a fasting state, CaPre demonstrated better bioavailability than LOVAZA, as measured by significantly higher blood levels of EPA and DHA. Since most HTG patients must follow a restricted low-fat diet, we believe that CaPre’s strong bioavailability profile could provide a more effective clinical solution for these patients.

We summarized and submitted data from our Bridging Study to the FDA for review and discussed it with the FDA at an End of Phase 2 meeting during the first quarter of 2017. We also presented our Bridging Study data at the National Lipid Association Conference in May 2017 and this data was subsequently published in the peer-reviewed Journal of Clinical Therapeutics.

- 28 -
PK Trial

During

The graph below illustrates that the same period, Acasti announced top-line resultsBridging Study achieved all of its objectives:

Absorption of EPA and DHA as ethyl ester formulations in the currently available prescription OM3 drugs derived from fish oil (such as LOVAZA and VASCEPA) require the breakdown of the ethyl esters by pancreatic enzymes (lipases) to be released into the blood. These particular enzymes are produced in response to the consumption of high-fat content meals, leading to optimal absorption of DHA and/or EPA. As a result, these OM3 ethyl ester formulations have demonstrated lower absorption and bioavailability when taken with a low-fat meal or on an empty stomach. As shown in our CAP13-101 study described further below, absorption of CaPre, which is formulated as a combination of OM3 phospholipids and free fatty acids, is not meaningfully affected by the fat content of a meal consumed prior to drug administration. Since a low-fat diet is typically a critical component for its PK trial. The PK trialtreatment of patients with severe HTG, we believe that being able to effectively combine CaPre with a low-fat diet could give CaPre a significant clinical and marketing advantage over the ethyl ester-based OM3s, such as LOVAZA and VASCEPA, that must be taken with a high-fat meal to achieve optimal absorption.

Our CAP13-101 study was an open-label, randomized, multiple-dose, single-center, parallel-design study in healthy volunteers. Forty-two male and female individuals, at least 18 years of age,42 subjects were enrolled into three3 groups of 14 subjects who took 1 gram, 2 grams or 4 grams of CaPre®,CaPre, administered once a day 30 minutes after breakfast. The objectives of the study were to determine the pharmacokinetic, or PK, profile and safety on Day 1 following a single oral dose and Day 14 following multiple oral doses of CaPre® onCaPre in individuals pursuing a low-fat diet (therapeutic lifestyle changes diet). The effect of a high-fat meal on the bioavailability of CaPre®CaPre was also evaluated at Day 15. Blood samples were collected for assessment of EPA and DHA total lipids in plasma to derive the pharmacokineticPK parameters.

19

CaPre® pharmacokinetics appear

The PK profile of CaPre following multiple 4-gram doses obtained in the CAP13-101 study at Day 14 was compared to be approximately dose-proportional over the 1 toresults obtained in a similar PK study (Offman 2013 - ECLIPSE 2) where LOVAZA was also administered at 4 gramgrams a day dose range. Followingfor 14 days with a single daily dose, CaPre® reached steady state (EPAlow-fat diet. Although CaPre contains approximately 2.5 times less EPA and DHA levels plateaued) within seven days of dosing. The bioavailability of CaPre® was not significantly reducedcompared to LOVAZA (approximately 310 mg/1g capsule for CaPre versus 770 mg/1g capsule for LOVAZA), when takenadministered with a low-fat meal, versus high-fat meal; a significant advantage for the management of hypertriglyceridemic patients on low fat diets. CaPre® was safe and well tolerated, with no safety concerns.

Following receipt of data for the Phase I PK Study and the Phase II clinical trials – COLT and TRIFECTA – Acasti provided a data package to the FDA to receive direction on requirements for the pivotal Phase III clinical program.
Strengthening Our Patent Estate
During the year, Acasti announced that the Japanese, Taiwanese and Mexican patent offices have each granted Acasti a composition and use patent. The patents are all valid until 2030 and relate to concentrated therapeutic phospholipid omega-3 compositions covering methods for treating or preventing diseases associated with cardiovascular diseases, metabolic syndrome, inflammation, neurodevelopmental diseases, and neurodegenerative diseases. They are in addition to multiple other patents that Acasti has been granted in the United States, Australia, Mexico, Saudi Arabia, Panama, and South Africa for phospholipid composition. As well, similar patent applications are being pursued in many jurisdictions worldwide. During the same period, the Chinese Patent Office also granted Acasti a composition and use patent. The Patent (ZL 201080059930.4), which is valid until 2030, relates also to concentrated therapeutic phospholipid omega-3 compositions.
The granting of these patents is a value-enhancing milestone, which further heightens the potential commercial implications, including possible licensing and partnership opportunities for CaPre®. Acasti is committed to building a global portfolio of patents to ensure a long-lasting and comprehensive protection, while also safeguarding valuable market expansion opportunities.
NASDAQ Continuous Listing Rules – Minimum Bid Price Requirements
On November 7, 2014 Acasti received notification from the NASDAQ Listing Qualifications Department for failing to maintain a minimum bid price of US$1.00 per share for 30 consecutive business days. To regain compliance, Acasti's shares had to close at US$1.00 per share or more for a minimum of ten (10) consecutive business days. The Corporation was able to cure the listing requirement violation during the fiscal year ended February 29, 2016. On September 29, 2015, Acasti announced a compliance plan to meet the NASDAQ Minimum Bid Price Rules, by consolidating the issued and outstanding Class A Common Shares of the Corporation.
The reverse split became effective at the open of trading on October 14, 2015 and the Common Shares began trading on NASDAQ and TSX on a reverse split-adjusted basis on such date. There were currently 106,616,262 Common Shares issued and outstanding on a pre-Consolidation basis, which resulted into approximately 10,661,626 Common Shares issued and outstanding on a post-Consolidation basis. The exercise price in effect on October 14, 2015, in the case of incentive stock options, warrants and other securities convertible into Common Shares, was increased proportionally to reflect the reverse split. The number of Common Shares subject to a right of purchase upon the exercise of convertible securities was also decreased proportionally to reflect the reverse split.
B.Business Overview
Acasti is an emerging biopharmaceutical company focused on the research, development and commercialization of new krill oil-based forms of omega-3 phospholipid therapies for the treatment of certain cardiometabolic disorders, in particular abnormalities in blood lipids, also known as dyslipidemia. Krill is a major source of phospholipids and polyunsaturated fatty acids, mainly eicosapentaenoic acid (EPA) and docosahexaenoic acid (DHA), which are two types of omega-3 fatty acids well known to be beneficial for human health.
Pursuant to a license agreement entered into with Neptune in August 2008, Acasti has been granted a license to rights on Neptune's intellectual property portfolio related to cardiovascular pharmaceutical applications (the "License Agreement"). In December 2013, the Corporation entered into a prepayment agreement with Neptune pursuant to which the Corporation exercised its option under the License Agreement to pay in advance all of the future royalties payable under the license in fiscal 2014. The royalty- free license allows Acasti to exploit the intellectual property rights in order to develop novel active pharmaceutical ingredients ("APIs") into commercial products for the medical food and the prescription drug markets. Acasti is responsible for carrying out the research and development of the APIs, as well as required regulatory submissions and approvals and intellectual property filings relating to the cardiovascular applications. The products developed by Acasti require the approval of the FDA before clinical studies are conducted and approval from similar regulatory organizations before sales are authorized.
CaPre®, Acasti's prescription drug candidate, is a highly purified omega-3 phospholipid concentrate derived from krill oil and is being developed to treat severe hypertriglyceridemia, a condition characterized by abnormally very high levels of triglycerides in the bloodstream. In 2011, two Phase II clinical trials in Canada were initiated and now completed (TRIFECTA trial and COLT trial) to evaluate the safety and efficacy of CaPre® for the management of mild to severe hypertriglyceridemia (high triglycerides with levels ranging from 200 to 877 mg/dL). Both trials also include the secondary objective of evaluating the effect of CaPre® in patients with mild to moderate hypertriglyceridemia (high triglycerides levels ranging from 200 to 499 mg/dL) as well as in patients with severe hypertriglyceridemia (very high triglycerides levels ranging from 500 to 877 mg/dL). The open-label COLT trial was completed during the second quarter of fiscal 2014 and the TRIFECTA trial was completed in the second quarter of fiscal 2015. Based on the positive results of these trials, Acasti filed an investigational new drug submission to the U.S. Food and Drug Administration to conduct a pharmacokinetic study in the U.S. Acasti subsequently received approval to conduct this trial and it was completed in the second quarter of fiscal 2015.
20

Due to a decision by the FDA not to grant authorization to commercialize a competitor's drug in the mild to moderate patient population before the demonstration of clinical outcome benefits, Acasti is reassessing its clinical strategy and primarily focusing on the severe hypertriglyceridemia population.
Onemia®, Acasti's commercialized product, has been marketed in the United States since 2011 as a medical food supplement and as a natural health product (NHP) in Canada since 2012. An NHP is the equivalent of a dietary supplement in the US. Onemia® is only administered in the U.S. under the supervision of a physician and is intended for the dietary management of omega-3 phospholipid deficiency related to abnormal lipid profiles and cardiometabolic disorders.
As previously disclosed, Acasti decided to find strategic alternatives for Onemia® and focus its energy and resources on the development of CaPre®. Acasti has entered into a non-exclusive licensing agreement for Onemia® with Neptune in which Neptune has to engage in best commercial efforts to expand the marketing of Onemia®. Acasti will receive a royalty of 17.5% on net sales of Onemia® and Acasti believes given Neptune's sales and marketing leadership in the krill oil market that Neptune represents the best partner for Onemia®. As of February 29, 2016, no sales have been realized by Neptune.
Next Steps
Acasti is now corresponding with the FDA about the next steps proposed for the clinical development plan of CaPre®. Such correspondence is meant to allow the FDA to provide feedback on Acasti's plans and to clarify or answer specific questions that the FDA may have prior to such next steps toward the pivotal Phase III clinical program. Such correspondence can take the form of written correspondence, discussions and potential in person meetings with the FDA.
Acasti intends to conduct a Phase III clinical trial in the United States, with potentially a few Canadian clinical trial sites, in a patient population with very high triglycerides (> or = 500 mg/dL). In addition to conducting a Phase III clinical trial, Acasti expects that additional time and capital will be required to complete the filing of a New Drug Application ("NDA") to obtain FDA approval for CaPre® in the United States before reaching commercialization, which may initially be only for the treatment of severe hypertriglyceridemia.
Acasti intends to pursue the regulatory pathway for CaPre® under section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act and conduct a pivotal bioavailability bridging study, comparing CaPre® to an omega-3 prescription drug as a means of establishing a scientific bridge between the two. This will help determine the feasibility of a 505(b)(2) regulatory pathway, while also optimizing the protocol design of a Phase III clinical program. The 505(b)(2) approval pathway has been used by many other companies and Acasti's regulatory and clinical experts believe such a strategy is best for CaPre®. This should allow Acasti to further optimize the advancement of CaPre® while benefiting most importantly from the substantial clinical and nonclinical data already available with another FDA-approved omega-3 prescription drug. In addition, this should reduce the expected expenses and streamline the overall CaPre® development program required to support a NDA submission.
The finalization and execution of Acasti's comprehensive Capre® development plan and definitive Phase III program, overall costs and timelines are contingent upon FDA review and direction. Acasti has recently received a response from the FDA on the CaPre® clinical development program. With this endorsement Acasti has submitted an amendment to its current IND application to commence a bioavailability bridging study, while continuing to work closely with the FDA to ensure the Corporation is aligned with their views on Capre®'s clinical development.
As planned, Acasti initiated and recently completed subject enrollment for the bioavailability bridging study. Acasti is expecting results of the study before the end of the year which should confirm Acasti's chosen regulatory pathway.
Business Strategy
Key elements of Acasti's strategy to commercialize therapies for dyslipidemia include: (i) completing its clinical program as per FDA recommendations and guidelines such as initiating a Phase III clinical trial and filing a New Drug Application ("NDA") to obtain regulatory approval for CaPre® in the United States (initially for the treatment of severe hypertriglyceridemia and thereafter possibly for the treatment of mild to moderate hypertriglyceridemia); (ii) strengthening Acasti's patent portfolio and other means of protecting intellectual property exclusivity; and (iii) pursuing distribution partnerships to commercialize CaPre® in the United States and elsewhere. Acasti may also pursue strategic opportunities including licensing or similar transactions, joint ventures, partnerships, strategic alliances or alternative financing transactions to provide sources of capital for Acasti. However, no assurance can be given as to when or whether Acasti will pursue any such strategic opportunities.
Treatments for Cardiometabolic Disorders – Acasti's Market
21

Lipid Disorders and Cardiovascular Disease
Heart attacks, strokes and other cardiovascular events represent the leading cause of death and disability among men and women in the United States. According to the 2011 At-A-Glance Report from the U.S. Center for Disease Control, more than 1 out of every 3 adults in the United States (approximately 83 million) currently lives with one or more types of cardiovascular disease; an estimated 935,000 heart attacks and 795,000 strokes occur in the United States each year; and an estimated 71 million adults in the United States have high cholesterol (i.e., high levels of LDL-C). Having abnormally high levels of lipids or lipoproteins, such as cholesterol and triglycerides, which are fats carried in the bloodstream, is an important risk factor for cardiovascular disease.
According to the American Heart Association, the prevalence of hypertriglyceridemia is increasing in the United States and globally, correlating to the increasing incidence of obesity and diabetes. Market participants, including the American Heart Association, have estimated that one-third of the population in the United States has elevated levels of triglycerides, including over 40 million people diagnosed with mild to moderate hypertriglyceridemia and over 4 million people diagnosed with severe hypertriglyceridemia. According to The American Heart Association Scientific Statement on Triglycerides and Cardiovascular Disease (2011), triglyceride levels provide important information as a marker associated with the risk for heart disease and stroke, especially when an individual also has low HDL-C and elevated levels of LDL-C. Lowering triglyceride levels is one of the primary goals to reduce a patient's risk of atherosclerotic cardiovascular disease. Hypertriglyceridemia is due to both genetic and environmental factors, including obesity, sedentary lifestyle and high-calorie diets. Hypertriglyceridemia is also associated with comorbid conditions such as chronic renal failure, pancreatitis, nephrotic syndrome and diabetes.
Patients with type 2 diabetes are more susceptible to cardiovascular disease. Cardiovascular disease may be preventable in some patients with appropriate treatment of lipid abnormalities. Diabetic dyslipidemia most commonly manifests as elevated triglycerides and low levels of HDL-C, with a predominance of small, dense LDL-C particles amid relatively normal LDL-C levels. Non-HDL-C reduction is a key secondary goal of therapy under the National Cholesterol Education Program Adult Treatment Panel III national lipid treatment guidelines and, according to the American Diabetes Association and the American College of Cardiology, has been emphasized as a major goal of therapy in the consensus guidelines for lipoprotein management in patients with cardiometabolic risk. Acasti believes, based in part on a study published by Blaha MJ et al. in The Journal of Clinical Lipidology in 2008, that non-HDL-C levels may be a better indicator than LDL-C for the prediction of cardiovascular events and that non-HDL-C reduction has many other compelling advantages over LDL-C and other traditional lipid parameters. Studies have established the clinical utility of non-HDL-C as a comprehensive measure of atherogenic lipoproteins.  In diabetic patients, non-HDL-C levels may be a stronger predictor of cardiovascular disease than LDL-C levels or triglycerides because it correlates highly with atherogenic lipoproteins. Target goals for LDL-C levels and non-HDL-C levels in patients with diabetes are < 100 and < 130 mg/dL, respectively. Failure to consider the importance of non-HDL-C in type 2 diabetes may result in under treatment of patients with diabetes.
Red blood cells are made of a molecule called haemoglobin that glucose adheres to in the bloodstream. The more glucose in the blood, the more it will adhere to haemoglobin to make a glycosylated haemoglobin molecule, called haemoglobin A1C (or HbA1c). HbA1c is measured primarily to identify the averageCaPre plasma glucose concentration over prolonged periods of time. This serves as a marker for average blood glucose levels over the previous months prior to the measurement.
A National Health and Nutrition Examination Survey analysis of dyslipidemia in the United States in 2010 indicated that while LDL-C levels have actually declined since its last analysis, the percentage of patients with hypertriglyceridemia has risen by 6% along with the dramatic increases in obesity. The National Cholesterol Education Program ("NCEP") Expert Panel on Detection, Evaluation and Treatment of High Blood Cholesterol recommends that the first priority for the management of hypertriglyceridemia is triglyceride reduction to decrease the risk of pancreatitis. In addition, severe hypertriglyceridemia is also associated with a markedly increased risk for cardiovascular disease and a recent report released by the NCEP Expert Panel has claimed that elevated triglyceride levels can be regarded as an independent risk factor for cardiovascular disease-related events such as myocardial infarction, ischemic heart disease and ischemic stroke.
In a subgroup analysis of the Japan EPA Lipid Intervention Study, in 2005, in which 18,645 hypercholesterolemic patients randomly received EPA plus a statin or statin control, patients with baseline triglycerides >150 mg/dL and HDL-C <40 mg/dL receiving EPA plus a statin (7,503 patients) had a 19% reduced risk of cardiovascular disease compared to a statin alone (7,478 patients; P=0.048). In addition, in 2001, the Italian Group for the Study of the Survival of Myocardial Infarction (GISSI) trial randomly assigned 11,324 survivors of recent myocardial infarction to receive omega-3 PUFAs (1 gram per day), vitamin E (300 mg per day), both, or neither (the control group) for 3.5 years. Among the patients who received omega-3 PUFAs alone, as compared to the control group, there was a 15% reduction in the composite primary end point of death, nonfatal myocardial infarction, or nonfatal stroke (p<0.02) and a 20% reduction in the rate of death from any cause (p<0.01). The reduction in risk of sudden death was statistically significant beginning at the four month stage of treatment. A similarly significant, although more delayed, pattern after six to eight months of treatment was observed for cardiovascular, cardiac and coronary deaths.
A meta-analysis by Sarwar et al. in 2007 included 29 prospective studies and was the largest and most comprehensive epidemiological assessment of the association between triglyceride levels and cardiovascular disease risk in Western populations (262,525 participants; 10,158 cases). A combined analysis of the 29 studies yielded an adjusted odds ratio of 1.72 (72% higher risk) for the patients with triglyceride levels greater than or equal to 200 mg/dL compared to those with normal triglyceride levels. The conclusion of the study is that there are moderately strong associations between triglyceride levels and cardiovascular disease risk. In addition, there are two outcome trials ongoing (REDUCE-IT and STRENGTH) designed to evaluate long-term benefit of lowering triglycerides with prescription omega-3 fatty acids on cardiovascular risks.
22

Several omega-3 fatty acid products derived from fish oil are currently being marketed and sold in the United States and elsewhere. Some consist of supplements that are commercialized for human health maintenance while others are prescription omega-3 fatty acids that are designed as treatments for severe hypertriglyceridemia.
Available Prescription Drugs
The rise in obesity over the last 20 years has led to a parallel increase in triglyceride levels among the population and awareness of medical and health practitioners about the critical role that high triglyceride levels, particularly together with abnormal levels of LDL-C, HDL-C and non HDL-C (which is collectively referred to as dyslipidemia), have as a predictor of cardiovascular events. Accordingly, the introduction of new prescription drugs and drug therapies to lower the risk of cardiovascular events by addressing dyslipidemia has become a priority. The initial treatment recommendation for patients with dyslipidemia is typically a lifestyle change (diet and increased exercise). Dyslipidemia is also treated with statins, which account for a large portion of prescriptions for dyslipidemia. However, statins alone are primarily used for reducing LDL-C and appear to have only modest effects on triglyceride levels. Recognizing that statins alone are not effective triglyceride lowering drugs, the NCEP panel recommends the use of more focused therapies to lower triglyceride levels in patients with severe hypertriglyceridemia. The first-line drug therapy in patients with severe hypertriglyceridemia is often a prescription omega-3 fatty acid or fibrates, but clinical tests have shown that fibrates may also induce side effects.
According to an investigation published by the American Medical Association in 2009, fewer than 4% of adults in the United States with hypertriglyceridemia receive prescription medication to lower their triglyceride levels, representing a significant unmet medical need. Many available treatment options have limitations in the treatment of hypertriglyceridemia which Acasti believes CaPre® can address. The use of fibrates, for example, has been shown to raise the risk of abnormal increases in liver enzymes and creatinine (a marker of kidney function) and, when combined with a statin, rhabdomyolysis (muscle breakdown). Based on the results of the COLT and TRIFECTA trials and other data collected by the Corporation, the Corporation does not believe that CaPre® produces such side effects. Furthermore, Acasti believes that CaPre® in combination with statins could become a standard of care in patients with mixed dyslipidemia because of its once per day dosing convenience.
There are several marketed prescription omega-3 fatty acids (such as Lovaza, Vascepa, Epanova, Omtryg and some generic of Lovaza) currently approved for treatment of dyslipidemia  in the United States (in severe hypertriglyceridemia) and elsewhere. According to the Frost Sullivan 2012 Global Overview of the EPA and DHA Omega-3 Ingredients Markets, the global revenue for the marine and algae EPA/DHA omega-3 ingredients market in 2011 was approximately $1.8 billion. Lovaza and Omacor, which are sold in the United States and Europe, respectively, are omega-3 ethyl-esters derived from fish oil comprised of EPA and DHA and are indicated for the treatment of severe hypertriglyceridemia in twice-daily doses of two 1-gram capsules or once-a-day dose of four 1-gram capsules. In addition, Vascepa and Epadel are two approved omega-3 ethyl-esters derived from fish oil comprised of EPA that are sold in the United States and Japan, respectively. A market research report published by Amadee & Company Inc. estimates that the total prescription omega-3 market generated over $2 billion in sales worldwide in 2012. Acasti believes that there will be increased growth in the prescription omega-3 market based on the expected introduction, and resulting increased promotion and awareness, of new prescription omega-3 products, as well as the emergence of new clinical data regarding the efficacy of omega-3s in the treatment of cardiometabolic disorders. Other disorders that potentially benefit from the use of prescription omega 3 fatty acids include osteopenia/osteoporosis, depression, sleep disorders associated with depression and pain and inflammation.
The cardioprotective efficacy of omega-3 fatty acids is well-established. Omega-3 products have anti-thrombotic and anti-inflammatory effects that have proven to inhibit atherosclerosis in animal models as well as reduce the rate of adverse cardiovascular events in humans. Omega-3 fatty acids, particularly those with concentrated levels of EPA and DHA have been demonstrated in multiple clinical trialsare very similar to lower concentrationsthose of triglyceridesLOVAZA. This is indicated by the area under the plasma drug concentration against time curve, or AUC, and non-HDLthe maximal plasma drug concentration. This study gives us confidence in the bloodstream. In a study published in the American Journaldosing and design of Clinical Nutrition in 2009, it was proposed that the omega-3 index be considered a potential risk factor for coronary heart disease mortality, especially sudden cardiac death.
Medical Foods
Medical foods are at the intersection of functional food and prescription drugs. Medical foods are regulated by the FDA and intended for specific dietary management of a disease with "distinctive nutritional requirements" under the supervision of a physician and contain ingredients that are generally recognizedour ongoing TRILOGY Phase 3 program, as safe ("GRAS") or are otherwise considered acceptable for use. No market pre-authorization by the FDA or other similar international agencies is needed for medical foods to be commercialized in the United States or elsewhere.
The majority of U.S. medical food products on the market are for metabolic diseases. Protein-based medical foods are the most common. Nutrients such as omega-3s, isoflavones, vitamin D, chelated zinc, flavonoids (e.g., baicalin, catechin, pterostilbene), chromium picolinate, phytosterols and L-arginine are other leading ingredients used in this developing category, along with other vitamins and minerals such as pyridoxine, thiamine and folic acid, which are being used in combination. Acasti believes ONEMIA® is the only medical food that offers a high concentration of krill oil-derived omega-3 fatty acids.
23

Manufacturers are bringing more medical foods to market that address metabolic processes. In 2006, Limbrel (flavocoxid), the first medical food for the management of osteoarthritis, was launched. Axona was designated by the FDA in 2009 as a medical food, targeting metabolic deficiencies associated with Alzheimer's disease; the well-researched VSL #3, a probiotic for ulcerative colitis and the ileal pouch, was introduced to the market in 2002; and NiteBite, a snack bar for the nutritional management of hyperglycemia, has been marketed since 1996.
Acasti's Products
Overview
Acasti believes its krill oil-based form of omega-3 phospholipid therapies have advantages over omega-3 products that are derived from fish oil. EPA and DHA in krill oil are mainly carried by phospholipids, while EPA and DHA derived from fish oil are mainly carried by triglycerides. Acasti believes that omega-3 phospholipids provide for better absorption and assimilationwe believe blood levels of EPA and DHA should translate into efficacy of TG reduction. This study gives us confidence that 4 grams/day of CaPre could be as effective in lowering TGs as LOVAZA. Our Phase 3 TRILOGY clinical program will confirm if this hypothesis is correct.

- 29 -

As illustrated by the bloodstream comparedtwo graphs below, CaPre reached similar blood and therapeutic levels to some other omega-3 sources, including those derived from fish oil. CaPre® (predominantly EPA and DHA) is a mixtureLOVAZA after 14 daily doses of phospholipid conjugates and free fatty acids. Except for Epanova® that is a mixture ofCaPre at 4 grams/day, despite CaPre containing 2.5 times less EPA and DHA as FFA, all the other products are ethyl esters of EPA with or without DHA ("OM3:EE"). Because OM3:EE requires an additional de-esterification step during digestion by the carboxyl ester lipase, their bioavailability is negatively affected when compared to EPA and LOVAZA:

The graph below illustrates that the bioavailability of CaPre (total EPA+DHA conjugatedlevels in the blood) does not appear to phospholipids or triglycerides

Absorption of ethyl-ester forms of currently available prescription omega-3 fatty acids derived from fish oil requires the breakdown of fats by pancreatic enzymes that are produced in response to the consumption of high fat meals. As a low fat diet is typically a critical component for treatment of patients with severe hypertriglyceridemia, these ethyl-ester formulations have demonstrated lower absorption and bioavailability when taken with a low fat meal compared to those formulated as omega-3 phospholipids where absorption is notbe meaningfully affected by the fat content of a meal.meal after multiple daily doses of CaPre at 4 grams/day (< 20% difference in AUC). We believe that CaPre’s strong bioavailability could represent a significant clinical advantage for CaPre since taking it with a low-fat meal represents a more realistic and attractive regimen for patients with HTG who must follow a restricted low-fat diet.

Our CAP13-101 Study for CaPre Pharmacokinetics Shows No Significant Food Effect

The graph below presents a summary of the effects of CaPre on patients’ lipid profiles as obtained in our completed TRIFECTA and COLT Phase 2 clinical trials. 90% of the patients in these clinical trials had mild to moderate HTG (levels between 200 - 499 mg/dL) and only 10% of patients had severe HTG (levels between 500 and 877 mg/dL), which was the maximum level of TGs permitted by Health Canada’s study protocol. Only 30% of the participating patients were taking statins, which we believe is important because statins appear to enhance the TG-lowering effect of OM3s. In contrast, in our competitors’ summary data that follows, 100% of the patients in those studies with mild to moderate HTG were taking statins with their OM3s.

The summary data from our COLT and TRIFECTA clinical trials shows that CaPre significantly reduces TGs, but unlike some other prescription EPA/DHA-based OM3s, it has no deleterious effect on LDL-C and may potentially increase HDL-C (p=0.07), which we refer to as the “trifecta effect”. Also, a dose response was seen for all of the major lipid markers; the greater the dose of CaPre, the greater the beneficial effect of CaPre.

- 30 -
CaPre®

CaPre® is

Our Phase 2 Study Results Show CaPre Dose Response and Potential for “Trifecta” Lipid Effect

* Indicates results reached statistical significance

TRIFECTA for 1g (N=130) & 2g (N=128) and COLT for 4g (N=62). HDL-C results at 4g from COLT approached statistical significance at P=0.07.

We conducted a subgroup analysis including only patients with severe HTG, consisting of approximately 10% of the patients from our TRIFECTA study, to compare the effects of CaPre versus other OM3 drugs in the initial target population of patients with severe HTG. Despite being developedgiven at a lower dose (only 1 gram and 2 grams), CaPre’s results compared very well with data from independent studies for the other prescription OM3 drugs that are FDA-approved for the treatment of severe hypertriglyceridemiaHTG at higher doses of 2 grams and eventually4 grams. While the results of this subgroup analysis were not statistically significant for CaPre (potentially due to the small sample size), numerically, the results compared well with the other OM3 drugs, even though CaPre was given at a much lower dose. The results for LDL-C, HDL-C and non-HDL-C levels in the subgroup shown in the table below are based on descriptive statistics only and are solely directional, meaning that no statistical testing was conducted and so no “p” values were generated. Note also that VASCEPA’s TG lowering results from the MARINE study were inflated due to a significant placebo effect. This resulted in VASCEPA’s placebo-corrected TG reduction being overstated by about 10%.

- 31 -

Since statins appear to enhance the TG-lowering property of OM3 drugs, we conducted a subgroup analysis that only included patients who were taking a statin at baseline in the COLT and TRIFECTA studies (approximately 30% of the population of both trials, combined). The graph below compares the TG-lowering effects of CaPre to other OM3s, all on a background of a statin drug, and shows that CaPre’s TG-lowering effects compare well with other FDA-approved OM3 drugs. We believe it is noteworthy that only 39 patients on 2 grams of CaPre in our TRIFECTA study (out of a total of 128) and only 22 patients on 4 grams of CaPre in our COLT study (out of 62) were taking statins.

The CaPre 2-gram bar graph in the table below shows the results from patients in our TRIFECTA trial who were taking statins. A statistically significant reduction in TGs (-25.7% placebo-corrected) was seen in that statin subgroup. The CaPre 4-gram bar graph in the table below shows patient results only from our COLT trial (as there was no 4-gram component for our TRIFECTA trial). None of the results were statistically significant at 4 grams of CaPre, potentially due to the small number of patients (22) in the statins subgroup.

As seen in the larger full study analyses in the tables above, CaPre does not show any deleterious effect on LDL, and shows the potential to decrease LDL and increase HDL (p=0.07). These observations will need to be confirmed in our ongoing TRILOGY Phase 3 program.

VASCEPA’s TG lowering results from the ANCHOR study were also inflated due to a placebo effect from their use of mineral oil. This resulted in VASCEPA’s placebo-corrected TG reduction being overstated by about 6% in this study.

- 32 -

In summary, in addition to effectively reducing TG levels in patients with mild to moderate hypertriglyceridemia. In addition to targeting the reduction of triglyceride levels,severe HTG, clinical data collected by Acasti to date has indicated that CaPre® may also normalize blood lipids by increasing HDL-C (good cholesterol) and reducing non-HDL-C, which includes all cholesterol contained in the bloodstream except HDL‑C. In addition, clinical data collected and reviewed by Acastius to date indicates that CaPre® has no significant deleterious effect on LDL-C (bad cholesterol) levels. Obtaining regulatory approval for the commercialization of CaPre® requiresCaPre may also have:

·beneficial clinical effects on other blood lipids, such as HDL-C (good cholesterol) and non-HDL-C;

·no deleterious effect on, and may potentially reduce, LDL-C (bad cholesterol) levels;

·potential to benefit diabetes patients by reducing HbA1c, an important marker of diabetes; and

·absorption capability that, unlike VASCEPA and LOVAZA, is not meaningfully affected by the fat content of a meal consumed prior to drug administration, providing patients with the reassurance that following their physician-recommended low-fat diet will still result in high absorption.

We believe that safety is confirmed and it is effective at reducing triglycerides at a level that would medically benefit the patient.

ONEMIA®
ONEMIA®, has a natural health product status in Canada and is commercialized as a medical foodthese features could set CaPre apart from currently available FDA-approved OM3 treatment options in the US.  Onemia ismarketplace and could give us a significant clinical and marketing advantage.

CaPre’s potential clinical benefits as compared to currently Acasti's only commercialized product, is a purified omega-3 phospholipids concentrate derived from krill oil with lower levels of phospholipids, EPA and DHA content than CaPre®. The term "medical food" is definedavailable FDA-approved OM3 treatment options are summarized in the United States Orphan Drug Act astable below and indicate that CaPre may deliver a food which is formulatedmore complete lipid management solution for patients with severe HTG:

- 33 -

Our Nonclinical Research

In addition to be consumed or administered enterally under the supervision of a physician and which is intended for the dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation. Nonclinical studies conducted by the Corporation, supported byour Phase 2 clinical testing conducted on Neptune Krill Oil (NKO®), have shown ONEMIA® to be safe and effective for the dietary management of omega-3 phospholipids deficiency and the related abnormal lipid profiles and cardiometabolic disorders. Phospholipid deficiency and abnormal lipid profiles can lead to a number of conditions, including hyperlipidemia (which generally manifests as high LDL-C and high triglycerides), atherosclerosis (the build-up of plaque on the inside of blood vessels), diabetes, rheumatoid arthritis, certain gastroenterology disorders and metabolic syndrome.

ONEMIA® was introduced in the U.S. market in 2011. In 2012, Acasti made its first sales of ONEMIA® to a medical food distributor in the United States, which has begun distribution of ONEMIA® through its network of dispensing physicians under its own brand name.  ONEMIA® is also available behind-the-counter in some pharmacies. During the fiscal years 2016, 2015 and 2014, Acasti generated revenues of approximately $38,000, $271,000 and $501,000, respectively, from sales of ONEMIA®.
Acasti decided to find strategic alternatives for Onemia® and focus its energy and resources on the development of CaPre®.  Acasti has entered into a non-exclusive licensing agreement for Onemia® with Neptune in which Neptune has to engage in best commercial efforts to expand the marketing of Onemia®.  Acasti will receive a royalty of 17.5% on net sales of Onemia® and Acasti believes given Neptune's sales and marketing leadership in the krill oil market that Neptune represents the best partner for Onemia®. As of February 29, 2016, no sales have been realized by Neptune.
24

Clinical and Nonclinical Research
Nonclinical
In preparation of its planned amendment of its Investigational New Drug ("IND") application with the FDA to conduct a Phase III clinical trial and for its New Drug Application ("NDA"), Acastitrials, we carried out an extensive nonclinical program to demonstrate the safety of CaPre®CaPre in a defined set of studies required by the FDA. These studies were carried out by contract research organizations in compliance with Good Laboratory Practice certificationPractices (GLPs) and conducted on various species of animals recommended by the FDA to investigate the long termlong-term effects of CaPre®CaPre at doses of up to 10g HED65 grams of human equivalent dose over 1339 weeks. In these studies, hematological, biochemical, coagulation and overall health parameters of CaPre®CaPre were evaluated and no toxic effects were observed in any of the segments of the studies. Once overall systemic toxicity was ruled out, Acasti'sOther studies focused on the potential toxic effects of CaPre®CaPre on vital systems, such as the cardiovascular, respiratory and central nervous system as evaluated by behaviouralbehavioral studies of the various species. These studies demonstratedshowed that CaPre®CaPre did not have any adverse or toxic effects on any of the vital systems investigated, again up to doses well above the recommended clinical dose of CaPre®.CaPre. To rule out any short term toxic effects of CaPre®CaPre on genes, genomic toxicity studies were undertaken on accepted cellular and animal models. These studies showed no toxic effects of CaPre®CaPre on any of the genetic markers indicative of potential gene altering toxic effects.
Acasti believes

We believe the studies conducted to date clearly indicate that CaPre® wasCaPre is well-tolerated and showedshows no toxic effects on any of the physiological and vital systems of the tested animal subjectsanimals or their genes or molecules at doses well above theCaPre’s anticipated clinical therapeutic dose of 1.0g-4.0g4 grams daily.

In parallel to its proposedour TRILOGY Phase III clinical trial, Acasti may complete3 program, we are currently completing additional  sets of nonclinical studies, dependingincluding a pre- and postnatal development study in rodents and a 26-week oral carcinogenicity study in transgenic homozygous rasH2 mice. Both study protocols were pre-approved by the FDA by means of Special Protocol Assessment (SPA) through the FDA’s Executive Carcinogenicity Assessment Committee. These nonclinical studies are required to support an NDA filing for CaPre.

Our TRILOGY Phase 3 Program

In March 2017, we announced our plans to proceed with our TRILOGY Phase 3 program following our End-of-Phase 2 meeting with the FDA in February 2017. Based on the regulatory pathway approvedguidance we received from the FDA, we are now actively conducting two pivotal, randomized, placebo-controlled, double-blinded Phase 3 studies to evaluate the safety and efficacy of CaPre in patients with severe HTG. These studies of 26-week duration will evaluate CaPre’s ability to lower TGs from baseline in approximately 500 patients (approximately 250 per study) randomized to either 4 grams daily or placebo. The FDA’s feedback supported our plan to conduct two studies in parallel, potentially reducing the cost and shortening the time to an NDA submission. These studies are being conducted in approximately 150 sites across North America.

- 34 -

The primary endpoint of these studies is to determine the efficacy of CaPre at 4 grams/day compared to placebo in lowering TGs after 12 weeks in severe HTG patients, and to confirm safety by FDAcontinuing to follow these patients for the full 26 weeks. The study was designed to provide at least 90% statistical power to detect a difference of at least a 20% decrease from baseline in TGs between CaPre and followed byplacebo. In addition, the Corporation, i.e. 505(b)(1) or 505(b)(2) as described below.

The first set ofPhase 3 studies the developmentalwill include numerous secondary and reproductive toxicology ("Dart"), isexploratory endpoints, which are designed to assess safetythe effect of CaPre on malethe broader lipid profile and female fertility, developmental toxicity (embryo-fetal development)certain metabolic, inflammatory and preCVD risk markers.

In November 2017, we announced that Dariush Mozaffarian, M.D., Dr.P.H., agreed to serve as the principal investigator of our Phase 3 clinical program. Dr. Mozaffarian is a cardiologist and postnatal developmentepidemiologist serving as the Jean Mayer Professor of Nutrition & Medicine, and the Dean of the Friedman School of Nutrition Science & Policy at Tuft’s University. His widely published research focuses on how diets, such as those rich in rodentsOM3s, and non-rodents.lifestyle influence cardiometabolic health and how effective policies can improve health and wellness.

Late in 2017, based on feedback from the FDA, we finalized our Chemistry, Manufacturing, and Controls plans and the clinical trial design that supports our TRILOGY Phase 3 program. In parallel with our Phase 3 clinical trial planning, additional current Good Manufacturing Practices (cGMP) production lots of API (known as NKPL66) and CaPre were manufactured, enabling us to build the CaPre and placebo inventory required to support the activated clinical trial sites and complete patient randomization. In the first calendar quarter of 2018, additional raw krill oil was purchased and additional lots of CaPre have been manufactured with this material for use in our Phase 3 program. With manufacturing of clinical trial material complete, we are now allocating additional technical resources to other activities related to the scale-up of manufacturing for the planned commercial launch of CaPre in 2021.

We initiated our TRILOGY Phase 3 program and began site activation and patient enrollment on schedule at the end of 2017. We are working with a major clinical research organization to manage our TRILOGY Phase 3 program. The second setTRILOGY studies continued to progress on schedule throughout 2018, and as of studies, the CARCINO, will consistdate of carcinogenicity testingthis annual report, they remain on schedule for delivery of topline results for TRILOGY 1 in December 2019, and TRILOGY 2 in January 2020. As of June 2019, our two on-going Phase 3 TRILOGY trials had reached 100% patient randomization at more than 150 clinical sites across the United States, Canada, and Mexico, and more than 60% of the patients in both rats and mice to identify a tumorigenic potential in animals and to assess the relevant risk in humans. Carcinogenicity testingtrials had completed their 6-month treatment plan.

Our first study, designated as TRILOGY 1, is usually required under the rules of the FDA prior to commercialization. Acasti believes that it will be necessary to complete the DART and CARCINO nonclinical studies prior to the filing of its NDA submission for CaPre®being conducted exclusively in the United States and expects to do sois fully randomized with a total of 245 patients. The TRILOGY 2 study, which is also fully randomized as of the date of this annual report, also has a total of 245 patients, and is being conducted in the allocated time frame. United States, Canada and Mexico. We expect to report topline results independently for each study as we receive the results.

The third setfollowing chart illustrates the design and dosing of studies, the long term animal toxicity studies, as defined by six month rodentour TRILOGY Phase 3 program for CaPre.

TRILOGY Phase 3 Clinical Program

- 35 -

Clinical Trial Process and nine month non-rodent, will be conducted as a requirement to support clinical trials to be done during the same extent of time or to support NDA. In these studies, we investigate the effects of CaPre® on blood parameters (hematology, biochemistry, coagulation), urinanalysis, opthamological and ECG testing.

Clinical
The Phase II COLT and TRIFECTA clinical trials were initiated during the Corporation's fiscal year ended February 29, 2012 under Canada's Natural Health Product Directorate ("NHPD") guidelines. The open-label COLT trial was completed duringTimeline

During the second half of 2017, our clinical research organization, or CRO, began the process of identifying a sufficient number of clinical sites with experienced investigators to conduct the two Phase 3 clinical trials. Site activation involves negotiating a contract, gaining approval from the site’s Institutional Review Board, or IRB, and delivery of clinical supplies. It was determined that approximately 150 sites across North America would be used to randomize the total of about 500 patients with severe HTG required to complete the two Phase 3 studies. Site activation was initiated in the fourth quarter of the 2014 fiscal year2017, and the double-blind TRIFECTA trial was completed in the first half of 2018. Site activation runs concurrently with patient screening and enrollment in order to secure an adequate number of sites to achieve the patient enrollment goals of the program.

Initiating a clinical trial involves numerous steps to engage investigators to screen and qualify patients as participants, prior to randomizing them to test the investigational drug. This entire screening and randomization process takes an average of six to nine weeks. Patient recruitment is conducted by each clinical trial site, supported by resources provided by the CRO. After a patient is identified by the investigator as a possible candidate for the clinical trial, they are screened to determine their eligibility for trial enrollment. The screening period takes four to six weeks. Patients must meet the inclusion criteria of the study, as described in the trial plan, also known as a protocol. We expect each patient will require two screening visits with the investigator’s clinical staff, whereby medical history and patient consent are obtained. This further qualification process takes two to three weeks.

When patient qualification is confirmed, the process of randomization begins. Approximately 245 patients were randomized in each Phase 3 study. This sample size per study would provide 90% statistical power to detect at least a 20% decrease in TG levels from baseline to week 12 between CaPre and placebo with a two-sided α at 0.05 (primary endpoint), a difference that is believed to be clinically relevant. A randomized controlled trial is designed to reduce bias when testing an investigational treatment. The process of assigning patients to these groups by chance, rather than choice, is completely blinded, and is called randomization. The groups are referred to as the experimental group or the control group. In the TRILOGY Phase 3 clinical trials, patients were assigned to either receive CaPre (experimental) or placebo (control). Each patient stays on CaPre or placebo for a period of 26 weeks.

The two TRILOGY Phase 3 clinical trials proceed to dosing both the experimental and control groups, according to the protocol, to assess CaPre’s efficacy and safety compared to placebo. In these double-blind studies, neither we, the patients or the investigators know which treatment (experimental drug or placebo) a patient receives. Only after all data has been recorded and analyzed will we, the investigators and the participants learn which were which. The trial conduct and patient safety are rigorously monitored to ensure regulatory compliance and to maintain the integrity of the study in order to assess outcomes.

Our Regulatory Strategy for CaPre

Our strategy is to develop and initially commercialize CaPre for the treatment of severe HTG. The TRILOGY Phase 3 program was initiated during the second quarterhalf of fiscal 2015. Based2017 and has been designed to evaluate the clinical effect of CaPre on TGs, non-HDL-C, LDL-C, and HDL-C levels together with a variety of other cardiometabolic biomarkers in patients with severe HTG.

We intend to pursue a 505(b)(2) regulatory pathway towards an NDA approval in the United States. A 505(b)(2) regulatory pathway is defined in the U.S. Federal Food Drug and Cosmetic Act (FDCA) as an NDA containing investigations of safety and effectiveness that are being relied upon for approval and were not, in whole, conducted by or for the applicant, and for which the applicant has not obtained a right of reference. 505(b)(2) regulatory pathways differ from a typical NDA because they allow a sponsor to rely, at least in part, on the FDA’s findings of safety and/or effectiveness for a previously- approved drug. We intend to pursue the 505(b)(2) regulatory pathway as a strategy to leverage the large body of safety data for LOVAZA, which could accelerate and streamline the development of CaPre and reduce associated costs and risks. This pathway still allows CaPre to retain its New Chemical Entity (NCE) status due to its novel, patented OM3 free fatty acid/phospholipid ester formulation.

In connection with our intended use of the 505(b)(2) pathway, the FDA supported our proposal to conduct our Bridging Study that compared CaPre (which has an OM3 free fatty acid/phospholipid composition) with LOVAZA (which has an OM3-acid ethyl esters composition) in healthy volunteers. In February 2017, we met with the FDA at an End-of-Phase 2 meeting where our Bridging Study data was discussed. We confirmed with the FDA the 505(b)(2) regulatory approach to use the safety data for LOVAZA and finalized the study design for our Phase 3 program that would be required for NDA approval.

- 36 -

Our planned remaining key development and regulatory milestones and timeline are presented below.

Our Intellectual Property Strategy

Under a license agreement we entered into with Neptune in August 2008, which was later amended on February 9, 2009 and March 7, 2013 (the “License Agreement”), we received an exclusive license to use certain intellectual property of Neptune (which includes several patents) to develop and commercialize CaPre and our novel and active pharmaceutical ingredients, or APIs, for use in pharmaceutical and medical food applications in the cardiometabolic field. The term of the License Agreement expires on the date of the last-to-expire licensed patents in 2022. As the result of a royalty prepayment transaction we entered into with Neptune on December 4, 2012, we are no longer required to pay any royalties to Neptune under the License Agreement during its term for the use of the licensed intellectual property.

On August 8, 2017, Neptune announced that it sold its krill oil inventory and intellectual property to Aker BioMarine Antarctic AS, or Aker. The sold intellectual property included the intellectual property to which rights were granted us under the License Agreement. As part of that transaction, Aker entered into a patent license agreement with Neptune pursuant to which it granted to Neptune the right to sublicense to us certain intellectual property as necessary to allow us to maintain our license grant under the original License Agreement. Accordingly, the license granted to us under the License Agreement remains in force.

Upon the expiry of the License Agreement, we believe that CaPre will be covered under our own issued and pending patents, and we do not believe that we will afterwards require any licenses to support the commercialization of CaPre.

We currently have patents granted and allowed in the following countries: United States, Canada, Russia, Belgium, Switzerland, Germany, Denmark, Spain, Finland, France, United Kingdom, Italy, Netherlands, Norway, Portugal, Sweden, Japan, Israel, Australia, China, Mexico, Panama, Saudi Arabia, Taiwan, South Africa, Chile and South Korea. We continue to expand our own intellectual property, or IP, patent portfolio. We have filed patent applications in more than 20 jurisdictions, including with the European Patent Office (but excluding the individual countries where we have subsequently registered), and in countries in North America, Asia and Australia for our “Concentrated Therapeutic Phospholipid Composition”, or Proprietary Composition, to treat HTG. We currently have more than 20 issued or allowed patents (including registered European countries) and numerous patent applications pending. A patent is generally valid for 20 years from the date of first filing. However, patent terms can be subject to extensions in some jurisdictions in order to compensate, for example, for delays caused by the patent office during prosecution of the patent application or for regulatory delays during the pre-market approval process.

Two U.S. patents, U.S. Patent Nos. 8,586,567 and 9,475,830, have issued which relate to the use of concentrated therapeutic phospholipid compositions for treating or preventing diseases associated with cardiovascular disease, comprising administering an effective amount of a concentrated therapeutic phospholipid composition. More specifically, U.S. Patent No. 8,586,567 covers a method of reducing serum TG levels comprising administering to a subject an effective amount of a concentrated phospholipid (PL) composition having, among other things, a concentration of total phospholipids in the composition of approximately 66% (w/w). U.S. Patent No. 9,475,830 covers a method of treating HTG comprising administering to a subject a therapeutically effective amount of a concentrated therapeutic phospholipid composition, having, among other things, a concentration of total phospholipids in the composition of approximately 60% (w/w). U.S. Patent No. 10,130,644 (U.S. Patent Application Serial No. 15/258,044) was granted and covers claims directed towards a composition encompassing an extract comprising a PL content between approximately 60% to approximately 99%. We also filed a U.S. continuation patent application (U.S. Patent Application Serial No. 16/135212) to pursue claims directed towards a composition encompassing an extract comprising a PL content between approximately 50% (w/w) to approximately 70% (w/w).

- 37 -

In 2017, additional patents were granted to us by the Taiwanese, South Korean, and Australian patent offices to protect our Proprietary Composition using compositions of matter claims and medical use claims. In 2018, we were also granted patents by the Canadian Intellectual Property Office, the European Patent Office (EPO), the Russian Patent Office, and the Japanese Patent Office for the Proprietary Composition, all of which contain compositions of matter claims and medical use claims. On January 9, 2019, we announced a Certificate for a European Patent had been issued by the European Patent Office. The granted patent is valid until 2030 and relates to a concentrated phospholipid composition and method of using the same for modulating blood lipids. This patent was validated in Belgium, Switzerland, Germany, Denmark, Spain, Finland, France, United Kingdom, Italy, Netherlands, Norway, Portugal and Sweden. We also received notices of allowances for patents in Chile, Mexico and Israel.

We believe these patents and patent applications increase potential commercial opportunities for CaPre, including through possible licensing and partnership opportunities. We are committed to building a global portfolio of patents to ensure long-lasting and comprehensive intellectual property protection and to safeguard potentially valuable market expansion opportunities.

Our patent No. 600167 in New Zealand, which is in force until 2030 and relates to a concentrated phospholipid composition comprising 60% PL and method of using the same for treating cardiovascular diseases, has been opposed by BIO-MER Ltd. The evidentiary stage in the New Zealand patent opposition has been completed. The next step is the hearing. In our view, no new prior art has been presented that was not already considered in other jurisdictions, such as in the United States, where our patents are in force.

We have received a notice issued from the Japan Patent Office (JPO) indicating that a third party filed an opposition against our Japanese Patent No. 6346121. We are in the process of replying by amendment of our claims to the Japanese Patent Office, which we believe would allow us to overcome the prior art cited in the opposition.

The trademark CaPre® is registered in the United States, Canada, Australia, China, Japan and Europe. We are currently in the process of developing a new brand name and logo for CaPre for launch into the U.S. market. That name, once it is developed, will be trademarked in all of the major jurisdictions around the world. In addition, two PCT applications that cover our encapsulation apparatus and manufacturing process while maintaining industrial trade secrets and know-how. We also filed a provisional application directed to our RKO manufacturing process.

Manufacturing of CaPre

We are developing CaPre as a new chemical entity (which means a novel chemical product protected by patents), and we are conducting our TRILOGY Phase 3 program using good manufacturing practices, or cGMP, good clinical practices, or cGCP, and good laboratory practices, or cGLP.

The contract manufacturing organizations, or CMOs, selected by us for manufacturing and packaging are all cGMP compliant. In preparation for our TRILOGY Phase 3 program, working together with our pharmaceutical CMOs, we advanced the installation and qualification of the proprietary extraction and purification equipment used to manufacture CaPre. We ran our first scaled cGMP production lots of CaPre at CordenPharma’s Chenôve facility in Dijon, France during the first half of 2017. We scaled up to 100 kg/day in late 2017 to fulfill the clinical product requirements for our TRILOGY Phase 3 program. We are currently operating at a scale of 20 tons per year, and plan to scale further to 40 tons to support our initial commercial launch. As of the date of this annual report, we have completed all clinical lots of NKPL66 and CaPre for our TRILOGY Phase 3 program, and we have made additional safety batches to mitigate any potential loss in shipping.

Our Business and Commercialization Strategy

Key elements of our business and commercialization strategy include initially obtaining regulatory approval for CaPre in the United States for severe HTG. We plan to launch CaPre ourselves in the U.S. market. Our preferred strategy outside the United States is to commercialize CaPre through regional or country-specific strategic partnerships, and to potentially seek support and funding from each partner for in-country clinical development, registration and commercialization activities. We believe that a late development-stage and differentiated drug candidate like CaPre could be attractive to various global, regional or specialty pharmaceutical companies, and we are taking a targeted approach to partnering and licensing in various geographies.

Our key commercialization goals include:

·complete our TRILOGY Phase 3 program and, assuming the results are positive, file an NDA by mid 2020 to obtain regulatory approval for CaPre in the United States, initially for the treatment of severe HTG, with the potential to afterwards expand CaPre’s indication to the treatment of high TGs (although at least one additional clinical trial would likely be required to expand CaPre’s indication to this segment);
- 38 -

·continue to strengthen our patent portfolio and other intellectual property rights;

·continue planning for the potential launch of CaPre in the United States by the second half of 2021; and

·continue to pursue strategic opportunities outside of the United States, such as licensing or similar transactions, joint ventures, partnerships, strategic alliances or alternative financing transactions, to provide development capital, market access and other strategic sources of capital.

In addition to completing our TRILOGY Phase 3 program, we expect that additional time and capital will be required to complete the filing of an NDA to obtain FDA approval for CaPre in the United States, and to complete business development collaborations, marketing and other pre-commercialization activities before reaching the commercial launch of CaPre in the United States.

Competition

The biotechnology and pharmaceutical industries are highly competitive. There are many pharmaceutical companies, biotechnology companies, public and private universities and research organizations actively engaged in the research and development of products that may be similar to CaPre. We believe that the number of companies seeking to develop products and therapies similar to CaPre will likely increase, particularly based on the positive results ofREDUCE-IT CVOT by Amarin, and if Astra Zeneca’s STRENGTH CVOT is successful.

Our competitors in the COLT trial, Acasti filed an IND submissionUnited States and globally include large, well-established pharmaceutical companies, specialty pharmaceutical sales and marketing companies, and specialized cardiovascular treatment companies. GlaxoSmithKline plc, which currently sells LOVAZA, a prescription-only OM3 fatty acid indicated for patients with severe HTG, was approved by the FDA to conduct a pharmacokinetic ("PK") studyin 2004 and has been available in the U.S. Acasti subsequentlymarket since 2005. Multiple generic versions of LOVAZA are now available in the United States. Amarin launched its prescription-only OM3 drug VASCEPA in 2013, and reached a market share of approximately 45% by the end of 2018. In addition, EPANOVA (OM3-carboxylic acids) capsules, a free fatty acid form of OM3 (comprised of 55% EPA and 20% DHA), is FDA-approved for patients with severe HTG.Omtryg, another OM3-acid fatty acid composition developed by Trygg Pharma AS, received FDA approval for severe HTG. Neither EPANOVA norOmtryg have yet been commercially launched, but could launch at any time.Matinas recently decided to conductrestart their development program for MAT9001, an omega-3 free fatty acid that consists primarily of EPA and docosapentaenoic acid (DPA). Other large companies with products that would compete indirectly with CaPre include AbbVie, Inc., which currently sells TRICOR and TRILIPIX for the PKtreatment of severe HTG, and NIASPAN, which is primarily used to raise HDL-C but is also used to lower TGs. Generic versions of TRICOR, TRILIPIX, and NIASPAN are also now available in the United States. In addition, we are aware of a number of other pharmaceutical companies that are developing products that, if approved and marketed, could compete with CaPre.

Raw Materials

We use semi-refined raw krill oil as our primary raw material to produce CaPre. Krill are generally harvested in Antarctic waters. The krill biomass is the world’s most abundant biomass and it is monitored to help ensure sustainable cultivation. Historically, we sourced all of our krill oil from Neptune. On August 8, 2017, Neptune announced it was discontinuing krill oil production, and selling its krill oil inventory and intellectual property to Aker. In the three-month period ending December 31, 2017, we purchased a reserve of krill oil from Neptune and Aker that was used in the production of CaPre capsules for our Phase 3 clinical trials. In addition, krill oil was purchased from Aker, which was also used in our Phase 3 trials. There are several alternative suppliers of krill oil that we have confirmed can meet our specifications for CaPre. Combined, they have more than adequate production capacity to meet our future needs.

Employees, Specialized Skills and Knowledge

Our management consists of professionals from business development, sales and marketing, clinical development, pharmaceutical manufacturing, finance and science backgrounds. Our research team includes scientists with expertise in pharmaceutical development, chemistry, manufacturing and controls, nonclinical and clinical studies, pharmacology, regulatory affairs, quality assurance/quality control, intellectual property and strategic alliances. We currently employ 28 full-time employees with the majority working out of our headquarters in Laval and at our laboratory in Sherbrooke. We generally require all of our employees to enter into invention assignment, non-disclosure and non-compete agreements. We rely on third-party consultants and contractors from time to time. Our employees are not covered by any collective bargaining agreement or represented by a trade union.

- 39 -

Additional Information About Our Phase 2 Clinical Trials

Our COLT Trial

Our COLT clinical trial, which was completed in the second quarter of fiscal 2015.

The COLT and TRIFECTA trials were conducted, by JSS Medical Research ("JSS"), a clinical research organization ("CRO") specializing in the pharmaceutical, biotechnology, nutraceutical and medical device industries, which is both owned and managed by Dr. John Sampalis, brother of Dr. Tina Sampalis, previously President and Chief Global Strategy Officer of Acasti. JSS2014, was selected by Acasti following a rigorous due diligence process conducted by the Corporation. Acasti's board of directors appointed an external independent auditor, SNC Lavalin Pharma, to confirm and validate the clinical trials' achievements, milestones and payments.
COLT Trial
The COLT trial, a randomized, open-label, dose-ranging, multi-center trial wasin Canada designed to assess the safety and efficacy of CaPre®CaPre in the treatment of patients with triglyceridesTG levels between 2.28 and 10.0 mmol/L (200-877200-877 mg/dL) (clinical trial.gov identifier NCT01516151).dL. The primary objectives of the COLT trialstudy were to evaluate the safety and efficacy of 0.5 1.0, 2.0gram, 1 gram, 2 grams and 4.0g4 grams of CaPre®CaPre per day in reducing fasting plasma triglyceridesTGs over 4 and 8 weeks, as compared to the standard of care alone.

The secondary objectives of the COLT trialstudy were to evaluate the effect of CaPre® on fasting plasma triglycerides in patients with triglycerides between 2.28 and 5.69 mmol/L (200-499 mg/dL) (mild to moderate hypertriglyceridemia); to evaluate the dose dependent effect on fasting plasma triglycerides in patients with triglycerides > 5.7 and <10 mmol/L (500-877 mg/dL); and to evaluate the effect of CaPre® on fasting plasma levels of LDL-C (direct measurement), HDL-C, non-HDL-C, hs-CRP and omega-3 index. Non-HDL-C is the total cholesterol minus the HDL-C.

25

evaluate:

·the effect of CaPre on fasting plasma TGs in patients with TGs between 200-499 mg/dL (mild to moderate HTG);

·the dose dependent effect on fasting plasma TGs in patients with TGs between 500-877 mg/dL (severe HTG); and

·the effect of CaPre on fasting plasma levels of LDL-C (direct measurement), HDL-C, non-HDL-C, hs-CRP and OM3 index.

The final results of the COLT trial indicated that CaPre®CaPre was safe and effective in reducing triglyceridesTGs in patients with mild to severe hypertriglyceridemiaHTG with significant mean (average) triglycerideTG reductions above 20% after 8 weeks of treatment with both daily doses of 4.0g4 grams and 2.0g.2 grams. Demographics and baseline characteristics of the patient population were balanced in terms of age, race and gender. A total of 288 patients were enrolled and randomized and 270 patients completed the study, which exceeded theour targeted number of evaluable patients. From this patient population, approximately 90% had mild to moderate hypertriglyceridemia.

CaPre® was safe and well tolerated. HTG.

The proportion of patients treated with CaPre®CaPre that experienced one or more adverse events in the COLT trial was similar to that of the standard of care group (30.0% versus 34.5%, respectively). A substantial majority of adverse events were mild (82.3%) and no severe treatment-related adverse effects have beenwere reported. Only one patient was discontinued from the study due to an adverse event of moderate intensity. It was noted thatWhile the rate of gastrointestinal side effects werewas higher in the CaPre®CaPre groups compared to standard of care alone and appeared to increase in a dose-related manner. However,manner, none of the subjects participating in the study suffered from a serious adverse event. The report concludesCOLT study results showed that even at higher doses, CaPre®CaPre is safe and well tolerated with only transient and predominantly mild adverse events occurring at low rates.

The COLT trial met its primary objective of showing CaPre®CaPre to be safe and effective in reducing triglyceridesTGs in patients with mild to severe hypertriglyceridemia.HTG. After only a 4-week treatment, CaPre®CaPre achieved a statistically significant triglycerideTG reduction as compared to standard of care alone. Standard of care could be any treatment physicians considered appropriate in a real-life clinical setting and included lifestyle modifications as well as lipid modifying agents, such as statins ezetimibe and fibrates.and/or ezetimibe. Patients treated with 4.0g4 grams of CaPre® aCaPre per day over 4 weeks reached a mean triglycerideTG decrease of 15.4% from baseline and a mean improvement of 18.0% over the standard of care. Results also showed increased benefits after 8 weeks of treatment, with patients on a daily dose of 4.0g4 grams of CaPre®CaPre registering a mean triglycerideTG decrease of 21.6% from baseline and a mean improvement of 14.4% over the standard of care. It is noteworthy that a mean triglyceride reduction of 7.1% was observed for the standard of care group at week 8, which may be explained by lipid lowering medication adjustments during the study, which was allowed to be administered in the standard of care group alone.

Moreover, after

After 8 weeks of treatment, patients treated with 1.0g1 gram of CaPre for the first 4 weeks of treatment and 2.0g2 grams for the following 4 weeks, showed a statistically significant triglyceridesTG mean improvement of 16.2% over the standard of care, corresponding to a 23.3% reduction for the 1.0-2.0g1-2 grams patient population as compared to a 7.1% reduction for the standard of care. After a 8 weekweeks of treatment, patients treated with 2.0g2 grams of CaPre®CaPre for the entire 8 weeks showed statistically significant triglyceridesTG mean improvements of 14.8% over the standard of care, corresponding to a 22.0% reduction for the 2.0g2 grams group as compared to a 7.1% reduction for the standard of care. Also, after 8 weeks of treatment, patients treated with 4.0g4 grams for the entire 8 weeks showed statistically significant triglycerides,TG, non-HDL-C and HbA1Cmean improvements of respectively, 14.4% and 9.8% and 15.0%, respectively, as compared to standard of care. The 4.0g4-gram group showed mean improvements in (i) triglycerides of 14.4% corresponds to a reduction of 21.6% as compared to a reduction of a 7.1% for the standard of care group, (ii) non-HDL-C of 9.8% corresponds to a reduction of 12.0% as compared to a reduction of 2.3% for the standard of care group, and (iii) HbA1C of 15.0% corresponds to a reduction of 3.5% as compared to an increase of 11.5% for the standard of care group. in:

·TGs of 14.4%, corresponding to a reduction of 21.6% as compared to a reduction of a 7.1% for the standard of care group;

·non-HDL-C of 9.8%, corresponding to a reduction of 12.0% as compared to a reduction of 2.3% for the standard of care group; and

·HbA1C of 15.0%, corresponding to a reduction of 3.5% as compared to an increase of 11.5% for the standard of care group.

In addition, all combined doses of CaPre®CaPre showed a statistically significant treatment effect on HDL-C levels, with an increase of 7.4% as compared to standard of care. Trends (p-value < 0.1) were also noted on patients treated with 4.0g4 grams of CaPre®CaPre for the entire 8-week treatment period with mean reduction of total cholesterol of 7.0% and increase of HDL-C levels of 7.7%, as compared to the standard of care. Furthermore, after doubling the daily dosage of CaPre® after an initial period of 4 weeks, the results indicate a dose response relationship corresponding to a maintained and improved efficacy of CaPre® after an 8-week period. The efficacy of CaPre® at all doses in reducing triglyceride levels and increased effect with dose escalation suggests that CaPre® may be titrable, allowing physicians to adjust dosage in order to better manage patients' medical needs. In addition, the results of the COLT trial indicateindicated that CaPre®CaPre has no significant deleterious effect on LDL-C (bad cholesterol) levels.

Acasti presented the results of the COLT

Our TRIFECTA Trial

Our TRIFECTA clinical trial, at two scientific forums, the National Lipid Association Scientific Sessionwhich was completed in Orlando in May 2014, and the 82nd Congress of European Atherosclerosis Society in Madrid in June 2014. Acasti also presented at the World Congress of Heart Disease in Boston in July 2014.

TRIFECTA Trial
The TRIFECTA trial (clinical trial gov identifier NCT01455844),2015, was a 12-week, randomized, placebo-controlled, double-blind, dose-ranging trial isin Canada, designed to assess the safety and efficacy of CaPre®,CaPre at a dose of 1.01 gram or 2.0g,2 grams on fasting plasma triglyceridesTGs as compared to a placebo in patients with mild to severe hypertriglyceridemia.TG levels between 200-877 mg/dL. A total of 387 patients were randomized and 365 patients completed the 12-week study, in lineconsistent with theour targeted number of evaluable patients. From this patient population, approximately 90% had mild to moderate hypertriglyceridemiaHTG with baseline triglyceridesTGs between 200 and 499 mg/dL (2.28 to 5.69 mmol/L).dL. The remainder had very highsevere HTG with baseline triglyceridesTGs between 500 and 877 mg/dL (> 5.7 and < 10 mmol/L).dL. Approximately 30% of patients were on lipid loweringlipid-lowering medications, such as statins, and approximately 10% were diabetic.

- 40 -

Similar to theour COLT trial,study, the primary objective of the TRIFECTA trial isstudy was to evaluate the effect of CaPre®CaPre on fasting plasma triglyceridesTGs in patients with triglyceridesTGs between 2.28 and 10.0 mmol/L (200-877200-877 mg/dL)dL and to assess the tolerability and safety of CaPre®.CaPre. The secondary objectives of the TRIFECTA trial arestudy were to evaluate the effect of CaPre® on fasting plasma triglycerides in patients with triglycerides between 2.28 and 5.69 mmol/L (200-499 mg/dL); to evaluate the dose dependent effect on fasting plasma triglycerides in patients with triglycerides > 5.7 and <10 mmol/L (500-877 mg/dL); to evaluate the effect of CaPre® in patients with mild to moderate hypertriglyceridemia and severe hypertriglyceridemia on fasting plasma levels of LDL-C (direct measurement), and on fasting plasma levels of HDL-C, non-HDL-C, hs-CRP and omega-3 index.

26

On September 29, 2014, Acasti announced successful top-line results for its Phase II double blind, placebo controlled trial (TRIFECTA) assessing the safety and efficacy of CaPre® for the treatment of patients with hypertriglyceridemia. CaPre®, Acasti's investigational new drug candidate, is composed of a patent-protected highly concentrated novel omega-3 phospholipid for the treatment of certain cardiometabolic disorders.
CaPre®evaluate:

·the effect of CaPre on fasting plasma TGs in patients with TGs between 200-499 mg/dL;

·the dose dependent effect on fasting plasma TGs in patients with TGs between 500-877 mg/dL; and

·the effect of CaPre in patients with mild to moderate HTG and severe HTG on fasting plasma levels of LDL-C (direct measurement), and on fasting plasma levels of HDL-C, non-HDL-C, hs-CRP and OM3 index.

CaPre successfully met the trial'sTRIFECTA study’s primary endpoint achieving a statistically significant (p < 0.001) mean placebo-adjusted decreaseobjective. The placebo-corrected percentage change in triglycerides from baseline to week-12, with reductionsTGs were decreases of 36.4%9.1% (p=0.049) and 9.7% (p=0.044) for 1 gram and 38.6% for 2 grams.

Along with material triglyceride reductions, all keygrams of CaPre, respectively. Key secondary endpointsobjectives were met. This is a notable achievement as the trial was not designed to show a statistical significance on any other lipid than triglycerides. Nevertheless, there was a statistically significant decrease in non-HDL-C versus placebo (p=0.038), with the 2 gram per day CaPre® group decreasing by 5.3% from baseline versus placebo over the 12-week period. Non-HDL is considered the most accurate risk marker for cardiovascular disease.
CaPre® was also shown to have a slight increase in HDL-C (good cholesterol) at both the 1 gram and 2 gram levels and decrease in LDL-C (bad cholesterol) at 2 grams. As well, there was a clinically meaningful mean placebo-adjusted reduction in VLDL-C of 10.9% and 13.5% at 1 gram and 2 gram daily doses of CaPre®, respectively. VLDL-C is considered a highly significant predictor of coronary artery disease.
met:

·there was a statistically significant decrease in non-HDL-C versus placebo (p=0.038), with the 2-gram group decreasing by 5.3% from baseline versus placebo over the 12-week period;

·HDL-C slightly increased at both the 1-gram and 2-gram levels; and

·LDL-C and slightly decreased at the 2-gram level.

Finally, a statistically significant dose response increase in the Omega-3 IndexOM3 index for patients on 1 gram and 2 grams of CaPre® versus placebo was noted. The Omega-3 IndexOM3 index reflects the percentage of EPA and DHA in red blood cell fatty acids. Theacids and the risk of cardiovascular disease is considered to be lower as the Omega-3 IndexOM3 index increases.

CaPre®

CaPre was found to be safe and well tolerated at all doses tested, with no serious adverse events that were considered treatmenttreatment- related. Out of 387 randomized patients, a total of 7 (1.8%) were discontinued as a result of adverse events, three were on placebo, two were on 1 gram of CaPre® and two were on 2 grams of CaPre®.CaPre. The predominant incidence was gastrointestinal related,gastrointestinal-related, with no difference between CaPre®CaPre and placebo. The safety profiles of patients on CaPre®CaPre and placebo were similar.

On March 2, 2015, the Corporation announced that it had received the full data for its Phase II double blind, placebo controlled (TRIFECTA) trial which confirms and supports the positive Phase II TRIFECTA results announced in September 2014, on the safety and efficacy of CaPre® in the treatment of patients with hypertriglyceridemia. The TRIFECTA trial's primary endpoint was met, with patients on 1 gram or 2 grams of CaPre® achieving a statistically significant mean placebo-adjusted decrease in triglycerides from baseline. In addition, benefits in other key cholesterol markers were announced, including slight increases in HDL-C (good cholesterol), no deleterious effect on LDL-C (bad cholesterol) and no safety concerns.
PK Trial
On November 11, 2013, the Corporation announced that it submitted an investigational new drug application to the FDA to initiate a PK trial of CaPre® in the United States. The PK trial was an open-label, randomized, multiple-dose, single-center, parallel-design study to evaluate blood profiles and bioavailability of omega-3 phospholipids on healthy volunteers taking single and multiple daily oral doses of 1.0g, 2.0g and 4.0g of CaPre®.
On January 9, 2014, the Corporation announced that the FDA granted Acasti approval to conduct its PK trial, having found no objections with the proposed PK trial design, protocol or safety profile of CaPre®. Acasti also announced that Quintiles, the world's largest provider of biopharmaceutical development and commercial outsourcing services, has been hired to conduct the PK trial. On July 9, 2014, Acasti announced the completion of the PK trial.
On September 30, 2014, Acasti announced top-line results for its PK trial. The PK trial was an open-label, randomized, multiple-dose, single-center, parallel-design study in healthy volunteers. Forty-two male and female individuals, at least 18 years of age, were enrolled into three groups of 14 subjects who took 1, 2 or 4 grams of CaPre®, administered once a day 30 minutes after breakfast. The objectives of the study were to determine the pharmacokinetic profile and safety on Day 1 following a single oral dose and Day 14 following multiple oral doses of CaPre® on individuals pursuing a low-fat diet (therapeutic lifestyle changes diet). The effect of a high-fat meal on the bioavailability of CaPre® was also evaluated at Day 15. Blood samples were collected for assessment of EPA and DHA total lipids in plasma to derive the pharmacokinetic parameters.
CaPre® pharmacokinetics results appeared to be approximately dose proportional over the 1 to 4 gram a day dose range. Following a single daily dose, CaPre® reached steady state (EPA and DHA levels plateaued) within seven days of dosing. The bioavailability of CaPre® did not appear to be meaningfully affected by the fat content of the meal consumed prior to dose administration.
CaPre® was found to be safe and well tolerated at all doses tested, with all subjects completing the study. Three adverse events were reported and considered relating to CaPre®, all of which were mild. The final clinical study report ("CSR") is completed.
27

Next Steps
Acasti is now corresponding with the FDA about the next steps proposed for the clinical development plan of CaPre®. Such correspondence is meant to allow the FDA to provide feedback on Acasti's plans and to clarify or answer specific questions that the FDA may have prior to such next steps (including an end of Phase II meeting, special protocol assessment and IND amendment) toward the pivotal Phase III clinical program. Such correspondence can take the form of written correspondence, discussions and potential in person meetings with the FDA.
Acasti intends to conduct a Phase III clinical trial in the United States, with potentially a few Canadian clinical trial sites, in a patient population with very high triglycerides (> or = 500 mg/dL). In addition to conducting a Phase III clinical trial, Acasti expects that additional time and capital will be required to complete the filing of a New Drug Application ("NDA") to obtain FDA approval for CaPre® in the United States before reaching commercialization, which may initially be only for the treatment of severe hypertriglyceridemia. The FDA may require Acasti to conduct additional clinical studies to obtain FDA approval for the treatment of mild to moderate hypertriglyceridemia, which may include a cardiovascular outcomes study.
More recently, the FDA has been providing Acasti with guidance and recommendations regarding the next steps in the clinical development of CaPre®.  Acasti is incorporating these comments into its development plan to be better aligned with current FDA views on CaPre® and to ensure it is well positioned to move towards regulatory approval. 
Acasti intends to pursue the regulatory pathway for CaPre® under section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act and conduct a pivotal bioavailability bridging study, comparing CaPre®  to an omega-3 prescription drug as a means of establishing a scientific bridge between the two. This will help determine the feasibility of a 505(b)(2) regulatory pathway, while also optimizing the protocol design of a Phase III program.  The 505(b)(2) approval pathway has been used by many other companies and Acasti's regulatory and clinical experts believe such a strategy is best for CaPre®.  This should allow Acasti to further optimize the advancement of CaPre® while benefiting most importantly from the substantial clinical and nonclinical data already available with another FDA-approved omega-3 prescription drug.  In addition, this should reduce the expected expenses and streamline the overall CaPre® development program required to support a NDA submission.  The 505(b)(2) application also enables regulatory submission of a New Chemical Entity (NCE) approval when some part of the data application is derived from studies not conducted by the applicant.
The finalization and execution of Acasti's comprehensive Capre® development plan and definitive Phase III program, overall costs and timelines are contingent upon FDA review and direction.  Acasti has recently received a response from the FDA on the CaPre® clinical development program.  With this endorsement Acasti has submitted an amendment to its current IND application to commence a bioavailability bridging study, while continuing to work closely with the FDA to ensure the Corporation is aligned with their views on Capre®'s clinical development.
In addition to conducting a Phase III clinical program, Acasti expects that additional time and capital will be required to complete the filing of a NDA to obtain FDA approval for CaPre® in the United States before reaching commercialization, which may initially be only for the treatment of severe hypertriglyceridemia. The FDA may require Acasti to conduct additional clinical or nonclinical studies to obtain FDA approval in severe hypertriglyceridemia and for the treatment of mild to moderate hypertriglyceridemia which may include a cardiovascular outcomes study.
Sales and Marketing
The Corporation has exclusive global commercial rights to CaPre®.  The Corporation does not currently have in-house sales and marketing or distribution capabilities and the Corporation currently plans to seek an established commercial partner for the distribution of CaPre® if it reaches commercialization. In addition to completing a Phase III clinical trial and the  nonclinical studies, the Corporation expects that additional time and capital will be required to complete the filing of a NDA to obtain FDA approval for CaPre® in the United States and to complete marketing and other pre-commercialization activities before reaching commercialization, which will  initially be only for the treatment of severe hypertriglyceridemia. The FDA may also require Acasti to conduct additional clinical studies to obtain FDA approval for the treatment of mild to moderate hypertriglyceridemia, which may include a cardiovascular outcomes study. The Corporation would focus initially on specialists, cardiologists and primary care physicians who comprise the top prescribers of lipid-regulating therapies as part of the sales and marketing strategy for CaPre®.
ONEMIA® is being distributed in the United States by Acasti to physicians, who then can either provide it to their patients directly or via a website by using a dedicated medical food access code. Acasti also makes ONEMIA® available via distributors and behind-the-counter in some pharmacies. In 2012, Acasti made its first sales of ONEMIA® to a medical food distributor in the United States, which has begun distribution through its network of dispensing physicians under its own brand name. Acasti intends to make ONEMIA® available via additional distributors and behind-the-counter in more pharmacies in the United States and to secure additional distribution partners to commercialize ONEMIA® outside of the United States. Revenues of Acasti for the fiscal years 2016, 2015 and 2014 were all derived from the sale of ONEMIA® and amounted to approximately $38,000, $271,000 and $501,000, respectively.
28

Acasti decided to find strategic alternatives for Onemia® and focus its energy and resources on the development of CaPre®.  Acasti has entered into a non-exclusive licensing agreement for Onemia® with Neptune in which Neptune has to engage in best commercial efforts to expand the marketing of Onemia®.  Acasti will receive a royalty of 17.5% on net sales of Onemia® and Acasti believes given Neptune's sales and marketing leadership in the krill oil market that Neptune represents the best partner for Onemia®. As of February 29, 2016, no sales have been realized by Neptune.
Competition
The biotechnology and pharmaceutical industries are highly competitive. There are many pharmaceutical companies, biotechnology companies, public and private universities and research organizations actively engaged in the research and development of products that may be similar to our products. It is probable that the number of companies seeking to develop products and therapies similar to our products will increase. Many of these and other existing or potential competitors have substantially greater financial, technical and human resources than we do and may be better equipped to develop, manufacture and market products. These companies may develop and introduce products and processes competitive with or superior to ours. In addition, other technologies or products may be developed that have an entirely different approach or means of accomplishing the intended purposes of our products, which might render our technology and products non-competitive or obsolete.
Our competitors both in the United States and globally include large, well-established pharmaceutical companies, specialty pharmaceutical sales and marketing companies, and specialized cardiovascular treatment companies. GlaxoSmithKline plc, which currently sells Lovaza ®, a prescription-only omega-3 fatty acid indicated for patients with severe hypertriglyceridemia was approved by FDA in 2004 and has been on the market in the United States since 2005. As described below, multiple generic versions of Lovaza are now available in the United States. Other large companies with competitive products include AbbVie, Inc., which currently sells Tricor ® and Trilipix ® for the treatment of severe hypertriglyceridemia and Niaspan ®, which is primarily used to raise HDL-C, but is also used to lower triglycerides. Generic versions of Tricor, Trilipix, and Niaspan are also now available in the United States. In addition, in May 2014, Epanova ® (omega-3-carboxylic acids) capsules, a free fatty acid form of omega-3 (comprised of 55% EPA and 20% DHA), was approved by the FDA for patients with severe hypertriglyceridemia. Epanova was developed by Omthera Pharmaceuticals, Inc., and is now owned by AstraZeneca Pharmaceuticals LP (AstraZeneca). Also, in April 2014, Omtryg, another omega-3-acid fatty acid composition developed by Trygg Pharma AS, received FDA approval for severe hypertriglyceridemia. Neither Epanova nor Omtryg have been commercially launched, but could launch at any time. Each of these competitors, other than potentially Trygg, has greater resources than we do, including financial, product development, marketing, personnel and other resources.
In addition, we are aware of other pharmaceutical companies that are developing products that, if approved and marketed, would compete with CaPre®. We believe Catabasis Pharmaceuticals, or Catabasis, and Sancilio & Company, or Sancilio, are also developing potential treatments for hypertriglyceridemia based on omega-3 fatty acids. To our knowledge, Catabasis initiated a Phase 2 clinical trial in October 2015 to evaluate the safety and efficacy of its product in combination with atorvastatin in patients with hypercholesterolemia, and Sancilio also is pursuing a regulatory pathway under section 505(b)(2) of the FDCA for its product and submitted an IND in July 2015. Sancilio completed two pivotal pharmacokinetic studies, and we expect the company to initiate a pivotal clinical endpoint study as the next step in development. In addition, we are aware that Matinas BioPharma, Inc. is developing an omega-3-based therapeutic for the treatment of severe hypertriglyceridemia and mixed dyslipidemia. Matinas BioPharma, Inc. has filed an Investigational New Drug Application with the FDA to conduct a human study in the treatment of severe hypertriglyceridemia. Akcea Therapeutics/Ionis Pharmaceuticals (formerly Isis Pharmaceuticals) announced favorable Phase 2 results of volanesorsen (formerly ISIS-APOCIII  Rx), a drug candidate administered through weekly subcutaneous injections, in patients with high triglycerides and type 2 diabetes and in patients with moderate to severe high triglycerides. Finally, Madrigal Pharmaceuticals has completed Phase 1 clinical testing of MGL-3196 for the treatment of high triglycerides and various lipid parameters in patients.In addition, Acasti is aware of the existence of omega-4 3 generic drugs and of other pharmaceutical companies (e.g Matinas Biopharma) that are developing products that, if approved, would compete with CaPre®. CaPre® may also compete with omega-3 dietary supplements that are available without a prescription.
There are also competitors in the medical food market. Pivotal Therapeutics announced positive results for its clinical trial of Vascazen, a medical food product being developed to improve patient lipid profiles and reduce cardiovascular disease risk factors.  In addition, Vaya Pharma, a division of Enzymotec Ltd has in its pipeline 3 medical food containing either fish or krill oil.
Intellectual Property
Acasti intends to obtain, maintain and enforce patent protection for its products, formulations, methods and other proprietary technologies, preserve its trade secrets and operate without infringing on the proprietary rights of other parties.
Patents
Acasti owns the following portfolio of patents, filed in various jurisdictions worldwide, including the United States, Canada, China, Japan, Australia and Europe:
29

Patent Family DescriptionDescription
WO (PCT)
Application Number
&
U.S. Patent
Number
Expiration Date of
the Patent Family
Number
of Patents
Worldwide
Concentrated Therapeutic Phospholipid CompositionComposition of Matter
WO2011050474 &
US8,586,567;
2028**
14*
(pending in approx. 38 countries)
*Five Australian innovation patents are valid until 2018 and patent (ZL 201080059930.4) granted by the Chinese Patent Office is valid until 2030
On November 19, 2013, the United States Patent and Trademark Office granted Acasti a concentrated phospholipid composition patent (US8,586,567) covering concentrated therapeutic phospholipid compositions useful for treating or preventing diseases associated with cardiovascular disease, metabolic syndrome, inflammation and diseases associated therewith, neurodevelopmental diseases, and neurodegenerative diseases, comprising administering an effective amount of a concentrated therapeutic phospholipid composition. The patent is valid until 2028, covers specific omega-3 phospholipid compositions, synthetic and/or natural, regardless of the extraction process, suitable for human consumption. The patent protects Acasti's phospholipid compositions, namely CaPre® and Onemia®.
The corresponding US8,586,567 Acasti patent has also been granted in South Africa and Japan while continuations have been filed in the US.
On March 25, 2015, Acasti announced that the Chinese Patent Office had granted Acasti a composition and use patent. The Patent (ZL 201080059930.4), which is valid until 2030, relates to concentrated therapeutic phospholipid omega-3 compositions and covers methods for treating or preventing diseases associated with cardiovascular diseases, metabolic syndrome, inflammation, neurodevelopmental diseases, and neurodegenerative diseases. On December 1st, 2015, Acasti announced that the patent had also been granted in Japan, Mexico and Taiwan.
To this day, Acasti's patents and pending patent applications have not been opposed and/or challenged by third parties, in Canada, the United States and Europe. The patent is currently under opposition by BIO-MER Ltd. in New Zealand. Acasti filed its Counter‑Statement of Opposition in October 2015.
A patent is generally valid for 20 years from the date of first filing. Patent terms can vary slightly for other jurisdictions, with 20 years from filing being the norm. In certain jurisdictions exclusivity can be formally extended beyond the normal patent term to compensate for regulatory delays during the pre-market approval process.
Licensed Rights
In August 2008, Neptune granted to Acasti a license to rights on its intellectual property portfolio related to cardiovascular pharmaceutical applications. This license allows Acasti to exploit the subject intellectual property rights in order to develop novel active pharmaceutical ingredients ("APIs") into commercial products for the medical food and the prescription drug markets. Acasti is responsible for carrying out the research and development of the APIs, as well as required regulatory submissions and approvals and intellectual property filings relating to the cardiovascular applications. The following table summarizes the patent applications related to Acasti's license from Neptune.
Patent descriptionUS Patent #Expiration Date of the PatentHolder
Composition of Matter
(natural phospholipids of marine origin containing flavonoids and polyunsaturated phospholipids and their uses)
US8,030,348 (1)
2022Neptune
Method of Use for Dyslipidemia
(krill and/or marine extracts for prevention and/or treatment of cardiovascular diseases, arthritis, skin cancer, premenstrual syndrome, diabetes and transdermal transport)
US8,057,8252022Neptune
Method of Extraction
(Method of extracting lipids from marine and aquatic animal tissues
US6,800,2992019Neptune


Note:
(1)Three continuations also stem from U.S. Pat. 8,030,348 (U.S. Pat. 8,278,351; and 8,383,675).
The license agreement provides that the products developed by Acasti must comply with the ranges specified in the license agreement pertaining to specific concentrations of phospholipids.
30

As a result of the royalty prepayment transaction entered into between Neptune and Acasti on December 4, 2012, Acasti is no longer required to pay any royalties to Neptune under the license agreement during its term for the use of the intellectual property under license.
Pursuant to the terms and conditions of the license agreement, Acasti is required, at Neptune's option, to have its products, if any, manufactured by Neptune at prices determined according to different cost-plus rates for each of the product categories under the license. A copy of the license agreement is available on SEDAR at www.sedar.com.
Brand names and trademarks
Acasti has applied for trademark protection of CaPre® as well as for the trademark ONEMIA®, and is the owner of the trademark BREAKING DOWN THE WALLS OF CHOLESTEROL™ in Canada, the United States and the European Union. The trademark CaPre® is now registered in certain jurisdictions including the United States, Canada and Europe.
Trade Secrets
In addition, Acasti protects its optimization and extraction processes through industrial trade secrets and know-how.
Raw Materials, Manufacturing and Facility
The Corporation's head office and operations are located at 545, Promenade Centropolis, suite 100, Laval, Québec, Canada, H7T 0A3.
Acasti uses krill oil as its primary raw material to produce CaPre® and ONEMIA®. There are two ocean regions where krill is generally harvested: the Southern Ocean (Antarctic krill Euphausia superba) and the Northern Pacific Ocean (Pacific krill Euphausia pacifica), mainly off the coasts of Japan and Canada. The total quantity of the krill species in these two oceans is estimated to be at least 500,000,000 metric tons. The World Health Organization estimates that approximately 271,000 metric tons of both krill species are harvested annually. From 2002 to 2011, between 105,000 to 212,000 metric tons originated from the Southern Ocean and, on average, 60,000 harvested metric tons originated from the Northern Pacific Ocean each year. The annual Antarctic krill catches represent an estimated 0.05% of the existing resource. Acasti's products are derived from Antarctic krill.
Acasti does not own its own manufacturing facility for the production of krill oil, CaPre® and ONEMIA® nor does it have plans to develop its own manufacturing facility in the foreseeable future. Acasti depends on third party suppliers and manufacturers for all of its required RKO and drug substance and products and, if approved for distribution by the FDA, Acasti expects to rely on cGMP- compliant third parties to manufacture NKPL66, encapsulate, bottle and package clinical supplies of CaPre®. The Corporation entered into contractual agreements with a third party for the manufacturing, in accordance with cGMP regulations imposed by the FDA, of CaPre® clinical material for the purposes of Acasti's upcoming clinical trials.
Employees, Specialized Skills and Knowledge
Acasti's management consists of professionals experienced in business development, finance and science. The Acasti research team includes scientists with expertise in pharmaceutical development, chemistry, manufacturing and controls, nonclinical and clinical studies, pharmacology, regulatory affairs, quality assurance/quality control, intellectual property and strategic alliances. As of February 29, 2016, the Corporation employed eleven people in Canada, ten of whom have biology, chemistry, biochemistry or microbiology credentials, and one administrative staff with a pharmaceutical industry background. Acasti generally requires all of its employees to enter into an invention assignment, non-disclosure and non-compete agreement. The Corporation relies, in part, on the administrative and other staff of its parent company, Neptune, and also relies on consultants from time to time. The Corporation's employees are not covered by any collective bargaining agreement or represented by a trade union. The Corporation places special emphasis on training for its personnel.

Government Regulation

United States Drug Development

Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping,record- keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug products such as CaPre®.CaPre. Generally, before a new drug can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific to each regulatory authority, submitted for review and approved by the regulatory authority.

31

FDA Regulatory Process

In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic ActFDCA and its implementing regulations. Drugs are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state and local statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable requirements at any time during the product development or approval process, or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA's refusal to approve pending applications, withdrawal of an approval, a "clinical hold" on investigations intended to support FDA approval, warning letters, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, debarment from government programs, restitution, disgorgement, civil or criminal penalties, or entry of consent decrees and integrity agreements. Any agency or judicial enforcement action could have a material adverse effect on Acasti.

In order to be marketed in the United States, CaPre®CaPre must be approved by the FDA through the NDA review process. The process required before a drug may be marketed in the United States generally involves the following:

·completion of extensive nonclinical (animal) and formulation studies in accordance with applicable regulations, including the FDA'sFDA’s Good Laboratory Practice, ("or GLP,") regulations;

·submission of an investigational new drug application, or IND, which must become effective before human clinical trials may begin in the United States;

·performance of adequate and well-controlled clinical trials in accordance with the applicable IND and other clinical study-relatedstudy- related regulations, such as current Good Clinical Practices, or cGMP, to establish the safety and efficacy of the proposed drug for its proposed indication;

·submission of an NDA for a new drug;
- 41 -

·satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the drug is produced to assess compliance with cGMP to assure that the facilities, methods and controls are adequate to preserve the drug'sdrug’s identity, strength, quality and purity;

·satisfactory completion of potential FDA audit of the nonclinical and/or clinical trial sites that generated the data in support of the NDA; and

·FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the United States.

The data required to support an NDA is generated in two distinct development stages: nonclinical and clinical. The nonclinical development stage generally involves synthesizing or otherwise producing the active component, developing the formulation and determining the manufacturing process, as well as carrying out non-human toxicology, pharmacology and drug metabolism studies in the laboratory, which support subsequent clinical testing. The sponsor must submit the results of the nonclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND, which is a request for authorization from the FDA to administer an investigational drug product to humans. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions regarding the proposed clinical trials. The FDA may also place the IND on clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. A clinical hold may be imposed at any time before or during a clinical trial due to safety concerns or non-compliance. Accordingly, the Corporation cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that could cause the trial to be suspended or terminated.

The clinical stage of development first involves the administration of the investigational drug to healthy volunteers orand then to patients with the disease being targeted with the drug, all done under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor'ssponsor’s control, in accordance with cGCPs, which include the requirement that allcGCP. All research subjects must provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, data collection, and the parameters to be used to monitor subject safety and assess the investigational drug'sdrug’s efficacy. Each protocol, and any subsequent amendments to the protocol or new investigator'sinvestigator’s information, must be submitted to the FDA as part of the IND. Further, each clinical trial must be reviewed and approved by an independent institutional review board, ("or IRB,") at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or its legal representative. There are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries, as well as reporting of safety information under the IND.

32

Clinical studies are generally conducted in three sequential phases that may overlap, known as Phase I,1, Phase II2 and Phase III3 clinical trials. Phase I1 generally involves a small number of healthy volunteers who are initially exposed to a single dose and then multiple doses of the investigational drug. The primary purpose of these studies is to assess the metabolism, pharmacologic action, side effect tolerability and safety of the drug. Phase II2 trials typically involve studies in disease-affected patients to determine the dose required to produce the desired benefits. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, as well as identification of possible adverse effects and safety risks and preliminary evaluation of efficacy. Phase III3 clinical trials generally involve large numbers of patients at multiple sites, often in multiple countries (from several hundred to several thousand subjects) and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use, and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product approval. Phase III3 clinical trials should, if possible, include comparisons with placebo and may include a comparison to approved therapies. The duration of treatment is often extended to mimic the actual use of a product during marketing. Generally, two adequate and well-controlled Phase III3 clinical trials are required by the FDA for approval of an NDA (Pivotal Studies).

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA. In addition, written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a significant risk for human subjects. The FDA, the IRB, or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.

Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides oversight and will determine whether or not a trial may move forward at designated check points based on review of interim data from the study. A clinical trial may be terminated or suspended based on evolving business objectives and/or competitive climate.

The manufacturing process must be capable of consistently producing quality batches of the investigational drug and, among other things, must develop methods for testing the identity, strength, quality and purity of the final drug product. The sponsor must develop appropriate labeling that sets forth the conditions of intended use. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.

- 42 -

Post-approval studies, sometimes referred to as Phase IV4 clinical trials, may be conducted after initial marketing approval. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase IV4 studies as part of a post-approval commitment, such as pediatric studies.

NDA and FDA Review Process

Nonclinical and clinical information is filed with the FDA in an NDA along with proposed labeling. The NDA is a request for approval to market the drug and must contain proof of safety, purity, potency and efficacy, which is demonstrated by extensive nonclinical and clinical testing. Data may come from company-sponsored clinical trials intended to test the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and effectiveness of the investigational drug product to the satisfaction of the FDA.

The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances. FDA approval of an NDA must be obtained before marketing a drug in the United States. In addition, under the Pediatric Research Equity Act, an NDA or supplement to an NDA must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers.

The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information. The FDA must make a decision on accepting an NDA for filing within 60 days of receipt. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, ("or PDUFA,") the FDA has ten months from the filing date in which to complete its initial review of a standard NDA and respond to the applicant. This review typically takes 12 months from the date the NDA is submitted to the FDA including the screening which takes a period of 60 days. The FDA does not always meet its PDUFA goal dates for standard NDAs, and the review process is oftenmay be significantly extended by FDA requests for additional information or clarification.

After the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product'sproduct’s identity, strength, quality and purity. The FDA will likely re-analyze the clinical trial data, which could result in extensive discussions with the FDA.

33

Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition, before approving an NDA, the FDA may also audit data from clinical trials to ensure compliance with cGCP requirements. After the FDA evaluates the application, manufacturing process and manufacturing facilities, it will issue a Complete Response Letter, ("CRL").or CRL. A CRL indicates that the review cycle of the application is complete and whether the application is approved and, when applicable, the CRL describes the specific deficiencies in the NDA and may require additional clinical data and/or an additional Phase III3 clinical trial(s), and/or other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. The applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than the Corporation interprets the same data.

There is no assurance that the FDA will ultimately approve a drug product for marketing in the United States and the Corporation may encounter significant difficulties or costs during the review process.

If a product receives marketing approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling, may condition the approval of the NDA on other changes to the proposed labeling, or may require a Risk Evaluation and Mitigation Strategy (REMS), which could limit the Corporation's ability to market the drug once approved. The FDA may also require the development of adequate controls and specifications, or a commitment to conduct post-market testing or clinical trials and surveillance to monitor the effects of approved products.

U.S. Post-Marketing Requirements

Following approval of a new product, a pharmaceutical company and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting to the applicable regulatory authorities of adverse experiences with the product and reporting Field Alert information relating to bacteriological contamination, significant deterioration of the product or failure of distributed product to meet specifications, providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are not described in the drug'sdrug’s approved labeling, ("off-label use")or “off-label use”, limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet. Although physicians may prescribe legally available drugs for off-label uses, manufacturers and distributors may not market or promote such off-label uses. Modifications or enhancements to the product or its labeling or changes of the site of manufacture are often subject to the approval of the FDA and other regulators, which may or may not be received or may result in a lengthy review process. In some cases, these changes will require the submission of clinical data and the payment of a user fee.

- 43 -

U.S. Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of the FDA approval of Acasti'sour prescription drug candidates, some of Acasti'sour U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product'sproduct’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The USPTO in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, Acasti intendswe intend to apply for restoration of patent term for one of itsour currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing and review of the relevant NDA.

Non-U.S. Drug Regulation

In Canada, biopharmaceutical product candidates are regulated by the Food and Drugs Act and the related rules and regulations, promulgated thereunder, which are enforced by the Therapeutic Products Directorate of Health Canada. In order to obtain approval for commercializing new drugs in Canada, the sponsor (Acasti) must satisfy many regulatory conditions. The sponsor must first complete preclinical studies in order to file a clinical trial application, ("or CTA,") in Canada. The sponsor will then receive different clearance authorizations to proceed with Phase I clinical trials, which can then lead to Phase II2 and Phase III3 clinical trials. Once all three phases of trials are completed, the sponsor must file a registration file named a New Drug Submission, ("or NDS,") in Canada. If the NDS demonstrates that the product was developed in accordance with the regulatory authorities'authorities’ rules, regulations and guidelines and demonstrates favorable safety and efficacy and receives a favorable risk/benefit analysis, then the regulatory authorities issue a notice of compliance, which allows the sponsor to market the product.

In addition to regulations in the United States and Canada, Acasti iswe are subject to a variety of regulations governing clinical studies and commercial sales and distribution of itsour products in other jurisdictions around the world. These laws and regulations typically require the licensing of manufacturing and contract research facilities, carefully controlled research and testing of product candidates and governmental review and approval of results prior to marketing therapeutic product candidates. Additionally, they require adherence to good laboratory practices, good clinical practices and good manufacturing practices during production. The process of new drug approvals by regulators in the United States, Canada and the European Union are generally considered to be among the most rigorous in the world.

34

Whether or not the FDA or Health Canada approval is obtained for a product, Acastiwe must obtain approvalsapproval from the comparable regulatory authorities of other countries before itwe can commence clinical studies or marketing of the product in those countries. The approval process varies from country to country and the time may be longer or shorter than that required for the FDA or Health Canada approval. The requirements governing the conduct of clinical studies, product licensing, pricing and reimbursement vary greatly from country to country. In some international markets, additional clinical trials may be required prior to the filing or approval of marketing applications within the country.

Medical Food Regulation
Prior to 1972, medical foods that mitigated serious adverse effects of the underlying diseases were regulated by the FDA as "drugs" under the Federal Food, Drug, and Cosmetic Act. In 1972, in an effort to encourage innovation and availability of such products, the FDA revised its regulatory approach and classified these products as "foods for special dietary use." The Orphan Drug Amendments of 1988 provided a statutory definition of a medical food, which means a food that is formulated to be consumed or administered enterally under the supervision of a physician and which is intended for the specific dietary management of a disease or condition, for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation. In the Nutrition Labeling and Education Act of 1990, the U.S. Congress exempted medical foods from the nutrition labeling, health claim, and nutrient disclosure requirements applicable to most other foods, further distinguishing this category from conventional food products.
The regulatory status of these products in other countries varies.  It is also possible that such products would be regulated in Canada as natural health products pursuant to the Natural Health Products Regulations.

Active Pharmaceutical Ingredient Regulation

The FDA will regulate finished products containing APIs developed or under development by Acasti; however, the FDA does not actively regulate the APIs themselves.us. Depending on its intended uses, a finished product containing the API may be regulated as a drug or a medical food under the procedures described above. It may be possible to market a finished product containing an API developed or under development by Acastius as a dietary supplement. Dietary supplements do not require FDA premarket approval. However, it may be necessary to submit a notification to the FDA that a company intends to market a dietary supplement containing a "new“new dietary ingredient." In general, the regulatory requirements in other countries also depend on the nature of the finished product and do not focus on the API itself.

Fiscal Year 2019 Developments

·On April 20-21, 2018, we hosted a well-attended investigators meeting for the TRILOGY Phase 3 studies in Fairfax, Virginia. The aim of the investigators meeting was to ensure that the clinical studies are conducted in compliance with the clinical study protocol, guidelines and applicable regulations. Approximately 200 attendees participated in this meeting, which was composed of physicians, study nurses and study coordinators representing 90 of the TRILOGY clinical sites together with the clinical team of Acasti, our CRO, and the lead Principal Investigator for the TRILOGY studies, Dariush Mozaffarian, M.D., Dr.P.H., who also presented at the meeting. Dr. Mozaffarian is a highly regarded cardiologist at Tufts University, and his research focuses on the influence of OM3s, diet and lifestyle on cardiometabolic health.
- 44 -

·On May 9, 2018, we announced the closing of a public offering of 9,530,000 units at a price of $1.05 per unit for aggregate gross proceeds to us of $10,006,500, with each unit consisting of one common share and one common share purchase warrant. The common share purchase warrants comprising the units are exercisable at any time prior to May 9, 2023 at an exercise price of $1.31 per common share. On May 14, 2018, we announced that the underwriter had exercised the over-allotment option in full pursuant to which we issued, on the same date, 1,429,500 additional units upon the same terms as set forth above for additional aggregate gross proceeds to us of $1,500,975.

·On April 27, 2018, we announced the appointment of Donald Olds to our board of directors and audit committee. See “Item 6. Directors, Senior Management and Employees – Directors and Senior Management.”

·On June 4, 2018, we announced the appointment of Mr. Brian Groch as our Chief Commercial Officer. Mr. Groch brings over 25 years of senior experience in the healthcare and life science industries, including product commercialization, developing and executing global sales strategies, business development, and operations. Mr. Groch will drive our global commercialization strategy, including U.S. launch planning and execution, and commercial partnering activities in the rest of the world. See “Item 6. Directors, Senior Management and Employees – Directors and Senior Management.”

·As of June 26, 2018, we had activated 110 clinical sites, 463 patients had been enrolled and 41 patients had been randomized for the CaPre TRILOGY Phase 3 program. Additional cGMP production lots of API and CaPre were manufactured during the fourth quarter, enabling us to continue to accumulate the CaPre and placebo inventory required to support the TRILOGY Phase 3 trials.

·On September 24, 2018, we announced that Mr. Jean-François Boily was appointed as the Vice President of Finance and Mrs. Linda O’Keefe, our former Chief Financial Officer, announced her retirement.

·On October 11, 2018, we announced the closing of its underwritten public offering in the United States of 19,090,000 Common Shares on October 9, 2018 (which included the exercise in full by the underwriters of their over-allotment option to purchase 2,490,000 additional common shares), at an offering price of US$1.00 per common share generating net proceeds to us of approximately $22.6 million (US$17.4 million).

·On October 23, 2018, we announced the closing of an underwritten public offering in Canada of 21,562,000 common shares (which included the exercise in full by the underwriters of their over-allotment option to purchase 2,812,500 additional common shares), at an offering price of $1.28 per common share generating net proceeds to us of approximately $25.4 million.

·On January 9, 2019, we announced a Certificate for a European Patent had been issued to us by the European Patent Office. The granted patent is valid until 2030 and relates to a concentrated phospholipid composition and method of using the same for modulating blood lipids. This patent was validated in Belgium, Switzerland, Germany, Denmark, Spain, Finland, France, United Kingdom, Italy, Netherlands, Norway, Portugal and Sweden.

·On February 21, 2019, we announced announces we had been recognized by the TSX Venture Exchange in its “2019 Venture 50,” a ranking of the strongest companies on TSX Venture Exchange by share price, trading volume and market capitalization.

·On April 1, 2019, we announced publication of CaPre’s bioavailability study in a leading peer-reviewed journal. This study further validated our prior study results demonstrating that the bioavailability of CaPre is significantly better than LOVAZA when taken with a low-fat meal.

·As of June 3, 2019, 100% of the required total patients for our two TRILOGY Phase 3 studies had been randomized, and more than 60% of patients who had previously been randomized in our TRILOGY program had already completed their 6-month treatment plans. This progress supports management’s expectation for announcing topline results of TRILOGY 1 before the end of calendar 2019 and topline results of TRILOGY 2 in January 2020.

C.Organizational Structure
The Corporation has

We have no subsidiaries. As of May 25, 2016, Neptune owns 5,064,694 Class A shares of Acasti (the "Common Shares"), representing approximately 47.28% of the Common Shares issued and outstanding. The Common Shares are voting, participating and have no par value. Neptune also owns a warrant entitling it to acquire 59,250 Common Shares.

D.Property, Plants and Equipment
The Corporation's

Our head office and operations are located at 545, Promenade Centropolis, suite 100, Laval, Québec, Canada, H7T 0A3.

Acasti does0A3 and our R&D and quality control laboratory is located at Espace Lab, 2650 Maximilien-Chagnon, Sherbrooke, Québec, Canada, J1E0M8. We do not own itsour own manufacturing facility for the production of krill oil, CaPre®CaPre; however, we do own the proprietary equipment for producing the API and ONEMIA® nor does itdrug product. We currently do not have plans to develop itsour own manufacturing facilityfacility. However, this could change in the foreseeable future. Acasti dependsfuture, as we consider the most cost-effective approaches to producing CaPre while ensuring the highest level of quality. We currently depend on third party suppliers and manufacturers for all of itsto produce our required RKOraw krill oil and drug substance and products and, ifproducts. If CaPre is approved for distribution by the FDA, Acasti expectswe initially expect to rely on cGMP- compliantcGMP-compliant third parties to manufacture NKPL66, which is API in CaPre, encapsulate, bottle and package clinical supplies of CaPre®.CaPre.

- 45 -
The Corporation

We have entered into contractual agreements withan agreement CordenPharma Chenôve, a third party CMO, for the manufacturing of CaPre clinical material for the purposes of our ongoing TRILOGY Phase 3 program in accordance with cGMP regulations imposed by the FDA, of CaPre® clinical material for the purposes of Acasti's upcoming clinical trials. See "Risk Factors – Risks Related to Product Development, Regulatory Approval and Commercialization – The Corporation's supply of krill oil for commercial supply and clinical trials is dependent upon relationships with Neptune and other third party manufacturers and key suppliers" and "Risk Factors - Risks Related to Product Development, Regulatory Approval and Commercialization - The Corporation relies on third parties for the manufacturing, production and supply of CaPre® and ONEMIA® and may be adversely affected if those third parties are unable or unwilling to fulfill their obligations." We are not subject to any material environmental risk in connection with our property, plants or equipment.

35

FDA.

Item 4A.Unresolved Staff Comments

Not applicable.

Item 5.Operating and Financial Review and Prospects
Information relating to our operating and financial review and prospects are detailed in the MD&A, for the years ended February 29, 2016, February 28, 2015 and February 28, 2014 included herein, and in conjunction with the audited consolidated financial statements and related notes included at "Item 17 – Financial Statements" of this Annual Report.
A.Operating Results
Refer to our MD&A included below in this Annual Report.
B.Liquidity and Capital Resources
Refer to our MD&A included below in this Annual Report.
C.Research and Development, Patents and Licenses, etc.
We incurred research and development costs net of tax credits amounting to $7,389,415, $8,856,941 and $6,059,311 in the years ended February 29, 2016, February 28, 2015 and February 29, 2014, respectively. Refer to the MD&A included below and to "Item 4.B – Business Overview" of this Annual Report.
D.Trend Information
The only trend during the current fiscal year reasonably likely to affect our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause our reported financial information not necessarily to be indicative of future operating results or financial condition is our expectation that research and development expenses will continue to trend upward as we pursue our product development strategy. Please refer to the MD&A included below.
E.Off-Balance Sheet Arrangements
Refer to our MD&A included below in this Annual Report.
F.Tabular Disclosure of Contractual Obligations
Refer to our MD&A included below in this Annual Report.
G.Safe Harbor

This annual report contains forward-looking statements, principally in, but not limited to, "Item“Item 4 - Information on the Company"Company” and "Item“Item 5 - Operating and Financial Review and Prospects"Prospects”. These statements may be identified by the use of words like "plan"“plan”, "expect"“expect”, "aim"“aim”, believe"believe”, "project"“project”, "anticipate"“anticipate”, "intend"“intend”, "estimate"“estimate”, "will"“will”, "should"“should”, "could"“could” and similar expressions in connection with any discussion, expectation, or projection of future operating or financial performance, events or trends. In particular, these include statements about the Corporation'sour strategy for growth, future performance or results of current sales and production, interest rates, foreign exchange rates, and the outcome of contingencies, such as acquisitions and/or legal proceedings and intellectual property issues.

Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors, including, among other things, the factors discussed in this annual report under "Item“Item 3.D - Risk Factors"Factors” and factors described in documents that the Corporationwe may furnish from time to time to the SEC. Although the forward-looking information is based upon what the Corporation believeswe believe to be reasonable assumptions, no person should place undue reliance on suchforward-looking information since actual results may vary materially from the forward-looking information. Except as required by law, the Corporation undertakeswe undertake no obligation to update publicly or revise any forward-lookingforward- looking statements because of new information. Please refer to the forward-looking statements section“Special Note Regarding Forward-Looking Statements” at the beginning of this annual report.

MANAGEMENT'S ANALYSIS OF THE FINANCIAL SITUATION AND OPERATING RESULTS — YEARS ENDED FEBRUARY 28, 2016 AND FEBRUARY 28, 2015 AND FEBRUARY 28, 2014
36

report for additional details.

Management’s Discussion and Analysis of Financial Situation and Operating Results Fiscal Years Ended March 31, 2018 and 2019

Introduction

This managementmanagement’s discussion and analysis ("(“MD&A"&A) is presented in order to provide the reader with an overview of the financial results and changes to theour financial position of Acasti Pharma Inc. ("Acasti" or the "Corporation") as at February 29, 2016March 31, 2019 and for the year then ended. This MD&A explains theour material variations in the financial statements of operations, financial position and cash flows of Acasti for the yearsyear ended March 31, 2019 and 2018, thirteen-month and one-month periods ended March 31, 2017 and the twelve-month period ended February 29, 2016 and February 28, 2015 and 2014. The Corporation effectively commenced active operations with the transfer of an exclusive worldwide license from its parent corporation, Neptune Technologies & Bioressources Inc. ("Neptune"), in August 2008.

2017.

This MD&A completed on May 25, 2016, must be read in conjunction with the Corporation'sour audited financial statements for the yearsyear ended February 29, 2016March 31, 2019 and February 28, 20152018, and 2014. The Corporation'sthe thirteen-month period ended March 31, 2017. Our audited financial statements were prepared in accordance with International FinancingFinancial Reporting Standards ("IFRS"(“IFRS), as issued by the International Accounting Standards Board. The Corporation'sOur financial results are published in Canadian dollars. All amounts appearing in this MD&A are in thousands of Canadian dollars, except share and per share amounts or unless otherwise indicated.

Caution Regarding Non-IFRS Financial Measures

The Corporation uses

We use multiple financial measures for the review of our operating performance. These measures are generally IFRS financial measures, but one adjusted financial measures, including Non-IFRSmeasure, non-IFRS operating loss, (loss from operating activities before interest, taxes, depreciation and amortization),is also used to assess itsour operating performance. TheseThis non-IFRS financial measures aremeasure is directly derived from the Corporation'sour financial statements and areis presented in a consistent manner. The Corporation uses theseWe use this measure, in addition to the IFRS financial measures, for the purposes of evaluating itsour historical and prospective financial performance, as well as itsour performance relative to competitors. These measures also help the Corporationcompetitors, and to plan and forecast for future periods as well as to make operational and strategic decisions. The Corporation believesWe believe that providing this non-IFRS information to investors, in addition to IFRS measures, allows them to see the Corporation'sour results through the eyes of management, and to better understand its historical and future financial performance.

Securities regulations require that companies caution readers that earnings

Earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. The Corporation uses Non-IFRSWe use non-IFRS operating loss to measure itsour performance from one period to the next without the variation caused by certain adjustments that could potentially distort the analysis of trends in ourits operating performance, and because the Corporation believeswe believe it provides meaningful information on the Corporationour financial condition and operating results. Acasti'sOur method for calculating Non-IFRSnon-IFRS operating loss may differ from that used by other corporations.

- 46 -
Acasti calculates its Non-IFRS

We calculate our non-IFRS operating loss measurement by adding to net loss finance costs,expenses that includes change in fair value of derivative warrant liabilities and foreign exchange gain (loss), depreciation and amortization, impairment loss, litigation settlement expected to be paid via common shares, and stock-based compensation and by subtracting finance income. Other itemsincome and deferred tax recovery. Items that do not impact our core operating performance of the Corporation are excluded from the calculation as they may vary significantly from one period to another. Finance income/costs include foreign exchange gain (loss) and change in fair value of derivative warrant liabilities. AcastiWe also excludesexclude the effects of certain non-monetary transactions recorded, such as stock-based compensation and litigation settlement expected to be paid via common shares, from its Non-IFRSour non-IFRS operating loss calculation.The Corporation believes it is useful to exclude this item as it is a non-cash expense. Excluding this item does not imply it is necessarily non-recurring.

A reconciliation of net loss to Non-IFRSnon-IFRS operating loss is presented later in this document.

MD&A.

Basis of presentationPresentation of the financial statements

The Corporation's current assets of $11,325 as at February 29, 2016 include cash and short-term investments for an amount of $10,470, mainly generated by the net proceeds from the public and private offerings of Common Shares and warrants, completed on December 3, 2013 and February 7, 2014, respectively. The Corporation's liabilities at February 29, 2016Financial Statements

We are comprised primarily of amounts due to creditors for $1,126 as well as derivative warrant liabilities of $156, which represents the fair value as at February 29, 2016, of the warrants issued to the Corporation's public offering participants. The Warrants forming part of the Units are derivative liabilities ("Derivative warrant liabilities") for accounting purposes due to the currency of the exercise price being different from the Corporation's functional currency.  The warrant liabilities will be settled in Class A Common Shares.  The fair value of the Warrants issued was determined to be $0.58 per warrant upon issuance and $0.09 per warrant as at February 29, 2016. The fair value of the Warrants is revalued at each reporting date.

The Corporation is subject to a number of risks associated with the successful development of new products and their marketing,our ongoing priorities, including the conduct of our clinical program and its clinical studies and their results, the meeting of development objectives set by Neptune in its license agreement, and the establishment of strategic alliances. The Corporation hasalliances and the development of new pharmaceutical products and their marketing. Our current product in development requires approval from the FDA and equivalent regulatory organizations in other countries before its sale can be authorized. Certain risks have been reduced for the longer term with the outcome of our actions, including our intellectual property strategy execution with filed patent applications in more than 20 jurisdictions, with more than 20 issued patents and with numerous additional patent applications pending. We have incurred significant operating losses and negative cash flows from operations since our inception. To date, the Corporation haswe have financed itsour operations through the public offering and private placement of Common Shares, fundscommon shares (with or without warrants) and convertible debt, the proceeds from its parent corporation, proceeds fromresearch grants and research tax credits, and the exercises of warrants, rights and options and research tax credits.options. To achieve the objectives of itsour business plan, the Corporation planswe plan to establish strategic alliances and raise the necessary capital. It is anticipated thatfunds through additional securities offerings and the products developed byestablishment of strategic alliances as well as additional research grants and research tax credits. Our ability to complete the Corporation will require approval from the U.S. Foodneeded financing and Drug Administration and equivalent organizations in other countries before their sale can be authorized.  The ability of the Corporation to ultimately achieve profitable operations is dependent on a number of factors outside of our control. See Item 3 “Risk Factors” in this MD&A.

We have incurred operating losses and negative cash flows from operations since inception. Our current assets of $37.3 million as at March 31, 2019 include cash and cash equivalents totaling $22.5 million, and marketable securities of $11.9 million mainly generated by the Corporation'snet proceeds from our recent securities offerings. Our current liabilities of $18.2 million at March 31, 2019 are comprised primarily of amounts due to or accrued for creditors. Management projects that additional funds will be needed in the future, after TRILOGY phase 3 clinical trials for activities necessary to prepare for CaPre’s commercial launch, including the scale up of our manufacturing operations, the completion of the potential regulatory (NDA) submission package (assuming positive Phase 3 clinical results), and the expansion of business development and U.S. commercial launch activities. We are working towards the development of strategic partner relationships, as well as actively seeking additional non-dilutive funds in the future, but there can be no assurance as to when or whether we will complete any strategic collaborations or succeed in identifying non-dilutive funding sources. Consequently, we may need to raise additional equity capital in the future to fund these activities. In particular, raising additional capital is subject to market conditions and is not within our control. If we do not raise additional funds or find one or more strategic partners, we may not be able to realize our assets and discharge our liabilities in the normal course of business. As a result, there exists a material uncertainty that casts substantial doubt about our ability to continue as a going concern and, therefore, realize our assets and discharge our liabilities in the normal course of business.

The financial statements have been prepared on a going concern basis, which assumes we will continue our operations in the foreseeable future and will be able to realize our assets and discharge our liabilities and commitments in the ordinary course of business. These financial statements do not include any adjustments to the carrying values and classification of assets and liabilities and reported expenses that may be necessary if the going concern basis was not appropriate for these financial statements. If we are unable to continue as a going concern, material write-downs to the carrying values of our assets, including our intangible asset, could be required.

- 47 -

37

SELECTED FINANCIAL INFORMATION
(In thousands

Selected Financial Information

  Three-month periods ended  Year ended  One-month ended  Thirteen-month
period
ended
 
  March 31,
2019
  March 31,
2018
  March 31,
2019
  March 31,
2018
  March 31,
2017
  March 31,
2017
 
  $  $  $  $  $  $ 
Net loss  (16,806)  (8,140)  (51,566)  (21,504)  (769)  (11,247)
Basic and diluted loss per share  (0.22)  (0.32)  (0.95)  (1.23)  (0.05)  (1.01)
Non-IFRS operating loss1  (12,095)  (6,427)  (40,157)  (16,095)  (406)  (7,798)
Total assets  48,471   22,959   48,471   22,959   25,456   25,456 
Working capital2  19,085   2,795   19,085   2,795   8,143   8,143 
Total non-current financial liabilities  16,263   8,038   16,263   8,038   1,615   1,615 
Total equity  13,962   8,224   13,962   8,224   21,703   21,703 

Comments on the Significant Variations of dollars, exceptResults from Operations for the Three-Month Periods, Years Ended March 31, 2019 and 2018 and the Thirteen-Month Period Ended March 31, 2017

The net loss totaling $16,806 or ($0.22) per share data)


       
  Three-month periods ended  Years ended 
  
February
29, 2016
  
February
28, 2015
  
February
29, 2016
  
February
28, 2015
  
February
28, 2014
 
                $ 
Revenue from sales  21   178   38   271   501 
Non-IFRS operating Loss(1)
  (1,163)  (2,263)  (6,569)  (8,506)  (5,584)
Net loss and comprehensive loss  (1,919)  (2,311)  (6,317)  (1,655)  (11,612)
Basic and diluted loss per share  (0.18)  (0.21)  (0.59)  (0.16)  (1.38)
Total assets  28,517   37,208   28,517   37,208   45,632 
Working capital(2)
  12,185   18,020   10,184   18,020   24,646 
Total non-current financial liabilities  156   2,357   156   2,357   11,181 
Total equity  27,220   33,228   27,220   33,228   33,280 
(1)for the three months ended March 31, 2019 increased by $8,666 or $0.10 per share from the net loss totaling $8,140 or ($0.32) per share for the three months ended March 31, 2018. The Non-IFRSincrease in net loss was resulted primarily from the $5,668 increased non-IFRS operating loss (lossgenerated by planned research and development expenses to execute the TRILOGY Phase 3 clinical program as well as from operating activities before interest, taxes,a $2,084 (see “Reconciliation of Net Loss to Non-IFRS Operating Loss”) increase in financial expenses due mostly to a loss related to the increase in value of the warrant derivative liability of $2,055. These losses were also affected by the legal settlement expected to be paid via common shares of $990 in addition to the increased depreciation and amortization)amortization expense of $64, offset by decreased stock-based compensation of $140.

The net loss totaling $51,566 or ($0.95) per share for the year ended March 31, 2019 increased by $30,062 from the net loss for the year ended March 31, 2018 while the loss per share decreased by ($0.28) per share from the loss of ($1.23) per share for the year ended March 31, 2018. The per share loss decreased due to the issuance of 52,494,519 common shares primarily in connection with the public financings that occurred in May and October 2018. The increased net loss resulted primarily from the $24,062 increased non-IFRS operating loss generated by planned research and development expenses to execute the TRILOGY Phase 3 clinical program, as well as increases in stock-based compensation of $112 and depreciation and amortization of $155. The increase in loss is also affected by the loss related to the legal settlement with our former CEO expected to be paid via common shares of $990 and the reimbursement of related legal fees of $64. These increased losses were further increased by a net increase of $4,743 in financial expenses, due mostly to a loss related to increased value of the warrant derivative liability of $5,943 (see “Reconciliation of Net Loss to Non-IFRS Operating Loss”), offset by a decrease of $481 in derivative warrant liability-related transaction costs and by the remaining gains of $311 due to a foreign exchange gain as well as an increase in interest income of $403. The foreign exchange gain is mostly due to the U.S. cash flows generated by the U.S. public financing of US$17.4 million that took place on October 9, 2018 and the U.S. denominated accounts payable, as well as the strengthening of the U.S. dollar in relation to the Canadian dollar functional currency. At the time of the U.S. public financing, a major portion of the net offering was invested in U.S. dollar investments as per our treasury policy (see “Treasury Operations”). The increase in interest income is a result of the increase in marketable securities and cash equivalents investments as per our treasury policy. As at March 31, 2019 cash equivalents and marketable securities amounted to $34,413 versus $8,249 as at March 31, 2018.

The net loss totaling $21,504 or ($1.23) per share for the year ended March 31, 2018 increased by $10,257 or ($0.22) per share from the net loss totaling $11,247 or ($1.01) per share for the thirteen-month period ended March 31, 2017. This resulted primarily from the $8,297 increased non-IFRS operating loss, a $1,642 increase in financial expense, a $255 increase in stock-based compensation, and a decrease of $129 in deferred tax recovery offset by a $66 decrease in depreciation and amortization.

1 The non-IFRS operating loss (adding to net loss financial expenses (income), depreciation and amortization, change in fair value of derivative warrant liabilities and stock-based compensation) is not a standard measure endorsed by IFRS requirements. A reconciliation to the Corporation's net loss is presented below.

(2)  The working On May 10, 2019 we announced the settlement regarding legal claims made by our former chief executive (“CEO”) officer with respect to the termination of his employment. Pursuant to the settlement agreement, we have agreed to issue 900,000 common shares at $1.10 per share to the former CEO.  In addition, we have agreed to reimburse the former CEO for legal fees of $64. Furthermore, pursuant to the settlement agreement, we have received a full and final release from the former CEO on all procedures in connection with the termination of his employment. This settlement has been accrued as at March 31, 2019 and the expense of $990 is included as part of general and administrative expenses.

2 Working capital is presented for information purposes only and represents a measurement of the Corporation'sour short-term financial health mostly used in financial circles. The workinghealth. Working capital is calculated by subtracting current liabilities from current assets. Because there is no standard method endorsed by IFRS requirements, the results may not be comparable to similar measurements presented by other public companies.

- 48 -

RECONCILIATION OF NET LOSS TO NON-IFRS OPERATING LOSS
 (In thousands of dollars, except per share data)

       
  Three-month periods ended  Years ended 
  February 29,
2016
  February 28,
2015
  
February
29, 2016
  February
28, 2015
  February
28, 2014
 
                
Net loss  (1,919)  (2,311)  (6,317)  (1,655)  (11,612)
Add (deduct)                    
Finance costs  (1)  2   2   4   1,118 
Finance Income  (175)  (1,398)  (1,096)  (1,920)  (814)
Change in fair value of derivative warrant liabilities  (114)  703   (2,201)  (8,824)  508 
Depreciation and amortization/Impairment of intangible assets  938   584   2,734   2,335   1,774 
Stock-based compensation  108   157   309   1,554   3,442 
Non-IFRS operating loss  (1,163)  (2,263)  (6,569)  (8,506)  (5,584)
The derivative warrant liability declined in fiscals 2016 and 2015 due to the decline in the Corporation's stock price resulting in gains in earnings.  Finance income also includes foreign exchange gains mainly on the Corporation's short-term investments in US dollars, which represented $1,022, $1,833, and $782 for the years ended February 29, 2016 and February 28, 2015 and 2014, respectively.
Stock-based compensation expense decreased for the quarter ended February 29, 2016 and the years ended February 29, 2016 and February 28, 2015 as the 2012 grants have fully vested.
The yearly increase in the depreciation and amortization expense from fiscal 2014 to fiscal 2015 is attributable to the prepayment agreement entered into in December 2013, whereby Acasti recognized an intangible asset in the amount of $15,130.  See section "Issuance of shares on license prepayment agreement". During the fourth quarter of 2016, the Corporation recorded an asset impairment loss of $339 relating to patents.  The Corporation determined that the recoverable amount of these costs was nil as it is no longer probable that sufficient future economic benefits will accumulate to the Corporation due to uncertainties related to project level revenues.
38

SELECTED QUARTERLY FINANCIAL DATA
(In thousands of dollars, except per share data)
Fiscal year ended February 29, 2016
             
  February 29,  November 30,  August 31,  May 31, 
  2016  2015  2015  2015 
             
Revenue from sales  21   5   7   5 
Non-IFRS operating loss  (1,163)  (1,988)  (1,485)  (1,946)
Net loss  (1,919)  (2,191)  (1,241)  (966)
Basic and diluted loss per share  (0.18)  (0.20)  (0.12)  (0.09)
Fiscal year ended February 28, 2015
             
  February 28,  November 30,  August 31,  May 31, 
  2015  2014  2014  2014 
             
Revenue from sales  178   29   8   56 
Non-IFRS operating loss  (2,263)  (2,099)  (2,449)  (1,695)
Net (loss) earnings  (2,311)  3,012   (3,712)  1,356 
Basic and diluted loss per share  (0.21)  0.28   (0.35)  0.13 
In the first, second, third and fourth quarters of fiscal 2016 the change in fair value of the derivative warrant liability was a loss of $1,708, $24, $355 and $114, respectively. The net earnings in the first and third quarters of fiscal 2015 are mainly attributable to the gain resulting from the change in fair value of the derivative warrant liability of $4,634, and $5,211, respectively.  In the second and fourth quarters the change in fair value of the derivative warrant liability was a loss of $318 and $703, respectively.
COMMENTS ON THE SIGNIFICANT VARIATIONS OF RESULTS FROM OPERATIONS FOR THE THREE-MONTH PERIODS AND YEARS ENDED FEBRUARY 29, 2016 AND FEBRUARY 28, 2015 AND 2014
Revenues
The Corporation generated revenues from sales of $21 from the commercialization of Onemia® during the three-month period ended February 29, 2016.  The Corporation generated revenue from sales of $178 during the corresponding period in 2015.
The Corporation generated revenues from sales of $38 from the commercialization of Onemia® during the year ended February 29, 2016, a decrease of $233 from the revenues of $271 generated during the corresponding period in 2015. The Corporation generated revenue from sales of $501 during the corresponding period in 2014. The revenues were generated from sales made directly to customers in the United States. The decline in sales is due to Acasti deciding to find strategic alternatives for Onemia® and focus its energy and resources on the development of CaPre®. Acasti has entered into a licensing agreement for Onemia® with Neptune in which Neptune has to engage in best commercial efforts to market Onemia®.  Acasti will receive a royalty of 17.5% on net sales of Onemia®, therefore, revenues from royalties may vary from period to period. No revenue from royalties has been recognized during the year ended February 29, 2016 and the Corporation does not expect significant revenues in the future.
Gross Loss
Gross loss is calculated by deducting the cost of sales from revenue.  Cost of sales consists primarily of costs incurred to manufacture products.  It also includes related overheads, such as certain costs related to quality control and quality assurance, inventory management, sub-contractors and costs for servicing and commissioning. The gross loss for the three-month period ended February 29, 2016 amounted to $53 or 3%.   The Corporation realized a gross loss of $3 or 2% during the three-month period ended February 28, 2015.
The gross loss for the year ended February 29, 2016 amounted to $44 or 116%.  The Corporation realized a gross profit of $36 or 13% during the year ended February 28, 2015 and $209 representing a gross profit margin of 42% during the year ended February 28, 2014.  The gross loss for the three-month period ended and year ended February 29, 2016 was lower than the Corporation's target range for its profit margin because of the change in strategy by the Corporation to shift its focus to the development of CaPre®.
39

Breakdown of Major Components of the Statement of Earnings and Comprehensive Loss for the three-month periods and years ended February 29, 2016 and February 28, 2015 and 2014

       
Research and development expenses Three-month periods ended  Years ended 
  February 29,
2016
  February 28,
2015
  February 29,
2016
  February 28,
2015
  February 28,
2014
 
                
Salaries and benefits  332   86   989   465   457 
Stock-based compensation  12   39   53   258   601 
Research contracts  317   1,463   2,550   5,062   3,081 
Regulatory expenses  80   83   472   160   141 
Professional fees(1)
  223   229   567   705   214 
Amortization and depreciation(1)
  599   584   2,395   2,335   1,774 
Impairment of intangible assets  339   -   339   -   - 
Tax credits  (126)  (192)  (169)  (264)  (270)
Other  53   51   193   136   61 
TOTAL  1,829   2,343   7,389   8,857   6,059 
(1)The Corporation modified the classification on amortization and depreciation as well as certain legal fees from "general and administrative expenses" to "research and development expenses" to reflect more appropriately the way in which economic benefits are derived from the use of the expenses, which resulted in $2,335 and $1,762 being reclassed in 2015 and 2014, respectively.

General and administrative expenses Three-month periods ended  Years ended 
  February 29, 2016  February 28, 2015  February 29, 2016  February 28, 2015  February 28, 2014 
  $   $   $   $   $  
Salaries and benefits  143   280   938   1,267   990 
Administrative fees  50   -   50   -   - 
Stock-based compensation  96   118   256   1,296   2,841 
Professional fees  34   46   650   501   607 
Royalties  -   -   -   -   228 
Sales and marketing  5   14   20   29   16 
Investor relations  33   48   78   63   84 
Rent  (12)  25   67   99   100 
Other  (22)  127   119   318   83 
TOTAL  327   658   2,178   3,573   4,949 
Operating loss before interest, taxes, depreciation and amortization (Non-IFRS operating loss)
Three-month period ended February 29, 2016 compared to February 28, 2015:
Non-IFRS operating loss decreased by $1,100 for the three-month period ended February 29, 2016 to $1,163 compared to $2,263 for the three-month period ended February 28, 2015, is mainly due

Research and Development Expenses      
  Three-month periods ended  Year ended 
  March 31,
2019
  March 31,
2018
  March 31,
2019
  March 31,
2018
 
  $  $  $  $ 
Salaries and benefits  676   615   1,805   1,705 
Research contracts  9,358   4,719   32,850   9,381 
Professional fees  81   248   719   1,790 
Other  183   38   506   222 
Government grants and tax credits  (298)  (325)  (588)  (409)
Total before stock-based compensation and depreciation and amortization  10,000   5,295   35,292   12,689 
                 
Stock-based compensation  64   91   247   308 
Depreciation and amortization  731   667   2,827   2,672 
Total  10,795   6,053   38,366   15,669 

General and Administrative Expenses      
  Three-month periods ended  Year ended 
  March 31,
2019
  March 31,
2018
  March 31,
2019
  March 31,
2018
 
  $  $  $  $ 
Salaries and benefits  934   584   2,305   1,576 
Administrative fees  8   14   34   121 
Professional fees  775   428   1,732   1,347 
Other  378   106   794   362 
Total before stock-based compensation and legal settlement expected to be paid via common shares  2,095   1,132   4,865   3,406 
                 
Stock-based compensation  64   177   794   621 
Legal settlement expected to be paid via common shares  990   -   990   - 
Total  3,149   1,309   6,649   4,027 

Three-Month Period Ended March 31, 2019 Compared to the decreaseThree-Month Period Ended March 31, 2018

During the three months ended March 31, 2019 we continued our planned advancement of the two-study TRILOGY Phase 3 clinical study program for our drug candidate, CaPre, in partnership with one of the world’s largest providers of biopharmaceutical development and clinical outsourcing services (“CRO”). The $10,795 in total research and development expenses for the three-months ended March 31, 2019 totaled $10,000 before consideration ofdepreciation, amortization and stock-based compensation amortization and depreciation and impairment of intangible assets.

Research and development expenses decreased by $502 before consideration of stock-based compensation, amortization and depreciation and impairment of intangible assets.  This decrease is mainly attributable to a decrease in research contract expenses related to the Corporation's clinical trials of $1,146, partially offset by an increase in salaries and benefits of $246 and impairment of intangible assets of $339.
General and administrative expenses decreased by $309 before consideration of stock-based compensation.  This decrease is mainly attributable to decreases in salaries of $137, rent of $37 and other expenses of $149 partially offset by an increase in administrative fees of $50.
Year ended February 29, 2016expense, compared to February 28, 2015:
Non-IFRS operating loss decreased by $1,937 for the year ended February 29, 2016 to $6,569 compared to $8,506 for the year ended February 28, 2015, mainly due to the increase$6,053 in total research and development expenses as well as generalfor the three-months ended March 31, 2018 or $5,295 before depreciation, amortization and administrative expenses before consideration of stock-based compensation and amortization and depreciation, partially offset by the decrease in gross profit of $80.
Research and development expenses decreased by $1,323 before consideration of stock-based compensation and amortization and depreciation.  This decreaseexpense. There is mainly attributable to a significant decrease in contract expenses related to the Corporation's clinical trials of $2,512 and other expenses of $181, partially offset by an increase in salaries and benefits of $524, regulatory expenses of $312 and impairment of intangible assets of $339.
40

General and administrative expenses decreased by $355 before consideration of stock-based compensation.  This decrease is mainly attributable to decreases in salaries of $329 and other expenses of $199 partially offset by an increase in professional fees of $149 and administrative fees of $50.
Year ended February 28, 2015 compared to February 28, 2014:
Non-IFRS operating loss increased by $2,922 for the year ended February 28, 2015 to $8,506 compared to $5,584 for the year ended February 28, 2014, mainly due to the$4,705 increase in research and development expenses before consideration ofdepreciation, amortization and stock-based compensation which was mainly attributable to a $4,639 increase in research contracts, a $61 increase to salaries, a $27 increase to government grants and tax credits and a $145 increase to other research and development expenses, offset by $167 decrease in gross profit.professional fees. Higher research contract expenses resulted primarily from a $3,988 increase in the CRO’s Phase 3 clinical trial program contract expense with continued site activation and patient enrollment, randomization and treatment. The decrease in professional fees is made up mostly of a $159 decrease in legal fees relating to services for contracting and due diligence activities performed during the three-months ended March 31, 2018.

General and administrative expenses totaling $2,095 before stock-based compensation expense for the three months ended March 31, 2019 increased by $963 from $1,132 for the three months ended March 31, 2018. This $963 increase was mainly attributable to a $350 increase in salaries and benefits, an increase of $347 related to professional fees, an increase of $272 related to other fees. The $350 increase in salaries and benefits primarily resulted from the hiring of a Chief Commercial Officer to support expanded business and market development activities. The professional fee increase of $347 was due in part to additional legal fees resulting from independence from Neptune, including no continued internal counsel services. Finally, the $272 increase in other expenses is associated with risk management programs now also independent of Neptune.

- 49 -

Stock-based compensation and depreciation and amortization included in both research and development and general and administrative expenses are explained in the following discussion of reconciliation of Net Loss to Non-IFRS Operating Loss.

Year ended March 31, 2019 Compared to the Year Ended March 31, 2018

As we continue advancing our planned TRILOGY Phase 3 clinical program and production scale-up of CaPre within its research and development program, $38,366 was incurred in total research and development expenses for the year ended March 31, 2019 and $35,292 was incurred before depreciation, amortization and stock-based compensation expense. This compares to $15,669 in total research and development expenses for the year ended March 31, 2018 or $12,689 before depreciation, amortization and stock-based compensation expense. The $22,603 increase in research and development expenses before stock based compensation anddepreciation, amortization and depreciation of $2,580 is mainly attributable to increases in contract expenses of $1,981 and professional fees related to the Corporation's clinical trials of $491.

Net Loss
The Corporation realized a net loss for the three-month period ended February 29, 2016 of $1,919 or $0.18 per share compared to a net loss of $2,311 or $0.21 per share for the three-month period ended February 28, 2015. These results arestock-based compensation was mainly attributable to the factors described above$23,469 increase in contracts with a $22,272 increase in Phase 3 CRO contract expenses and $1,196 of increased research contracts resulting from the planned scale-up of CaPre production activities in the Gross Profit (loss)year ended March 31, 2019. An increase of $100 in salaries and Non-IFRS operating loss sectionsbenefits relates to the increased headcount. These increases are offset by a $1,071 decrease in legal fees for contracting and due diligence activities, as well as the $179 increase in tax credits which relates to higher research and development expenditures combined with a higher investment.

General and administrative expenses totaling $4,865 before stock-based compensation expense for the year ended March 31, 2019 increased by $1,459 from $3,406 for the decreaseyear ended March 31, 2018. This increase was mainly attributable to a $729 increase in salaries and benefits primarily resulting from the expansion of the team to become independent of Neptune, and the expansion of our commercialization team and business development activities. Professional fees increased by $385 due in part to additional legal fees resulting from independence from Neptune. Additionally, professional fees increased due to implementation of a new ERP system. An increase of $432 of other general and administrative expenses associated with risk management programs as we became independent of Neptune. These increases were partially offset by an $87 reduction in Neptune’s administrative fees.

Stock-based compensation and depreciation and amortization included in both research and development and general and administrative expenses are explained in the following discussion of reconciliation of Net Loss to Non-IFRS Operating Loss.

Reconciliation of Net Loss to Non-IFRS Operating Loss

  Three-month periods ended  Year ended 
  March 31,
2019
  March 31,
2018
  March 31,
2019
  March 31,
2018
 
  $  $  $  $ 
Net loss  (16,806)  (8,140)  (51,566)  (21,504)
Add (deduct):                
Stock-based compensation  128   268   1,041   929 
Depreciation and amortization  731   667   2,827   2,672 
Legal settlement – expected to be settled in common shares  990   -   990   - 
Financial expenses  2,862   778   6,551   1,808 
Non-IFRS operating loss  (12,095)  (6,427)  (40,157)  (16,095)

For the three-month period and year ended March 31, 2019 we recognized stock-based compensation under our compensation plans in the amount of $128 and $1,041, respectively, compared to the three-month and year ended March 31, 2018 totalling $268 and $929 respectively. The weighted average grant date fair value of the options granted to employees and directors during the year ended March 31, 2019 was $0.51 compared to the grant date value of options granted in the year ended March 31, 2018 of $1.22, whereas an increase of 1,052,023 of number of options granted occurred, with total granted stock options of 2,173,523 for the year ended March 31, 2019 compared to 1,121,500 stock options granted for the year ended March 31, 2018. No stock options were granted during the three-month periods March 31, 2019 and 2018. No options were granted to consultants.

The depreciation and amortization expense increased by $64 to $731 for the three months ended March 31, 2019 from $667 for the three months ended March 31, 2018. The depreciation and amortization expense increased by $155 to $2,827 for the year ended March 31, 2019 from $2,672 for the year ended March 31, 2018. The depreciation increased due to encapsulation production equipment being put into use during the three months ended March 31, 2019 and therefore related depreciation commencing.

- 50 -

Legal settlement expected to be paid via common shares relates to the settlement regarding legal claims made by our former CEO with respect to the termination of his employment. Pursuant to the settlement agreement, we have agreed to issue 900,000 common shares at $1.10 per share to the former CEO.  Furthermore, pursuant to the settlement agreement, we receive a full and final release from the former CEO on all procedures in connection with the termination of his employment. This settlement amount of $990 has been accrued as at March 31, 2019, included as part of general and administrative expenses thus increasing the loss.

Financial expenses increased by $2,084 from a loss of $778 for the three months ended March 31, 2019 to a loss of $2,862 for the three months ended March 31, 2018. The main component of this increase resulted from the measurement of the fair value of the derivative warrant liabilities as at March 31, 2019, which resulted due to an increase to the derivative warrant liabilities included in the statement of $818financial position of $2,055 and the decreasea corresponding loss to change in stock-based compensationfair value of warrant liabilities, included in financial income.

Financial expenses of $49.

The Corporation realized a net lossincreased by $4,743 to $6,551 for the year ended February 29, 2016March 31, 2019 from financial expenses of $6,317 or $0.59 per share compared to a net loss of $1,655 or $0.16 per share$1,808 for the year ended February 28, 2015. These results are mainly attributableMarch 31, 2018. The main component of this increase relates to the factors described above inmeasurement of the Gross Loss and Non-IFRS operating loss sections as well as by the decrease infair value of the derivative warrant liabilities of $2,201 compared toas at March 31, 2019. This increase was offset by a decrease of $8,824$481 in prior period, a decrease in thederivative warrant liability-related transaction costs, by foreign exchange gain over the prior period by $810 and a decrease in stock-based compensation expenses of $1,245, offset by a slight$311 as well as an increase in amortizationinterest income of $403.

Two separate derivative warrant liabilities are included in the statement of financial position as at March 31, 2019, compared to one derivative warrant liability as at March 31, 2018. These derivative warrant liabilities stem from the financing transactions that took place in May 2018 and depreciation of $58.December 2017. The foreign exchangederivative warrant liabilities are re-measured at each reporting date using the Black-Scholes option pricing model. The valuations are driven by the fluctuation in our common stock price resulting in an increased or decreased loss or gain is due mainlyrelated to the strengthening US dollar impact onchange in fair value of the Corporation's US dollar short-term investments.  Stock-based compensation decreased as grants providedwarrant liabilities and increasing or decreasing the corresponding liability in 2012 have fully vested.the statement of financial position.

- 51 -

Selected Quarterly Financial Data

  March 31,  December 31,  September 30,  June 30, 
  2019  2018  2018  2018 
  $  $  $  $ 
             
Net loss  (16,806)  (4,610)  (22,729)  (7,421)
Add (deduct):                
Depreciation and amortization  731   723   689   684 
Stock based compensation  128   336   326   251 
Legal settlement expected to be paid via common shares  990   -   -   - 
Financial (income) expense  2,862   (6,100)  12,291   (2,502)
Non-IFRS operating loss  (12,095)  (9,651)  (9,423)  (8,988)
                 
Basic and diluted net loss per share  (0.22)  (0.07)  (0.62)  (0.23)

  March 31,  December 31,  September 30,  June 30, 
  2018  2017  2017  2017 
  $  $  $  $ 
             
Net loss  (8,140)  (6,079)  (4,507)  (2,778)
Add (deduct):                
Depreciation and amortization  667   671   667   667 
Stock based compensation  268   330   295   36 
Financial (income) expense  778   929   122   (21)
Non-IFRS operating loss  (6,427)  (4,149)  (3,423)  (2,096)
                 
Basic and diluted net loss per share  (0.32)  (0.40)  (0.31)  (0.19)

The Corporation realized a netquarterly year-to-year non-IFRS operating loss for the year ended February 28, 2015 of $1,655 or $0.16 per share compared to a net loss of $11,612 or $1.38 per share for the year ended February 28, 2014. These resultsvariances are mainly attributable to the factors described abovefluctuations in the Gross Profitresearch and Non-IFRS operating loss sectionsdevelopment expenses from quarter-to-quarter as well as an increase in general and administrative expenses over the last four quarters as we established an administrative and finance team independent from Neptune and expanded our business development and pre-commercialization activities. The increase in net loss, net loss per share in the fourth quarter of fiscal 2019 compared to the fourth quarter of fiscal 2018 can primarily be explained by the decreasecosts incurred in CRO’s expenses associated with its TRILOGY Phase 3 clinical trial program. The increases in net loss from quarter to quarter, in addition to the increased non-IFRS operating losses, are mainly due to the changes in fair value of the derivative warrant liabilities of $8,824 compared to an increase of $507as well as variations in prior period, an increase in the foreign exchange gain over the prior period by $1,051gains or losses.

- 52 -

Liquidity and a decrease in stock-based compensation expenses of $1,888, offset by increases in amortization and depreciation of $561, following the increase in the Corporation's license asset as a result of the prepayment agreement with Neptune.  The foreign exchange gain is due mainly to the strengthening US dollar impact on the Corporation's US dollar short-term investments.  Stock-based compensation decreased as grants provided in 2012 are fully vested.

LIQUIDITY AND CAPITAL RESOURCES
Capital Resources

Share Capital Structure

(In thousands of dollars, except per share data)
The

Our authorized share capital consists of an unlimited number of Class A, Class B, Class C, Class D and Class E shares, without par value. Issued and outstanding fully paid shares, stock options, restricted shares units and warrants, were as follows asfor the periods ended:

  March 31,
2019
  March 31,
2018
 
  Number
outstanding
  Number
outstanding
 
Class A shares, voting, participating and without par value  78,132,734   25,638,215 
Stock options granted and outstanding  4,046,677   2,284,388 
May 2018 public offering of warrants exercisable at $1.31, until May 9, 2023  10,188,100   - 
Public offering broker warrants May 2018 exercisable at $1.05 until May 9, 2023  547,975   - 
December 2017 U.S. public offering of warrants exercisable at US$1.26, until December 27, 2022  9,801,861   9,802,935 
December 2017 U.S. broker warrants exercisable at US$1.2625, until December 27, 2022  495,050   495,050 
February 2017 public offering of warrants exercisable at $2.15, until February 21, 2022  1,904,034   1,904,034 
2017 unsecured convertible debentures conversion option contingent warrants exercisable at $1.90, until February 21, 20201  1,052,630   1,052,630 
Series 8 warrants exercisable at US$15.00, until December 3, 20182  -   1,840,000 
Series 9 warrants exercisable at $13.30 until December 3, 2018  -   161,654 
Total fully diluted shares  106,169,061   43,178,906 

Comparison of Cash Flows and Financial Condition Between the Three Month and Year End Periods March 31, 2019 and 2018

Summary

As at the years ended:


  
February 29,
2016
  February 28, 2015  February 28, 2014 
Class A shares, voting, participating and without par value  10,712,038   10,644,440   10,586,253 
Stock options granted and outstanding  454,151   429,625   491,100 
Restricted Shares Units granted and outstanding  -   18,398   77,494 
Series 6 & 7 warrants expired on February 10, 2015  -   -   75,000 
Series 8 warrants exercisable at $1.50 USD, until            
December 3, 2018(1)
  1,840,000   1,840,000   1,840,000 
Series 9 warrants exercisable at $16,00, until            
December 3, 2018  161,654   161,654   161,654 
Total fully diluted shares  13,167,843   13,094,117   13,231,501 
(1) Total of 18,400,000 units, in order to obtain one share of Acasti, 10 units must be exercised.
41

Issuance of shares on license prepayment agreement
On July 12, 2013, the Corporation issued 675,000 Class A shares, atMarch 31, 2019, cash and cash equivalents totaled $22,521 with a price of $23.00 per share to Neptune to pay in advance all of the future royalties' payable under the intellectual property license it had with Neptune.
The value of the prepayment, determined with the assistance of outside valuations specialists, using the pre-established formula set forth in the license agreement (adjusted to reflect the royalties of $395 accrued from December 4, 2012, the date at which the Corporation entered into the prepayment agreement to July 12, 2013, the date of issuance of the shares) totalling $15,130, was recognized as an intangible asset.  The shares issued as a result of this transaction corresponded to an increase in share capital of $15,525, net of $29 of share issue costs.  The Corporation no longer has a royalty payment commitment under the License Agreement.
CASH FLOWS AND FINANCIAL CONDITION BETWEEN THE THREE-MONTH PERIODS AND YEARS ENDED FEBRUARY 29, 2016, AND FEBRUARY 28, 2015 AND 2014
Operating Activities
During the three-month periods ended February 29, 2016 and February 28, 2015, the Corporation's activities generated decreases in liquidities of $1,691 and $2,622, respectively.  The decrease in the cash flows from operating activitiesand cash equivalents totaling $6,372 for the three-month period ended February 29, 2016 is mainly attributable to the changes in non-cash working capital items.
During the years ended February 29, 2016March 31, 2019 and February 28, 2015 and 2014, the Corporation's operating activities resulted in decreases in liquiditiessources of $6,575, $7,198 and $6,805 respectively. The decrease in the cash flows used in operating activitiestotaling $14,298 for the year ended February 29, 2016 is mainly attributableMarch 31, 2019. This compares to $8,223 in total cash and cash equivalents as at March 31, 2018 with a net decrease in cash and cash equivalents totaling $4,252 for the decreased loss from operating activities after adjustments for non-cash items.  The increasethree-month period ended March 31, 2018 and a net decrease in the cash flows used in operating activitiesand cash equivalents totaling $1,549 for the year ended February 28, 2015 compared to prior period is mainly attributable toMarch 31, 2018.

Operating Activities

During the higher loss fromthree months ended March 31, 2019 and March 31, 2018, our operating activities after adjustments for non-cash items offset by the changes in non-cash working capital items, primarily by decreases in tradeused cash of $10,330 and other receivables of $534$4,362, respectively, and prepaid expenses of $385, and an increase in payable to parent corporation of $539.  The comparative changes in non-cash working capital were due to increases in trade and other receivables of $469 and prepaid expenses of $687, and decrease in payable to the parent corporation of $417.

Investing Activities
Duringduring the years ended February 29, 2016March 31, 2019 and February 28, 2015March 31, 2018, our operating activities used cash of $32,476 and 2014,$12,519, respectively (see “Reconciliation of Net Loss to Non-IFRS Operating Loss”), further modified by changes in working capital, excluding cash.

Investing Activities

During the Corporation'sthree months ended March 31, 2019, our investing activities generated ancash of $5,148 compared to a use of cash of $123 for the three months ended March 31, 2018. The significant increase in liquiditiescash generated by investing activities during the three months ended March 31, 2019 resulted from our disposal of $8,229, anmarketable securities due to cash on hand following the financings in October 2018. Cash used by investing activities during the three-month period ended March 31, 2018 was due to the acquisition of equipment of $128, acquisition of marketable securities of $26, offset by interest received of $31.

1 The debentures are convertible into common shares at a fixed price of $1.90 per common share except if we pay before the maturity, if we pay all or any portion of the convertible debentures before maturity, then warrants become exercisable at $1.90 per common share for the equivalent convertible debenture amount prepaid.

2 Total of 18,400,000 warrants. In order to obtain one common share, 10 warrants must be exercised for a total amount of US$15.00.

- 53 -

During the year ended March 31, 2019, our investing activities used cash of $12,136 compared to a use of cash of $411 for the year ended March 31, 2018. The significant increase in liquidities of $7,627 and a decreasecash used by investing activities resulted from our investment in liquidities of $19,446, respectively. These variations are mainly explainedmarketable securities. Additionally, cash used by changes in short-term investments which increased in 2014 following the public and private offerings and decreased in following periods.

Financing Activities
During the years ended February 29, 2016 and February 28, 2015 and 2014, the Corporation's financinginvesting activities generated a decrease in liquidities of $2 and an increase in liquidities of $46 and $24,963, respectively. The increase in liquidities generated from financing activity during the year ended February 28, 2014 resultedMarch 31, 2019 was due to the acquisition of equipment of $700, partially offset by interest received of $384. Cash used by investing activities during the year ended March 31, 2018 was due to the acquisition of equipment totaling $455, acquisition of marketable securities of $26, partially offset by interest received of $70.

Financing Activities

During the three months ended March 31, 2019, our financing activities used cash of $483 due primarily to the payment of transaction costs related to the public offerings. For March 31, 2018 we used cash of $36.

During the year ended March 31, 2019, our financing activities generated cash of $58,862 mainly from the net proceeds of the public offerings of $57,892 and proceeds from warrants exercised related to the May 2018 public offering (see “Derivative warrant liabilities”) of $1,011. During the year ended March 31, 2018, our financing activities generated cash of $11,406 primarily to the net proceeds from a public offering of $21,953$11,065 and net proceeds from a private placementwarrants exercised of $2,068. Acasti has continued to allocate the proceeds obtained through public offering and private placement to the current and future clinical trials of CaPre®. The Corporation did not raise any additional funding during the years ended February 29, 2016 and February 28, 2015.

Overall, as a result, the Corporation's cash increased by $1,716 and $635 and decreased by $521, respectively, for the years ended February 29, 2016 and February 28, 2015 and 2014. Total liquidities as at February 29, 2016, comprised of cash and short-term investments, amounted to $10,470. $384.

See basis of presentation for additional discussion of our financial condition, including the Corporation's financial condition.need for additional funds and the material uncertainty that casts substantial doubt about our ability to continue as a going concern.

ATM Program

On February 14, 2019, we entered into an “at-the-market” (“ATM”) sales agreement with B. Riley FBR, Inc., pursuant to which our common shares may be sold from time to time for aggregate gross proceeds of up to US $30 million, with sales only being made on the NASDAQ Stock Market. 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. As at March 31, 2019, no securities have been issued in relation to the ATM, and it remains our intent to use this facility to prepare for commercial launch. Costs incurred in connection to the ATM of $179 have been included as deferred financing costs.

October 2018 Public Offering

On October 9, 2018, we closed a U.S. public offering of 16,600,000 common shares at a price of US$1.00 per share. In addition, the underwriters fully exercised their over-allotment option to purchase 2,490,000 additional common shares at the same public offering price. This offering generated gross proceeds of $24.7 million (US$19.1 million), which resulted in net proceeds to us of $22.6 million (US$17.4 million) and a total of 19,090,000 common shares issued.

On October 23, 2018, we closed a Canadian public offering of 18,750,000 common shares at a price of $1.28 per share. In addition, the underwriters fully exercised their over-allotment option to purchase 2,812,500 additional common shares at the same public offering price. This offering generated gross proceeds of $27.6 million, which resulted in net proceeds to us of approximately $25.4 million and a total of 21,562,500 common shares issued.

May 2018 Public Offering

On May 9, 2018 we closed a Canadian public offering issuing 9,530,000 units of Acasti (“Units”) at a price of $1.05 per Unit for gross proceeds of $10 million. The Units issued consist of 9,530,000 common shares and 9,530,000 Warrants. Each Warrant entitles the holder thereof to acquire one of our common shares at an exercise price of $1.31 at any time until May 9, 2023.

On May 14, 2018, the underwriters exercised their over-allotment option by purchasing an additional 1,429,500 units at a price of $1.05 per Unit, for additional gross proceeds of $1.5 million. The units issued consist of 1,429,500 common shares and 1,429,500 warrants. Each Warrant entitles the holder thereof to acquire one of our common shares at an exercise price of $1.31 at any time until May 9, 2023.

The warrant component of these Units are Derivative Warrant Liabilities for accounting purposes due to the warrant agreement, which contains certain contingent provisions that allow for cash settlement. The proceeds of the offering are required to be split between the Derivative Warrant Liabilities and the equity-classified common shares at the time of issuance of the Units. The fair value of the Derivative Warrant Liabilities at the time of issuance was determined to be $4.3 million and the residual of the proceeds of $6.2 million was allocated to the Common Shares. Issuance costs related to this transaction totaled approximately $1.8 million and have been allocated between the Derivative Warrant Liabilities and Common shares based on relative value. Resulting from this allocation, $0.7 million has been allocated to the Derivative Warrant Liability and is recognized in finance costs in the Statements of Earnings and Comprehensive Loss, whereas the remaining portion of $1.1 million in issuance costs was allocated to the common shares and recognized as a reduction to share capital, in the Statements of Financial Position.

- 54 -
On January 7, 2016 Neptune announced

The weighted average fair value of the acquisition2018 Warrants issued in May 2018 was determined to be $0.39 per warrant. Changes in the fair value of Biodroga Inc. the 2018 Warrants are recognized in finance expense.

As part of this transaction, the Corporation has pledged an amountMay financing, we also issued broker warrants to purchase up to 547,975 Common Shares. Each broker warrant entitles the holder thereof to acquire one of 2 million dollars to partly guarantee the financing for the said transaction. Consequently, the corresponding amount shall be considered as restricted cash until released by the lender or reduced by Neptune. Neptune has agreed to pay Acasti an annual fee on the Committed Funds outstandingour common shares at an annual rateexercise price of (i) 9% during the first six months$1.05, at any time until May 9, 2023. The broker warrants are considered for compensation to non-employees under IFRS 2, stock-based compensation, and (ii) 11%are accounted for the remaining term of the Pledge Agreement. Neptune's intention is to release the pledged amount within the next twelve months.

Toat fair value at issuance date the Corporation has financed its operations through public offering and private placement of Common Shares, funds from its parent corporation, proceeds from the exercise of warrants, rights and options and research tax credits. The future profitability of the Corporation is dependent upon such factors as the success of the clinical trials, the approval by regulatory authorities of products developed by the Corporation, the ability of the Corporation to successfully market and sell and distribute products and the ability to obtain the necessary financing to do so.  The Corporation believes that its available cash and short-term investments, expected interest income and research tax credits should be sufficient to finance the Corporation's operations and capital needs during the ensuing twelve-month period.
42

not subsequently revalued.

Financial Position

(In thousands of dollars)

The following table details the significant changes to the statements of financial position as at February 29, 2016March 31, 2019 compared to February 28, 2015:


the prior fiscal period end at March 31, 2018:

Accounts 
Increase

(Decrease)
 Comments
Cash and cash equivalents  1,71614,298 See cash flow statement
Short-term investmentsMarketable securities – current and long term  (7,628)Maturity of investments held
Trade and other receivables11,866  (47)Payments receivedSee cash flow statement
Tax credits receivableReceivable  (359857)Payments receivedTiming of receipts
Prepaid expenses  138709 Increase in prepaid portionAdvancement of expensescontracts
InventoriesOther Asset – current and long term  (8737)Onemia® sales and write-offUsage of inventoryKrill Oil supply
Intangible assetsDeferred financing costs179Equity transactions
Equipment  (2,3238)Acquisition of equipment and depreciation
Intangible asset(2,322)Amortization
Trade and other payables  42Increase in expenses
Payable to parent corporation11,549  (474)Payments madeIncreased expenses and accruals
Derivative warrant liabilities  (2,2019,837)Change  Issuance of derivative warrants and change in fair value
Unsecured convertible debentures205Accretion of interest

See the statement of changes in equity in our financial statements for details of changes to the equity accounts since March 31, 2019.

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 (“GICs”), term deposits and high-interest savings accounts, which are issued and held with Canadian chartered banks; high rated promissory notes issued by government bodies and commercial paper. We hold cash denominated in both US and CAD dollars. Funds received in US dollars from the equity private placement are invested as per our treasury policy in US dollar investments and converted to CAD dollars as appropriate to fulfill operational requirements and funding. 

Derivative warrant liabilities

The 2018 Warrants issued as part of our May 2018 public offering were recognized as Derivative Warrant Liabilities with a fair value of $4,272. As of March 31, 2019, the Derivative Warrant Liabilities for the 2018 Warrants totaled $8,246, which represents the fair value of these warrants. The weighted average fair value of the 2018 Warrants issued was determined to be $0.39 per warrant at inception and approximately $0.81 per 2018 Warrant as at March 31, 2019.

On December 27, 2017, warrants were issued as part of our U.S. public offering and recognized as Derivative Warrant Liabilities with a fair value of $5,873 (“2017 Warrants”). The 2017 Warrants are Derivative Warrant Liabilities for accounting purposes due to the currency of the exercise price (US$) being different from our Canadian dollar functional currency. The fair value of the 2017 Warrants as of March 31, 2019, totaled $8,017 which represents the fair value of these warrants. The fair value of the 2017 Warrants was determined to be $0.60 per warrant upon issuance and approximately $0.82 per warrant as of March 31, 2019.

As of March 31, 2019, the fair value of the Derivative Warrant Liabilities issued as part of our Series 8 December 2013 securities offering was nil as the warrants expired December 3, 2018.

- 55 -

The increase in the fair value of both existing derivative warrant liabilities as at March 31, 2019 is due to the increase in our share price and the dilution factor, and the impact within the valuation model.

  Warrant liabilities
issued May 2018
  Warrant liabilities issued
December 27, 2017
  Warrant liabilities issued
December 3, 2013
 
  Fair value per shares issuable 
March 31, 2019 $0.81  $0.82   - 
December 31, 2018 $0.68  $0.66   - 
September 30, 2018 $0.96  $0.95   - 
June 30, 2018 $0.36  $0.36   - 
March 31, 2018  -  $0.65   - 

During October 2018, 771,400 - 2018 Warrants were exercised for one of our common shares at an exercise price of $1.31 for aggregate gross proceeds of approximately $1.0 million. In addition, 4,455 2017 Warrants were exercised in a cashless manner to acquire 1,074 of our common shares. A total of 772,474 common shares were issued as a result of 775,855 warrants exercised.

Contractual Obligations, Off-Balance-Sheet Arrangements and Commitments

The Corporation has no off-balance sheet arrangements.

As of February 29, 2016, the Corporation'sat March 31, 2019, our liabilities are $1,297,total $34,509, of which $1,141$18,426 is due within twelve months, and $156$16,263 relates to derivative warrant liabilitiesDerivative Warrant Liabilities that will likely be settled by issuing common shares in exchange for proceeds equal to the strike price of the instrument, and $1,817 of outstanding unsecured convertible debentures. The unsecured convertible debentures may be prepaid. The debentures are convertible into common shares and thus are excluded fromat a fixed price of $1.90 per common share except if we pay before the table below.

A summarymaturity, all or any portion of Acasti's contractual obligations at February 29, 2016 is as follows:
  Total  Less than 1 year 
  $   $  
Payables  1,141   1,141 
Research and development contracts  5,358   5,358 
Purchase obligation  2,271   2,271 
Total  8,770   8,770 

Significant commitments as of February 29, 2016 include:
Research and development agreements
In the normal course of business, the Corporation has signed agreements with various partners and suppliers for them to execute research projects and to produce and market certain products.
The Corporation initiated research and development projects that will be conducted over a 12 to 24 month period for a total cost of $7,776, of which an amount of $1,967 has been paid to date.  As at February 29, 2016, an amount of $451 is included in ''Trade and other payables'' in relation to these projects.
During the year, the Corporationconvertible debentures.

We also entered into a contract to purchase research and developmentproduction equipment for $2,271 to be used in the manufacturing of the clinical and future commercial supply of CaPre.®

A summary of the contractual obligations at March 31, 2019, is as follows:

  Carrying value  Total contractual
cash flows
  1 year or less  1 to 3 years 
  $  $  $  $ 
Trade, other payables and due to related party  16,429   16,429   16,429   - 
Lease  79   79   79   - 
Unsecured convertible debentures  1,817   1,817   1,817   - 
Total  18,325   18,325   18,325   - 

Research and development contracts and contract research organizations agreements

We utilize CMOs for the development and production of clinical materials and research organizations to perform services related to our clinical trials. Pursuant to the agreements with these contract manufacturing and contract research organizations, we have either the right to terminate the agreements without penalties or under certain penalty conditions. For agreements which contain penalty conditions, we would be required to pay penalties of approximately $109.

Lease

During fiscal year 2018, we entered into a lease agreement for our research and development and quality control laboratory facility located in Sherbrooke, Québec, resulting in a commitment of $79 over the remaining lease term, which is committed in the next year.

Contingencies

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

- 56 -

On May 10, 2019 we announced the settlement regarding legal claims made by our former CEO with respect to the termination of his employment. Pursuant to the settlement agreement, we have agreed to issue 900,000 common shares at $1.10 per share to the former CEO.  In addition, we have agreed to reimburse the former CEO for legal fees of $64. Furthermore, pursuant to the settlement agreement, we received a full and final release from the former CEO on all procedures in connection with the termination of his employment. This settlement has been accrued as at March 31, 2019 and the expense of $1,054 is included as part of general and administrative expenses.

Related Party Transactions

The Corporation was

We were charged by Neptune, our former parent company, for the purchase of research supplies and for certain costs incurred by Neptune for theour benefit of the Corporation and for royalties, as follows:

  February 29,  February 28,  February 28, 
  2016  2015  2014 
Administrative costs  485   226   128 
Research and development costs  347   188   24 
Royalties1
  -   -   228 
   832   414   380 
(1)Refer to Issuance of shares on license prepayment agreement section above.
43

        Thirteen-
months ended
  Month
ended
  Twelve-months
ended
 
  March 31,
2019
  March 31,
2018
  March 31,
2017
  March 31,
2017
  February 28,
2017
 
  $  $  $  $  $ 
                
Research and development expenses                    
Supplies and incremental costs  -   7   -   -   - 
Shared service agreement  -   20   60   1   59 
Total  -   27   60   1   59 
                     
General and administrative expenses                    
Supplies and incremental costs  211   239   293   16   277 
Shared service agreement  34   121   325   25   300 
Total  245   360   618   41   577 
Total related parties expenses  245   387   678   42   636 

Where Neptune incurs specific incremental costs for theour benefit, of the Corporation, it charges those amounts directly. Costs that benefit more than one entityNeptune provides us with the services of personnel for certain administrative work as part of a shared service agreement. The employees’ salaries and benefits are charged proportionally to the time allocation agreed upon within the shared service agreement. Effective September 30, 2017, the laboratory support, the corporate affairs and the public company reporting services previously provided by Neptune as part of the shared service agreement were discontinued. We are now incurring incremental costs and expects to do so in the future, partially offset by reduced shared service fees. The account payable to Neptune group are charged by allocating a fraction of costs incurred by Neptune thatamounted to $2 at March 31, 2019, $44 at March 31, 2018 and $12 at March 31, 2017, is commensurate to the estimated fraction of services or benefits received by each entity for those items.non-interest bearing and has no specified maturity date. These charges do not represent all charges incurred by Neptune that may have benefited the Corporation as Acasti benefits from certain cost synergies through shared services with Neptune.us. Also, these charges do not necessarily represent the cost that the Corporationwe would otherwise need to incur, should it not receive these services or benefits through the shared resources of Neptune.

During the three-months and year ended March 31, 2019, we recognized expenses of $47 and $245, respectively in general and administrative expenses in relation to supplies and incremental costs, compared to $80 and $387, respectively, for the three-month and year ended March 31, 2018. As the research and development and quality control laboratory facility is now completely independent of the Neptune or receive financing from Neptune.

Payable to parent corporation amounts to $15facility, there were no related party charges for research and development as at February 29, 2016March 31, 2019.

Historically, Neptune has provided us with the raw krill oil needed to produce CaPre for our clinical programs, including all of the raw krill oil projected as needed for our Phase 3 clinical study program. However, Neptune discontinued its krill oil production and has no specified maturity date for payment or reimbursement and does not bear interest.

Thesold its krill oil inventory to Aker on August 7, 2017. We are continually evaluating alternative suppliers of raw krill oil. At March 31, 2019, a reserve of raw krill oil was still stored at Neptune’s facility.

Our key management personnel of the Corporation are our officers and the members of theour Board of Directors and certain officers.Directors. They control in the aggregate less than 1% of theour total voting shares of the Corporation.(1% at March 31, 2018). See note 5 (e)7 to the financial statements for disclosures of key management personnel compensation.

Use of estimates and measurement of uncertainty

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

- 57 -

Estimates are based on the management'smanagement’s best knowledge of current events and actions that the Corporationwe 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.

Critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements include the identification of triggering events indicating that intangible assets might be impaired and the use of the going concern basis of preparation of the financial statements. At each reporting period, management assesses the basis of preparation of the financial statements. The financial statements have been prepared on a going concern basis in accordance with IFRS. The going concern basis of presentation assumes that the Corporation will continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business.  following:

·The use of the going concern basis of preparation of the financial statements. At the end of each reporting period, management assesses the basis of preparation of the financial statements. The financial statements have been prepared on a going concern basis in accordance with IFRS. The going concern basis of presentation assumes that we will continue our operations for the foreseeable future and can realize its assets and discharge its liabilities and commitments in the normal course of business.

Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year include the measurement derivative warrant liabilities (note 21 to the financial statements), of stock-based compensation (note 15 to the financial statements) and the determination of the recoverable amount of the Corporation's cash generating unit ("CGU") (note 3(e) (ii) to the financial statements).  following:

·Measurement of derivative warrant liabilities and stock-based compensation.

Also, the management uses judgment to determine which research and development ("R&D") expenses qualify for R&Dresearch and development tax credits and in what amounts. The Corporation recognizesWe recognize the tax credits once it haswe have had 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.

Critical Accounting Policies
Impairment of non-financial assets
The carrying value of the Corporation's license asset is reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the CGU's recoverable amount is estimated.  The identification of impairment indicators and the estimation of recoverable amounts require the use of judgment.

CRITICAL ACCOUNTING POLICIES

Derivative warrant liabilities

The warrants forming part of the Units issued from the 2014May 2018 public offering are derivative liabilities for accounting purposes given to the fact that the warrant indenture contains certain contingent provisions that allow for cash settlement. The warrants forming part of the Units issued from the December 2017 and December 2013 public offering are derivative liabilities for accounting purposes due to the currency of the exercise price being different from the Corporation'sour functional currency. The derivative warrant liabilities are required to be measuremeasured at fair value at each reporting date with changes in fair value recognized in earnings. The Corporation's usesWe use Black-Scholes pricing model to determine the fair value. The model requires the assumption of future stock price volatility, which is estimated based on weighted average historic volatility. Changes to the expected volatility could cause significant variations in the estimated fair value of the derivative warrant liabilities.

Stock-based compensation

The Corporation has

We have a stock-based compensation plan, which is described in note 1517 of the financial statements. The Corporation accountsWe account for stock options granted to employees based on the fair value method, with fair value determined using the Black-Scholes model. The Black Scholes model requires certain assumptions such as future stock price volatility and expected life of the instrument. Expected volatility is estimated based on weighted average historic volatility. The expected life of the instrument is estimated based on historical experience and general holder behavior. Under the fair value method, compensation cost is measured at fair value at date of grant and is expensed over the award'saward’s vesting period with a corresponding increase in contributed surplus. For stock options granted to non-employees, the Corporation measureswe measure based on the fair value of services received, unless those are not reliably estimable, in which case the Corporation measureswe measure the fair value of the equity instruments granted. Compensation cost is measured when the Corporation obtainswe obtain the goods or the counterparty renders the service.

44

Also, the Corporation records as stock-based compensation expense a portion of the expense being recorded by Neptune that is commensurate to the fraction of overall services that the grantees provide directly to the Corporation with the offset to contributed surplus reflecting Neptune's contribution to the Corporation. Stock-based compensation recognized under these plans amounted to $10,349 for the year ended February 29, 2016 compared to $561,347 and $2,194,684 for the years ended February 28, 2015 and 2014, respectively.

Tax credits

Tax

Refundable tax credits related to eligible expenses are accounted for as a reduction of related costs in the year during which the expenses are incurred as long as there is reasonable assurance of their realization.

Future Accounting change
New standard and interpretation not yet adopted:
Financial instruments:
On July 24, 2014, the International Accounting Standards Board (IASB) issued the final version of IFRS 9, Financial Instruments, which addresses the classification and measurement of financial assets and liabilities, impairment and hedge accounting, replacing IAS 39, Financial Instruments: Recognition and Measurement.  IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with earlier adoption permitted.  The Corporation has not yet assessed the impact of adoption of IFRS 9, and does not intend to early adopt IFRS 9 in its financial statements.
Financial Instruments

FINANCIAL INSTRUMENTS

Credit Risk

Credit

Credit risk is the risk of a loss if a customer or counterparty to a financial asset fails to meet its contractual obligations. The Corporation hasWe have credit riskrisks relating to cash, cash equivalents and short-term investments,marketable securities, which it manages by dealing only with highly-rated Canadian institutions. The carrying amount of financial assets, as disclosed in the statements of financial position, represents the Corporation'sour credit exposure at the reporting date.

- 58 -

Currency risk

The Corporation is

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 the Corporation'sour business transactions denominated in currencies other than the Canadian dollar. Fluctuations related to foreign exchange rates could cause unforeseen fluctuations in the Corporation'sour operating results.

All of the Corporation's revenues are in US dollars.

A portion of the expenses, mainly related to research contracts and purchase of production equipment, is madeincurred in US dollars.dollars and in Euros, for which no financial hedging is required. There is a financial risk involvedrelated to the fluctuation in the value of the US dollar and the Euro in relation to the Canadian dollar. In order to minimize the financial risk related to the fluctuation in the value of the US dollar in relation to the Canadian dollar, funds which were part of US dollar financings continue to be invested as short-term investments in the US dollar.

Furthermore, a significant portion of the Corporation'sour cash and short-term investmentscash equivalents and marketable securities are denominated in US dollars, further exposing the Corporationus to fluctuations in the value of the US dollar in relation to the Canadian dollar presented in Note 1921 of the financial statements.

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.

The Corporation's

Our exposure to interest rate risk as at February 29, 2016March 31, 2019 and February 28, 2015March 31, 2018 is as follows:


45

Cash Short-term fixed interest rateand cash equivalentsShort-term fixed interest rate
Marketable Securities
Short-term investmentsfixed interest rate
Unsecured convertible debenturesShort-term fixed interest rate

The

Our capacity of the Corporation 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 that the risk that the Corporationwe will realize a loss as a result of the decline in the fair value of its short-term investments is limited because these investments have short-term liabilitiesmaturities and are generally held to maturity.

Liquidity risk

Liquidity risk is the risk that the Corporationwe will not be able to meet itsour financial obligations as they fall due. The Corporation managesWe manage liquidity risk through the management of itsour capital structure and financial leverage, as outlined in Note 21 to the financial statements. ItWe also managesmanage liquidity risk by continuously monitoring actual and projected cash flows. The Board of Directors reviews and approves the Corporation'sour operating budgets, and reviews material transactions outside the normal course of business.

The Corporation's

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.

Future accounting changes:

The Corporation hasfollowing new standards, and amendments to standards and interpretations, are not yet effective for the period ended March 31, 2019, and have not been applied in preparing these financial statements.

New standards and interpretations not yet adopted:

Leases – IFRS 16

IFRS 16, Leases (“IFRS 16”) In January 2016, the IASB issued IFRS 16, a significant financial instrument measured at fair value, the derivative warrant liabilities. Significant assumptions in determining this fair valuenew standard that replaces IAS 17, Leases. IFRS 16 is disclosed in Note 21a major revision of the financial statements. The carrying valueway in which companies account for leases and will no longer permit off balance sheet leases. Adoption of all other financial assetsIFRS 16 is mandatory and liabilitieswill be effective in our fiscal year beginning on April 1, 2019. We are assessing the impact of adoption of IFRS 16, and currently there is only one lease that will be impacted by this new standard and the Corporation approximate their fair value given the short-term nature of these investments. The carrying value of the restricted short-term investment also approximates its fair value given the short-term maturity of the reinvested funds.impact is expected to be minimal.

- 59 -

Item 6.Directors, Senior Management and Employees

A.Directors and Senior Management

The following table sets out the name and the province or state and country of residence of each of the persons proposed for election as Directors at its next Annual General Meeting,our directors and all other positions and offices with the Corporationus held by such person, his or herthem, their principal occupation, the year in which the personthey became a director, of the Corporation, and the number of Common Shares of the Corporation that such person hascommon shares they have declared to beneficially own, directly or indirectly, or over which control or direction is exercised by such person as at the date indicated below. The Corporation is currently searching for an additional independent director nominee which it intends to includethem.

Name, Province or State, as the case
may be, and Country or Residence of
each Director
Principal OccupationFirst
Year as
Director
Number of Common
Shares Beneficially
Owned or Controlled or
Directed by Each Director (1)
Roderick Carter
California, United States
Chairman of the Board
Principal Aquila Life Sciences LLC2015-
Jean-Marie (John) Canan
Florida, United States
Corporate Director2016107,500
Jan D’Alvise
California, United States
President and CEO of Acasti201652,500
Donald Olds
Quebec, Canada
President and CEO of NEOMED Institute201838,000

Notes:

(1) Based on the slate of directors being nominated for election at its next Annual General Meeting.

Name, province or state, as the case may be, and country of residence of each director and proposed directorPrincipal OccupationFirst year as directorNumber of Common Shares beneficially owned or controlled or directed by each proposed director
Roderick N. Carter
California, United States
Executive Chairman of the Board
Principal, Aquila Life Sciences LLC2015-
Janelle D'Alvise
California, United States
President and CEO of the Corporation2016-
James S. Hamilton
Québec, Canada
President and CEO of Neptune Technologies & Bioressources Inc.2015-
Leendert H. Staal
Maryland, United States
Independent consultant and owner of Staal Consulting LLC.2016-

information publicly available on SEDI.

The following is a brief biography of the directors:

our current directors and senior management:

Dr. Roderick N. Carter

Dr. Carter has a strong history of contributions to healthcare through clinical, research, business and people leadership. He has significant experience developing and commercializing nutraceutical and pharmaceutical products and has successfully led clinical research and business development strategies for cardiovascular and inflammation related diseases. Dr. Carter is currently Principal at Aquila Life Sciences LLC, a consulting firm he founded in April 2008 focusing on pharmaceutical development and commercialization. Prior to this, he was Vice President of Clinical Development at Reliant Pharmaceuticals, which developed the omega-3OM3 cardiovascular drug Lovaza,LOVAZA, and today is a wholly ownedwholly-owned subsidiary of GlaxoSmithKline. He also served as Executive Director at Merck and Co., USA, President and Chief Executive Officer of WellGen and Senior Medical Director at Pfizer Inc., USA. Dr. Carter received his Medical Degree from the University of Witwatersrand, Johannesburg, along with a Master of Science degree in Sports Medicine from Trinity College, Dublin.

46

Jannelle D'AlviseJan D’Alvise (also our President and CEO)

Ms. D'AlviseD’Alvise has extensive experience in diagnostics, medical devices, pharmaceuticals and drug discovery research tools. Until recently,2016, Ms. D'AlviseD’Alvise was the President and Chairman of Pediatric Bioscience. Before that, she was the CEO of Gish Biomedical, a cardiopulmonary medical device company. Prior to Gish, Ms. D'AlviseD’Alvise was the CEO of the Sidney Kimmel Cancer Center (SKCC), a drug discovery research institute. From 1995 until 1998, she was also the Co-Founder and Executive VP/COO of Metrika Inc., and in 1999 was the Co- Founder/President/CEO/Chairman of NuGEN, Inc. Ms. D'AlviseD’Alvise built both companies from technology concept through to successful regulatory approvals, product introduction and sustainable revenue growth. Prior to 1995, Ms. D'AlviseD’Alvise was a VP of Drug Development at Syntex/Roche and Business Unit Director of their Pain and Inflammation business, and also VP of Commercial Operations at SYVA, (Syntex's(Syntex’s clinical diagnostics division), and began her career with Diagnostic Products Corporation (DPC).Corporation. Ms. D'AlviseD’Alvise has a B.S. in Biochemistry from Michigan Technological University. She has completed post- graduate work at the University of Michigan, Stanford University, and the Wharton Business Schools. JanMs. D’Alvise has served on the board of numerous private companies and non-profits, and is an Entrepreneur-in-Residence for the von Liebig Institute for Entrepreneurship at the University of California, San Diego.

- 60 -

James S. HamiltonJean-Marie (John) Canan

Mr. HamiltonCanan is currentlyan accomplished business executive with over 34 years of strategic, business development and financial leadership experience. Mr. Canan recently retired from Merck & Co., Inc. where his last senior position was as Senior Vice-President, Global Controller, and Chief Accounting Officer for Merck from November 2009 to March 2014. He has managed all interactions with the audit committee of the Merck board of directors, while participating extensively with the main board and the compensation & benefits committee. Mr. Canan serves as a director of REV Group, a public company, where he chairs the audit committee. He also serves on the board of trustees of Angkor Hospital for Children, where he also chairs the audit & risk committee. Mr. Canan is a graduate of McGill University, Montreal, Canada, and is a Canadian Chartered Accountant.

Donald Olds

Mr. Oldswas until recently President and Chief Executive Officer of Neptune Technologies & Bioressourcesthe NEOMED Institute, an R&D organization dedicated to advancing Canadian research discoveries to commercial success. Prior to NEOMED, he was the Chief Operating Officer of Telesta Therapeutics Inc., Acasti's parenta TSX-listed biotechnology company, where he was responsible for finance and investor relations, manufacturing operations, business development, human resources and strategy. In 2016, he led the successful sale of Telesta to a larger public biotechnology company. Prior to joining Neptune, from 2006 to 2015, Mr. Hamilton served as Vice President Human Nutrition and Health, North America, and President of DSM Nutritional Products USA, Inc., based in Parsippany, New Jersey. HeTelesta, he was serving on the global management team of DSM Nutritional Products' Human Nutrition & Health business, an organization with over $2 billion in global sales and operations in more than 40 countries. DSM Nutritional Products is an important division of the life sciences and material sciences corporation, DSM N.V. of the Netherlands. Mr. Hamilton's industry knowledge has made him a valuable contributor to several trade associations and he a director and is the immediate past chairman of the board of directors of the Council for Responsible Nutrition, the dietary supplement industry's leading trade association. Mr. Hamilton is a graduate of Concordia University in Montreal, Canada and has attended a number of business education and leadership programs at the London Business School and INSEAD.

Leendert H. Staal
Dr. Staal is a seasoned and accomplished senior executive with a strong track record of value creation. Dr. Staal has held numerous senior level positions within the DSM group, most recently as President and Chief Executive Officer of DSM Nutritional Products from January 2008 to March 2013 and previously as PresidentPresagia Corp., and Chief ExecutiveFinancial Officer and Chief Operating Officer of DSM Pharmaceuticals. Dr. Staal also held the position of Group Vice President of Quest InternationalAegera Therapeutics, where he was responsible for clinical operations, business development, finance, and mergers and acquisitions. At both Telesta and Aegera, Mr. Olds was Chairman of Unipath (a wholly owned subsidiary of Unilever). Heresponsible for raising more than $100 million in equity financing and leading regional and global licensing transactions with life sciences companies. Mr. Olds is currently Director of Goodfood Market Corp, Oxfam Quebec and Director of Presagia Corp. He has extensive past corporate governance experience serving on the boards of private and public for-profit and not-for-profit organizations. He holds an independent consultantMBA (Finance & Strategy) and owner of Staal Consulting LLC, focusing on Mergers & Acquisitions and business strategy. Recently, he has been providing consulting services in connection with Neptune's Sherbrooke plant, where he is part of a team enhancing and optimizing plant output. Dr. Staal has a Ph.D. in ChemistryM.Sc. (Renewable Resources) from the University of Amsterdam.
Name, Province and Country of
Residence
Principal Occupation
Position Within the Corporation
Pierre Lemieux
Québec, Canada
Chief Operating Officer of AcastiChief Operating Officer
FollowingMcGill University.

The following are brief biographies of our senior managers:

managers, other than our President and Chief Financial Officer, Jan D’ Alvise, whose biography appears further above:

Dr. Pierre Lemieux – Chief Operating Officer

and Chief Scientific Officer (COO and CSO)

Dr. Pierre Lemieux has been theour Chief Operating Officer of the Corporation since April 12, 2010.2010 and our Chief Scientific Officer since June 2018. Previously, Mr. Lemieux was CEO, Co-Founder and Chairman of BiolActis Inc. which he sold in 2009 to interests affiliated with the Nestlé multinational group. Mr. Lemieux joined Suprateck Pharma in 1999 as Director and Vice-President involved in the development of formulations for gene therapy on behalf of Rhone-Poulenc Rorer and Genzyme, which today are under the Sanofi banner. Prior to this, Mr. Lemieux was involved in the development of cardiovascular products at Angiotech Pharmaceuticals. Mr. Lemieux has a Ph.D. in biochemistry from Université Laval (Québec). He holds a post-doctoral degree inmore than 16 patents and has authored over 50 publications. Mr. Lemieux’s research was conducted at Université Laval as well as at the anti-cancer center Paul Papin D’Angers (France) and the University of Nottingham (England). His research focused on ovarian cancer and its treatment with monoclonal antibodies used to target cancer drugs. After completing his graduate studies, Mr. Lemieux joined the Oncology fromdivision of the Center for Health Science Center,Research, University of Texas (San Antonio)(U.S.). He obtained a postdoctoral fellowship from the Susan G. Komen Foundation (Breast Cancer). Mr. Lemieux has served on the boards of BioQuébec, Montreal in vivo and PharmaBio Development.

Mr. Brian Groch – Chief Commercial Officer (CCO)

Mr. Groch has been our Chief Commercial Officer since June 4, 2018. Mr. Groch brings over 25 years of senior experience in the healthcare and life science industries, including product commercialization, developing and executing global sales strategies, business development, and operations. Most recently, Mr. Groch served as Executive Vice President and Chief Commercial Officer at Veru Inc., USA,a urology, oncology and female health products company, where he was responsible for leading the development and execution of the company’s long-term commercial strategy. Under his leadership, Veru experienced rapid growth in sales of the company’s women’s health product. Mr. Groch also served as Chief Commercial Officer for Telesta Therapeutics, where he led the development and implementation of the global commercial strategy. Previously, Mr. Groch served as Vice President of Commercial Operations and Market Access for Horizon Therapeutics, where he oversaw global operations including the integration of two acquisitions valued over $1.5 billion. Mr. Groch has also served as CEO and President of Exsto Therapeutics, Head of Market Access for Dendreon, and Director of Health Policy for Phadia. He has held senior management roles with Novartis and Merck & Co. He holds an M.S. in Healthcare Administration and Marketing from Central Michigan University, as well as a PhDB.S. in biochemistryPhysiology from Laval University, Canada, jointly with UniversityCentral Michigan University.

Jean-François Boily – Vice-President, Finance

Mr. Boily has been our Vice-President of Nottingham, England.Finance since September 24, 2018. Prior to joining the Corporation, Dr. Lemieux wasAcasti, Mr. Boily served as a Director of Finance & Information Technology (IT) at Innovaderm Research Inc., a large North American contract research organization (CRO) specialized in dermatology. At Innovaderm Mr. Boily worked closely with the President and Chief ExecutiveMedical Officer and founder, where Mr. Boily was responsible for all aspects of Finance and IT. Mr. Boily undertook a major financial, IT and growth mandate where Mr. Boily increased revenues and profits over 25%. Prior to that, Mr. Boily was a Director of Finance at Teva Canada, a generic drug products manufacturer, where he oversaw manufacturing of generics, managing branded product launches and clinical R&D activities. At Teva, Mr. Boily worked closely with the chairmanCFO, where he had oversight of the boardfour production sites that generated more than four billion doses. Most recently, Mr. Boily worked as well as being the founder of Technologie Biolactis Inc., a late-stage biotechnology company specialized in the valorization of proteins to better serve the nutraceutical, cosmeticconsultant and pharmaceutical industries. Dr. Lemieux cumulates 20 years of experience in pharmaceutical development and has occupied a variety of high management positions in the pharmaceutical industry.

Mr. Laurent Harvey B.Pharm.,M.Sc. – Vice President Clinicalof Finance and Non-Clinical Affairs
47

Laurent has more than 25 years' experienceIT for a pharmaceutical start-up led by a US-based investor, where he helped raise seed capital in advance of a planned initial public offering in Canada and the biopharmaceutical industry, primarily in drug development and clinical research. Before joining Acasti Pharma, he occupied different management positions at Bristol-Myers Squibb, Æterna-Zentaris, Innodia, Bellus Health and KLOX Technologies. During his career, he participated in many national and international clinical programs in various therapeutic fields such as cardiovascular, endocrinology, oncology and neurology. LaurentUS. Mr. Boily holds a Bachelor's degreeBS in pharmacyAccounting from HEC Montreal and M.Sc in hospital pharmacy, both from Université de Montréal.
is a Chartered Public Accountant (CPA).

- 61 -

B.Compensation

Summary of the Corporation'sour Compensation Programs

The key components of our compensation programs are highlighted in the table below:

What are the
key features?
Primary objective
What does the compensation
element reward?
How is the annual value or target determined?
ANNUAL
BASE SALARY
Fixed compensation
· Payable in cash
· Revised annually and adjusted, as necessary
Provides a market competitive fixed rate of payRewards skills, knowledge, responsibilities and experience
Targets are set at the 50th percentile of what is paid in the reference market for similar positions
SHORT-TERM
INCENTIVE
PLAN (STIP)
Variable compensation
· Payable in cash following the end of each fiscal year
Encourages performance against our annual corporate and individual objectivesRewards the achievement of our annual objectives
Targets are set at the 50th percentile of what is paid in the reference market for similar positions
LONG-TERM
INCENTIVE
PLAN (LTIP)
Variable compensation
· In forms of stock options, which vest over three years at a rate of 1/3 per year and expire after five to seven years
· Generally granted annually at the beginning of each financial year
· Equity incentive grants
Aligns interests of executives and shareholdersRewards the creation of shareholder value
Targets are set at the 50th percentile of what is paid in the reference market for similar positions
EMPLOYEE BENEFITS AND PERQUISITES
Fixed compensation
Group Benefits
· Life, medical, dental and disability insurance
Perquisites
· RRSP Matching Program
Group Benefits
· Provides employees and their families with assistance and security
Perquisites
· Complements executives' total compensation
---Competitive overall with programs offered in comparable organizations
PENSION
The Corporation does not have any pension plan available for its executives or Directors
----------

48

The Corporation's

Our executive compensation program is intended to attract, motivate and retain high performinghigh-performing senior executives, encourage and reward superior performance and align the executives'executives’ interests with those of the Corporationours by providing a compensation which is competitive with the compensation received by executives employed by comparable companies and ensuring that the achievement of annual objectives is rewarded through the payment of bonuses and providing executives with long-term incentive through the grant of stock options.

The

Our governance & human resources, or GHR, Committeecommittee has authority to retain the services of independent compensation consultants to advise its members on executive compensation and related matters, and to determine the fees and the terms and conditions of the engagement of suchthose consultants. During the financialour fiscal year ended February 28, 2015,March 31, 2019, the GHR Committeecommittee retained thecompensation consulting services, of Hexarem Inc. ("Hexarem")including those led by The Sarkaria Group, to review the Corporation'sour executive compensation programs, including base salary, short-term and long-term incentives, total cash compensation levels and total direct compensation of certain senior positions, against those of peer groups of similar and larger size, as measured by market capitalization, biotechnology and pharmaceutical companies listed or headquartered in North America.

All of the services provided by Hexaremthe consultants were provided to the GHR Committee.committee. The GHR Committee hascommittee assessed the independence of Hexaremthe consultants and concluded that its engagement of Hexarem doesthe consultants did not raise any conflict of interest with the Corporationus or any of the Directorsour directors or executive officers.
As influenced by the consultants’ fiscal period 2019 executive compensation review, the board and GHR committee set the following executive compensation program.

Use of Fixed and Variable Pay Components

Compensation of our named executive officers (“NEOs”) is revised each year and has been structured to encourage and reward the executive officers on the basesbasis of short-term and long-term corporate performance. In the context of theits analysis of the compensation for Fiscal 2016,our fiscal year ended March 31, 2019, the following components were examined:

examined by the GHR committee:

(i)·base salary;

(ii)·short term incentive plan, consisting of a cash bonus;

(iii)·long term incentive plan, consisting of stock options and equity incentive grants based on performance and/or time vesting conditions; and

(iv)·other elements of compensation, consisting of group benefits and perquisites.

Base Salary

Actual base

We intend to be competitive with comparator companies and to attract and retain top talent. The GHR committee will review compensation periodically to be sure it meets this strategic imperative. Base salary paidis set to executives is setreflect an individual’s skills, experience and contributions within a salary structure consistent with the Corporation'sour gender pay equity policy with a mid-point aligned withpolicy. Base salary structure is revised annually by the 50th percentile value of the job within the comparator group. The actual paid salary is set in recognition of the individual's skills, experienceGHR committee as our financial and contribution.

market conditions evolve.

Short Term Incentive Plan ("(STIP)STIP")

Our Short-Term Incentive Plan, or STIP, targetsprovides for potential rewards when a threshold of corporate performance is met. Personal objectives that support corporate goals are alignedestablished annually with each employee and are assessed at the 50th percentileend of our reference market and seteach financial year. Personal objectives are assessed through a performance grid, with pre-specified, objective performance criteria. STIP awards are paid out in proportion to individual performance, determined in end-of-year performance reviews. For the most senior participants in the STIP, greater weight is assigned to corporate objectives. Target payout is expressed as a percentage of base salary and is determined by employment contracts and board discretion. Annual salary for STIP purposes is the executive's base salary. Mr. Pierre Lemieux, COOannual salary in effect at the end of Acasti,the plan year (i.e., prior to annual salary increases).

The actual amount awarded ranges from zero for performance well below expectation and is capped at two times target for exceptional performance. The STIP is a discretionary variable compensation plan and all STIP payments are subject to board approval. Participants must be employed by us at the end of the financial year to qualify. We reserve the right to modify or discontinue the STIP at any time.

- 62 -

Ms. D’Alvise, our CEO, is eligible for up to a 25%50% bonus of hisher annual base salary,salary. Dr. Lemieux, our COO, and Mr. Laurent Harvey, Vice President, Clinical and Non-Clinical AffairsGroch, our CCO, are each eligible for up to a 40% bonus of their annual base salary. Mr. Boily, our Vice-President, Finance, is eligible for up to a 20% bonus. Mr. Mario Paradis, CFO, did not receive any compensation from the Corporation in30% bonus of his capacity as CFO other than the compensation he receives from Neptune, Acasti's parent company, in his capacity of CFO of Neptune. Please refer to the June 2016 proxy circular of Neptune, for more information on his compensation as CFO of Neptune, a copy of which is available on SEDAR at www.sedar.com.

The STIP is revised by the GHR Committee and its independent advisor every 2 to 3 years as market conditions evolve. The annual bonus provides an opportunity for management and executive employees to earn an annual cash incentive based on the global financial results of the Corporation and the degree of achievement of objectives set by the Board of Directors, generally based on actual versus budgeted results.
base salary.

These performance goals will take into account (1) the achievement of R&D milestones within timelines and budget and (2) individual objectives determined annually by the Boardboard according to short-term priorities.

Long Term Incentive Plan (LITP)

The detail of these goalsLTIP has been adopted as a reward and retention mechanism. Participation is not disclosed herein asdetermined annually at the disclosurediscretion of the specific goals could be detrimental to the Corporation and its shareholdersboard. Employees approved by providing competitors with proprietary and extremely sensitive information.

Long Term incentive Plan ("LITP")
LTIP targets are aligned with the 50th percentileour board of directors may participate in our reference market and set as a percentage of the executive base salary. LTIP targets are revised by the GHR Committee and its independent advisor every 2 to 3 years as market conditions evolve. The grant of stock options by the Corporation to executives and management aims to recognize and reward the impact of longer-term strategic actions undertaken by management, offering an added incentive for the retention of the Corporation's executives as well as aligning the interests of the Corporation's executives with that of its Shareholders.
The GHR Committee is responsible for overseeing and managing the Corporation's stock option plan, (the "Stock Option Plan"). Grantswhich is designed to align the long-term interests of participants with those of shareholders, in order to promote shareholder value.

The GHR committee determines the number of stock options to executivesbe granted to a participant based on peer group data and management aretaking into account corporate performance and level in the organization. The LTIP calculation is based on a guideline percentage of base salary and the number of options is determined based on an approved dollar value (rather than a specific number of shares). The guideline ranges from 15% to 200% and is subject to adjustment by the Boardboard in reviewing annual achievement of Directors. Generally, new stock option grants do not take into account previous grantscorporate performance and availability of stock options when considering new awards.  The terms of the Stock Option Plan are described below under the heading "Stock Option Plan ".shares. The GHR Committeecommittee may also determine, in its sole discretion, and taking into consideration a wide variety of qualitative and quantitative factors, ad hoc numbers of stock optionsoption awards to be granted to participants in order to address extraordinary situation affectingsituations. Awards at any level may be adjusted as necessary to maintain an equity burn rate and overhang similar to comparator companies. In addition to our stock option plan, the Corporation's overall activities.

The CEOboard is also provided with a pool of Stock Options for empowered to grant ad hoc grantsawards, from time to a limited number of other contributors. The CEO has the discretion, with the concomitant support of the GHR Committee to allocate none or all the pool at his/her discretion to:
49

·reward top performers;
·new hires;
·retain high-potential contributors; and
·address special needs.
Each ad hoc grant must be ratified and approved by the Board of Directors in order to give full effect to the issuance of such securitiestime, under the Stock Option Plan.
An Equity Incentive Plan was adopted by the Board of Directors in orderour equity incentive plan to provide the Corporation withfor a share-related mechanism to attract, retain and motivate qualified Directors,directors, senior employees and consultants of the Corporation and its subsidiaries. The adoption of the Equity Incentive Plan was approved initially by the Shareholders at the 2013 Shareholders' meeting held on June 27, 2013. See section "Compensation Discussion & Analysis – Equity Incentive Plan" below.
The Directorsconsultants.

Our directors and executive officers are not permitted to purchase financial instruments, including for greater certainty,such as prepaid variable forward contracts, equity swaps, collars or units of exchange funds that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by the Directordirector or officer.

Share Ownership Guidelines

To further align the interests of our executives with those of our other shareholders, the board has adopted share ownership guidelines. Under these guidelines, the CEO and other executives (i.e., CFO, COO, VPs) are required to retain and hold 50% of the shares acquired by them under any equity incentive award granted on or after June 7, 2017 (after subtracting shares sold to pay for option exercise costs, and relevant federal, state, and local taxes which are assumed to be at the highest marginal tax rates). In addition, the share retention rule applies unless the executive beneficially owns shares with a value at or in excess of the following share ownership guidelines:

·CEO — 2x then-current annual base salary

·Other executives — 1x then-current annual base salary.

The value of an individual’s shares for purposes of the share ownership guidelines is deemed to be the greater of the then- current fair market value of the shares, or the individual’s cost basis in the shares. Shares counted in calculating the share ownership guidelines include shares beneficially owned outright, whether from open market purchases, shares retained after option exercises, and shares of restricted stock or deferred stock units that have fully vested. In addition, in the case of vested, unexercised, in-the-money stock options, the in-the-money value of the stock options will be included in the share ownership calculation. Executives have five years from their date of hire or promotion to satisfy the share ownership guidelines.

Stock Option Plan

The following is a summary of important provisions of the Stock Option Plan. It is not a comprehensive discussion of all of the terms and conditions of the Stock Option Plan. Readers are advised to review the full text of the Stock Option Plan to fully understand all terms and conditions of the Stock Option Plan. A copy of the Stock Option Plan can be obtained by contacting Acasti's Corporate Secretary.
The Corporation's Stock Option Plan

Our stock option plan was adopted by the Boardour board of Directorsdirectors on October 8, 2008 and washas been amended from time to time, including most recently on May 25, 2016.

April 15, 2019. The grant of options is part of the long-term incentive component of executive and Directordirector compensation and an essential part of compensation. Qualified Directors,directors, employees and consultants of the Corporation and its subsidiaries may participate in the Stock Option Plan,our stock option plan, which is designed to encourage optionneesoption holders to link their interests with those of Shareholders,our shareholders, in order to promote an increase in Shareholdershareholder value. Awards and the determination of any exercise price are made by the Boardour board of Directors,directors, after recommendation by the GHR Committee.committee. Awards are established, among other things, according to the role and responsibilities associated with the participant'sparticipant’s position and his or her influence over appreciation in Shareholdershareholder value. Any award grants a participant the right to purchase a certain number of Common Sharescommon shares during a specified term in the future, after a vesting period and/or specific performance conditions, at an exercise price equal to at least 100% of the Market Pricemarket price (as defined below) of our Common Sharescommon shares on the grant date. The "Market Price"“market price” of Common Sharescommon shares as of a particular date shall generally meanmeans the closing price per Common Sharecommon share on the TSXV, or any other exchange on which the Common Sharescommon shares are listed from time to time, for the last preceding date on which there was a sale of such Common Sharescommon shares on suchthat exchange (subject to certain exceptions set forth in the Stock Option Planstock option plan in the event that the Company iswe are no longer traded on any stock exchange). Previous awards may sometimes be taken into account when new awards are considered.

- 63 -
On May 25, 2016,

In accordance with the Board of Directors approved an amendment to the Stock Option Plan pursuant to whichstock option plan, all of an option holder'sholder’s options will immediately vest on the date of a Change of Control event (as such term is defined in the Stock Option Plan)stock option plan), subject to the terms of any employment agreement or other contractual arrangement between the option holder and us.

However, in no case will the Corporation. Ongrant of options under the same dateplan, together with any proposed or previously existing security based compensation arrangement, result in (in each case, as determined on the Boardgrant date): the grant to any one consultant within any 12-month period, of Directors also approved amendment to extend to 12 months the period during which an option holder can exercise its vested options reserving for issuance a number of common shares exceeding in the caseaggregate 2% of death, disability or retirement. Shareholder approval was not required for the May 25, 2016 amendments as the Stock Option Plan contains specific amendment provisions pursuant to which such amendments may be made to the Stock Option Plan upon approval of the Board, without Shareholder approval.

Options for Common Shares of the Corporation representing, from time to time, up to 10% of the outstanding issued Common Shares of the Corporation then outstanding may be granted by the Board pursuant to the Stock Option Plan. As at the Record Date, there were 1,071,203 Common Shares reserved for issuance pursuant to the Stock Options Plan, representing 10% of the Common Shares of the Corporationour issued and outstanding at that date. As ofcommon shares (on a non-diluted basis); or the Record Date, there are 886,151 options outstanding under the Corporation's Stock Option Plan.
50

Not more than 5% of Common Shares issued by the Corporation pursuant to the Stock Option Plan may be grantedgrant to any single optionee during a 12 month period (not more than 2% if such optionee is aone employee, director and/or consultant, or an employee providingwhich provides investor relations services). In addition, the Stock Option Plan, together withservices, within any other plan to be established or any12-month period, of options already granted, will not result in either (i) thereserving for issuance a number of Common Shares reserved for issuancecommon shares exceeding in connection with options granted to insiders representing more than 10%the aggregate 2% of the number of Common Shares of the Corporationour issued and outstanding or (ii) the issuance to insiders, duringcommon shares (on a 12 month period, of a number of options representing more than 10% of the number of Common Shares of the Corporation issued and outstanding.
non-diluted basis).

Options granted under the Stock Option Planstock option plan are non-transferable and are subject to a minimum vesting period of 18 months, with gradual and equal vesting on no less than a quarterly basis. They are exercisable, subject to vesting and/or performance conditions, at a price equal to the closing price of the Common Sharescommon shares on the TSXV on the day prior to the grant of such options. In addition, and unless otherwise provided for in the agreement between the Corporationus and the holder, options will also lapse upon termination of employment or the end of the business relationship with the Corporationus except that they may be exercised for 60 days after termination or the end of the business relationship (30 days for investor relations services employees), to the extent that they will have vested on such date of termination of employment.

employment, except in the case of death, disability or retirement where this period is extended to 12 months.

Subject to the approval of the relevant regulatory authorities, including the TSXV, if applicable, and compliance with any conditions attached to suchthat approval (including, in certain circumstances, approval by disinterested Shareholders)shareholders) if applicable, the Boardboard of Directorsdirectors has the right to amend or terminate the Stock Option Plan.stock option plan. However, unless option holders consent to the amendment or termination of the Stock Option Planstock option plan in writing, any such amendment or termination of the Stock Option Planstock option plan cannot affect the conditions of options that have already been granted and that have not been exercised under the Stock Option Plan. Pursuant tostock option plan.

Options for common shares representing a fixed rate of 15% of our outstanding issued common shares as of April 9, 2019 may be granted by the rulesboard under the stock option plan. As at April 9, 2019, there were 11,719,910 common shares reserved for issuance under the stock option plan. As of the TSXV,date of this annual report, there were 600,081 options outstanding under the Stock Option Plan must be approved each year by the Shareholders of the Corporation at its annual meeting.

stock option plan.

Equity Incentive Plan

The following is a summary of important provisions of the Equity Incentive Plan. It is not a comprehensive discussion of all of the terms and conditions of the Equity Incentive Plan. Readers are advised to review the full text of the Equity Incentive Plan to fully understand all terms and conditions of the Equity Incentive Plan. A copy of the Equity Incentive Plan can be obtained by contacting Acasti's Corporate Secretary.

On May 22, 2013, the Equity Incentive Planour equity incentive plan was adopted by the Boardboard in order to, amongstamong other things, provide Acastius with a share-relatedshare- related mechanism to attract, retain and motivate qualified Directors,directors, employees and consultants of Acasti.consultants. The adoption of the Equity Incentive Planequity incentive plan was initially approved by the Shareholdersshareholders at itsour 2013 Shareholders'Shareholders’ meeting held on June 27, 2013.

2013 and has been amended from time to time, including most recently on April 15, 2019.

Eligible Personspersons may participate in the Equity Incentive Plan. "Eligible Persons"equity incentive plan. “eligible persons” under the Equity Incentive Planequity incentive plan consist of any director, officer, employee or consultant (as defined in the Equity Incentive Plan)equity incentive plan) of Acastius or of a subsidiary.subsidiary may participate in the equity incentive plan. A participant ("Participant") is an Eligible Personeligible person to whom an award has been granted under the Equity Incentive Plan.equity incentive plan. The Equity Incentive Planequity incentive plan provides Acastius with the option to grant to Eligible Persons Bonus Shares, Restricted Shares, Restricted Share Units, Performance Share Units, Deferred Share Unitseligible persons bonus shares, restricted shares, restricted share units, performance share units, deferred share units and other Share-Based Awards.

Subject to the adjustment provisions provided for in the Equity Incentive Plan and the applicable rules and regulations of all regulatory authorities to which Acasti is subject (including any stock exchange), the total number of Common Shares reserved for issuance pursuant to awards granted under the Equity Incentive Plan will be equal to a number that (A) if, and for so long as the Common Shares are listed on the TSXV, shall not exceed either (i) 1,829,282 Common Shares, and (ii) 10% of the issued and outstanding Common Shares, which number shall include Common Shares issuable pursuant to the Acasti Stock Option Plan, or (B) if, and for so long as the Common Shares are listed on the TSX, shall not exceed 2.5% of the issued and outstanding Common Shares from time to time.
share-based awards.

If, and for so long as the Common Sharesour common shares are listed on the TSXV, no more than 5% of the issued and outstanding Common Shares may be granted to any one individual Participant in any 12 month period (unless Acasti has obtained disinterested approval for such grant) and no more than 2% of the issued and outstanding Common Sharescommon shares may be granted to any one consultant or employee conducting investor relations activities in any 12 month12-month period.

If, and for so long as the Common Shares are listed on the TSX, the number of Common Shares (A) issuable, at any time, to Participants that are insiders, and (B) issued to Participants that are insiders within any 12 month period, pursuant to the Equity Incentive Plan, or when combined with all of Acasti's other security based share compensation arrangements shall not, in aggregate, exceed 10% of the total number of outstanding Common Shares on a non-diluted basis.

The Boardboard has the right to determine that any unvested or unearned Restricted Share Units, Deferred Share Units, Performance Share Unitsrestricted share units, deferred share units, performance share units or other Share-Based Awardsshare-based awards or Restricted Sharesrestricted shares subject to a Restricted Periodrestricted period outstanding immediately prior to the occurrence of a change in control shallwill become fully vested or earned or free of restriction upon the occurrence of sucha change in control. The Boardboard may also determine that any vested or earned Restricted Share Units, Deferred Share Units, Performance Share Unitsrestricted share units, deferred share units, performance share units or other Share-Based Awards shallshare-based awards will be cashed out at the market price as of the date sucha change in control is deemed to have occurred, or as of such other date as the Boardboard may determine prior to the change in control. Further, the Board shall haveboard has the right to provide for the conversion or exchange of any Restricted Share Unit, Deferred Share Unit, Performance Share Unitrestricted share unit, deferred share unit, performance share unit or other Share-Based Awardshare-based award into or for rights or other securities in any entity participating in or resulting from the change in control.

51

The Equity Incentive Planequity incentive plan is administered by the Boardboard and the Boardboard has sole and complete authority, in its discretion, to determine the type of awards under the Equity Incentive Planequity incentive plan relating to the issuance of Common Sharescommon shares (including any combination of Bonus Shares, Restricted Share Units, Performance Share Units, Deferred Share Units, Restricted Sharesbonus shares, restricted share units, performance share units, deferred share units, restricted shares or other Share-Based Awards)share-based awards) in such amounts, to such persons and under such terms and conditions as the Boardboard may determine, in accordance with the provisions of the Equity Incentive Planequity incentive plan and the recommendations made by the GHR Committee.committee.

- 64 -

Subject to the adjustment provisions provided for in the equity incentive plan and the applicable rules and regulations of all regulatory authorities to which we are subject (including any stock exchange), the total number of common shares reserved for issuance pursuant to awards granted under the equity incentive plan will be equal to a number that (A) if, and for so long as the common shares are listed on the TSXV, will not exceed the lower of (i) 1,953,318 common shares, and (ii) 15% of the issued and outstanding common shares as of April 9, 2019, representing 11,719,910 common shares, which includes common shares issuable pursuant to options issued under our stock option plan.

Other Forms of Compensation

RRSP Matching Program

Program. Effective June 1, 2016, the Corporation sponsorswe sponsor a voluntary Registered Retirement Savings Plan, or RRSP, matching program, (the "RRSP Matching Program" which is open to all eligible employees, including NEOs. The RRSP Matching Programmatching program matches employees'employees’ contributions up to a maximum of $1,000$1,500 per fiscal year for eligible employees who participate in the program.
Other than matching contributions under the RRSP Matching Programmatching program (which amounts are disclosed in the column entitled "All“All Other Compensation"Compensation” in the summary compensation table below, the Corporation doesbelow), we do not provide pension or retirement benefits to itsour executive officers or Directors.
directors.

Other Benefits and Perquisites

The Corporation'sPerquisites. Our executive employee benefit program also includes life, medical, dental and disability insurance. These benefits and perquisites are designed to be competitive overall with equivalent positions in comparable organizations. The Corporation doesWe do not have anya pension plan available for its employees, executives or Directors.
COMPENSATION TO NAMED EXECUTIVE OFFICERS
employees.

Compensation paid by the CorporationPaid to Named Executive Officers

The following compensation table sets forth the compensation information for the named executive officers (NEOs) for services renderedNEOs during the financialfiscal year ended February 29, 2016. Mr. Mario Paradis, CFO, did not receive any compensation fromMarch 31, 2019, the Corporation in his capacity as CFO other thanfiscal year ended March 31, 2018 and the compensation he receives from Neptune, Acasti's parent company, in his capacity of CFO of Neptune.


Name and
Principal Position
Year ended February 28/29
Salary
($)
Share-Based Awards(1)(2)
($)
Option-based/Warrant-based awards
(1) (2)
($)
Annual incentive plans
($)
All other compensation
($)(3)(4)
Total compensation
($)
Pierre Lemieux
COO
2016
2015
2014
239,565
186,115
170,308
-
-
207,000
33,320
22,163
102,505
42,000
12,000
-
-
16,000
-
314,885
236,278
479,813
Laurent Harvey
Vice President, Clinical and Non-Clinical Affairs
2016159,808-17,15316,000-192,961
2015107,977-7,3888,000-123,365
201433,600-13,734--47,334
André Godin(5)
Former Interim President, CEO and CFO
2016
2015
2014
14,798
63,538
23,442
-
-
54,790
-
14,775
12,255
-
20,000
-
132,653
19,419
-
147,451
117,732
90,487
fiscal year ended March 31, 2017.

Name and
Principal
Position
Period
ended
Salary
($)
Share-
Based
Awards
($)
Option-Based
Awards
($)(1) (2)
Annual
Incentive
Plans
($)
All Other
Compensation
($)
Total
Compensation
($)
Jan D’Alvise(4)
President and CEO
March 31, 2019498,332-497,196241,291(10)-1,236,819
March 31, 2018431,902-528,279183,500(6)-1,143,681
March 31, 2017365,072-502,163136,049(7)-1,003,284
Pierre Lemieux
COO
March 31, 2019261,018-200,53399,298-560,849
March 31, 2018253,680-190,42671,1551,500(3)516,761
March 31, 2017275,819-96,52249,000-421,341
Brian Groch(8)
CCO
March 31, 2019295,681-164,58988,864(11)-549,134
Jean-François Boily(9)
VP Finance
March 31, 2019103,821-111,69330,638-246,152
Linda O’Keefe
Former CFO(12)
March 31, 2019269,762----269,762
March 31, 2018327,199-159,71264,475(13)-551,386
March 31, 2017114,183-237,34039,897(14)109,414500,834

- 65 -

Notes:

(1)The Corporation has adopted the IFRS 2 Shared-based payment to account for the issuance of stock options to employees and non-employees. The fair value of stock options is estimated at the grant date using the Black-Scholes Option Pricing Model.option pricing model. This model requires the input of a number of parameters, including stockshare price, stockshare exercise price, expected stockshare price volatility, expected time until exercise and risk-free interest rates. Although the assumptions used reflect management'smanagement’s best estimates, they involve inherent uncertainties based on market conditions generally outside of the Corporation'sour control.

52


(2)
For the period ended on February 29, 2016, theThe fair market value of the June 1, 2015 option-based awards of the Corporation is based on a fair value of $1.97 per option granted to the NEOs of the Corporation. No additional grants were awarded to the NEOs during the 2015-2016 financial year.
For the period ended on February 28, 2015, the fair market value of the October 20, 2014 option-based award granted to Mr. André Godin and Mr. Pierre Lemieux is based on a fair value of $3.00 per option.
For the period ended on February 28, 2014, the fair market value of the June 27, 2013 Acasti share-based awards is based on a fair value of $28.90 per restricted share unit ("RSU") granted to Mr. Pierre Lemieux and Mr. André Godin.
For the period ended on February 28, 2014, the fair market value of the June 21, 2013 Acasti call-option based awards granted by Neptune is based on a fair value of $11.40 per Acasti call-option granted to Mr. Pierre Lemieux, and $1.22 per Acasti call‑option granted to Mr. André Godin.
For the period ended on February 28, 2014, the fair market value of the October 1, 2013 option-based awards granted to Mr. Laurent Harveyon July 2, 2018 in the fiscal year ended March 31, 2019 is based on a fair value of $9.16 per option.
$0.5486.
(3)The value of perquisites and other personal benefits received by these executives did not total an aggregate value of $50,000 or more, and does not represent 10% or more of their total salary during the financial yearfiscal years ended February 29, 2016.March 31, 2019, March 31, 2018 and March 31, 2017.

(4)These amounts include severance payments, vacation time accumulated and paid during the financial year ended February 29, 2016.

(5)Mr. André Godin became InterimMs. D’Alvise was appointed our President and CEO of the Corporation on May 23, 201411, 2016 and CFO of the Corporationbegan her functions on June 16, 2014. 1, 2016. Her employment agreement provides for payments in U.S. dollars with an annual base salary of US$380,000. In fiscal 2019, Ms. D’Alvise earned an annual base salary of US$394,398.
(5)US$142,303 converted as at March 31, 2018, based on a closing exchange rate of US$1.00 = $1.2895.
(6)US$102,300, converted as at March 31, 2017, based on a closing exchange rate of US1.00= $1.3299.
(7)US$50,000 converted as at March 31, 2018, based on a closing exchange rate of US$1.00 = $1.2895.
(8)Mr. Godin's functionsGroch was appointed our CCO on June 1, 2018. His employment agreement provides for payments in U.S. dollars with the Corporation were terminatedan annual base salary of US$280,000. In fiscal 2019, Mr. Groch earned an annual base salary of US$225,346.
(9)Mr. Boily was appointed our VP Finance on April 29, 2015.September 24, 2018. His employment agreement provides for an annual base salary of $215,000.
(10)US$180,566 converted as at March 31, 2019, based on a closing exchange rate of US$1.00 = $1.3363.
(11)US$66,500 converted as at March 31, 2019, based on a closing exchange rate of US$1.00 = $1.3363.
(12)Ms. O’Keefe resigned as CFO effective October 26, 2018.
(13)US$50,000 converted as at March 31, 2018, based on a closing exchange rate of US$1.00 = $1.2895.
(14)US$30,000 converted as at March 31, 2017, based on a closing exchange rate of US$1.00 = $1.3299.

- 66 -

Outstanding Share-Based and Option-Based Awards

The following tables provide information onabout the number and value of the outstanding option-based awards held by the NEOs as of the date of this Annual Report.March 31, 2019. There are no share-based awards outstanding as of the date of this Annual Report.

Option-Based Awards
Name / Grant Date
Number of securities underlying
unexercised options(1)
(#)
Option exercise
price ($)(1)
Option expiration
date
Value of unexercised
in-the-money
options(2)
($)
Pierre Lemieux
June 1, 201516,9004.50June 1, 2022-
October 20, 20147,5006.50October 19, 2019-
April 11, 201215,00021.00April 11, 2017-
June 16, 201120,00014.00June 16, 2016-
Laurent Harvey
June 1, 20158,7004.50June 1, 2022-
October 20, 20142,5006.50October 19, 2019-
André Godin(3)
October 20, 20145,0006.50April 29, 2017-
April 11, 201210,00021.00April 11, 2017-
June 16, 201115,00014.00June 16, 2016-
October 8, 200810,0002.50April 29, 2017-
annual report.

Name/Grant DateNumber of Securities
Underlying Unexercised
Options
(#)
Option Exercise Price
($)(1)
Option Expiration DateValue of Unexercised
In-The-Money Options
($)(2)
Jan D’Alvise
July 2, 2018906,2480.77July 2, 2028525,624
June 14, 2017430,0001.77June 14, 2027--
May 12, 2016525,0001.56May 12, 2023--
Pierre Lemieux
July 2, 2018365,5150.77July 2, 2028211,999
June 14, 2017155,0001.77June 14, 2027--
February 24, 201750,0001.65February 24, 2027--
May 30, 201631,4001.99May 29, 2023--
June 1, 201516,9004.50June 1, 2022--
October 20, 20147,5006.50October 19, 2019--
Brian Groch
July 2, 2018300,0000.77July 2, 2028174,000
Jean-François Boily
September 21, 2018200,0000.78September 21, 2028114,000

Notes:

(1)Acasti option-basedOption-based awards were consolidated following the Reverse-Split.our share consolidation. The exercise price was increased proportionally to reflect the consolidation.
(2)Calculation is based on a trading price of $2.02 for the Common Shares$1.35 of our common shares on the TSXV, as at closing on FebruaryMarch 29, 2016.2019.
(3)Mr. André Godin became Interim President and CEO of the Corporation on May 23, 2014 and CFO of the Corporation on June 16, 2014. Mr. Godin's functions with the Corporation were terminated on April 29, 2015.
53

Share-based and Option-based Awards of the Corporation – value vested during the financial year ended on February 29, 2016

The following table sets out the value of share-based, awards and the value of option-based, and warrant-based awards of the Corporation held by the NEOs of the Corporation that vested during the financialfiscal year ended on February 29, 2016:

March 31, 2019:

Name
Share-basedShare-Based Awards of the Corporation –
value vested during the financial year ended
on February 29, 2016

($)
Option-basedOption-Based Awards of the Corporation –
value vested during the financial year ended
on February 29, 2016

($)
Pierre LemieuxJan D’Alvise4,500---439,821
André GodinJean-François Boily4,500---18,250
Pierre Lemieux--150,624
Brian Groch--40,635
None

Compensation of the stock options held by NEOs of the Corporation that vested during the financial year ended on February 29, 2016 were in-the-money at their respective vesting date.

COMPENSATION OF DIRECTORS
The Directors'Directors

Our directors’ compensation consists of an annual fixed compensation in the amount of $30,000 and fees per meeting in the amount of $2,500 per meeting attended in person and $750 per meeting attended by teleconference. In addition,US$60,000 for the chairman of the Boardboard and eachUS$30,000 for the other non-executive board members. In addition, the chairperson of the Auditaudit committee and the Governancechairperson of the governance and Human Resources Committeeshuman resources committee receive an additional compensation of $50,000 (reducedUS$15,000 and US$10,000, respectively, while members of the audit committee and the governance and human resources committee receive additional compensation of US$7,500 and US$5,000, respectively. The directors are also entitled to $30,000be reimbursed for travelling and other reasonable expenses properly incurred by them in attending meetings of the current fiscal year)board or any committee or in otherwise serving us, in accordance with our policy on travel and $3,000, respectively,expenses.

- 67 -

Following their first election to our board of directors, non-executive directors are eligible to receive an initial equity grant of up to 150% of their annual cash retainer worth of stock options vesting annually in equal installments over an 18-month period, subject to the other terms and conditions set forth under the heading “Stock Option Plan”. In addition to their initial grant, non-executive directors are eligible to receive an annual equity-based award equal to 100% of their total annual cash retainer vesting quarterly in equal installments over an 18-month period. These awards will be granted at the same time that we are performing our annual performance review for their additional work duringour employees, subject to availability of common shares and subject to the financial year ended February 29, 2016.

Compensation Paid to Directors
terms and conditions described under the headings “Stock Purchase Plan” and “Equity Incentive Plan”. The level of these awards will be consistent with equivalent awards in comparable companies obtained from the benchmark exercise and in accordance with the recommendations obtained from our independent compensation consultant. The total compensation paid to thefor our non-executive Directors by the Corporation and its subsidiariesdirectors during the financialfiscal year ended on February 29, 2016 is set out in the following table:
NameFinancial Year Ended February 29
Fees earned
($)
Option-based awards(1)(2)
($)
All other compensation(3)
($)
Total
($)
Jerald J. Wenker(4)
201662,16723,111-85,278
Roderick N. Carter201628,50023,111-51,611
James S. Hamilton2016----
Adrian T. Montgomery(4)
201628,75023,111-51,861
Reed V. Tuckson(4)
 
2016
 
25,75023,111-48,861
Harlan W. Waksal(4)
201621,50023,111-44,611
54

March 31, 2019 was as follows:

NameFiscal Year Ended
March 31
Fees Earned
($)
Option-Based
Awards
($)(1)(2)
All Other
Compensation
($)(3)
Total
($)
Roderick N. Carter201985,291 (4)80,377--165,668
Jean-Marie (John) Canan201958,778 (5)60,283--119,061
Donald Olds201936,657 (6)50,000--86,657

Notes:

(1)The Corporation has adopted the IFRS 2 Shared-based payment to account for the issuance of stock options to employees and non-employees. The fair value of the awards is estimated at the grant date using the Black-Scholes Option Pricing Model.option pricing model. This model requires the input of a number of parameters, including stockshare price, stockshare exercise price, expected stockshare price volatility, expected time until exercise and risk-free interest rates. Although the assumptions used reflect management'smanagement’s best estimates, they involve inherent uncertainties based on market conditions generally outside of the Corporation'sour control.
(2)For the periodfiscal year ended on February 29, 2016, (i)March 31, 2019, the fair market value of the August 19, 2015July 2, 2018 option-based awards of the Corporation is based on a fair value of $2.31$ 0.51 per option granted to Mr. Wenker, Dr. Carter, Mr. Montgomery, Dr. Tuckson and Dr. Waksal. No additional grants were awarded to the Directors during the 2015-2016 financial year.granted.
(3)The value of the perquisites and other personal benefits received by these Directors did not total an aggregate value of $50,000 or more, and does not represent more than 10% of the compensation paid during financial year ended February 29, 2016. The Directorsdirectors do not receive pension benefits or other non-equity based annual compensation.
(4)On February 29, 2016, Messrs. Wenker, Montgomery, TucksonDr. Carter earned a director compensation of US$65,000.
(5)Mr. Canan earned a director compensation of US$45,000.
(6)Mr. Olds was appointed as a director on April 27, 2018 and Waksal resigned as Directorsearned a director compensation of the Corporation.US$27,885.
Outstanding Share-Based and Option-Based Awards for Directors

The following tablestable provides information onabout the number and value of the outstanding share-based and option-based awards held by non-executive Directors of the Corporation as of the date of this Annual Report.directors. There were no share-based awards outstanding as of the date of this Annual Report.

Option-Based Awards
Name / Grant Date
Number of securities underlying unexercised options(1)
Option exercise price ($)(1)
Option expiration date
Value of unexercised in-the-money options
($)(2)
Jerald J. Wenker(5)
June 26, 20142,81312.00February 28, 2017-
December 19, 20133,75021.00December 19, 2016-
Roderick N. Carter
August 19, 201510,0004.80August 19, 2022-
Adrian T. Montgomery(4)
June 26, 20145,62512.00February 28, 2017-
Reed V. Tuckson(4)
December 19, 20137,50021.00December 19, 2016-
Harlan W. Waksal(4)
April 11, 2012
20,000(3)
21.00February 28, 2017-
June 16, 2011
20,000(3)
14.00June 16, 2016-
annual report.

Name/Grant DateNumber of Securities
Underlying Unexercised
Options
(#)
Option Exercise Price
($)(1)
Option Expiration DateValue of Unexercised
In-The-Money Options
($)(2)
Roderick N. Carter
July 2, 201880,3770.77July 2, 202846,619
June 14, 201751,0001.77June 14, 2027--
May 30, 2016200,0001.99May 29, 2023--
August 19, 201510,0004.80August 19, 2022--
Jean-Marie (John) Canan
July 2, 201860,2830.77July 2, 202834,964
June 14, 201729,0001.77June 14, 2027--
February 24, 201750,0001.65February 24, 2027--
Donald Olds
July 2, 201850,0000.77July 2, 202829,000

Notes:

(1)Acasti option-basedOption-based awards were consolidated following the consolidation of Acasti's issued and outstanding Common Shares in a proportion of ten (10) pre-consolidation shares for (1) post-consolidation shares dated October 15, 2015.our share consolidation. The exercise price was increased proportionally to reflect the consolidation.
(2)Calculation is based on a trading price of $2.02$1.35 for the Common Sharesour common shares on the TSXV, as at closing on FebruaryMarch 29, 2016.2019.

- 68 -

(3)Awards received for his role as former Vice-President, Business and Scientific Affairs.
(4)On February 29, 2016, Mr. Wenker, Mr. Montgomery, Dr. Tuckson and Dr. Waksal resigned as directors of the Corporation.
55

Share-based and Option-based Awards of the Corporation – value vested during the financial year ended on February 29, 2016
The following table sets out the value of share-based and option-awards of the Corporation held by non-executive Directors of the Corporation that vested during the financial year ended on February 29, 2016:
Name
Share-based Awards of the
Corporation – value vested
during the financial year ended
on February 29, 2016 ($)
Option-based Awards of the
Corporation – value vested
during the financial year ended
on February 29, 2016 ($)
Harlan W. Waksal13,500-
None of the stock options of the Corporation held by non-executive Directors that vested during the financial year ended on February 29, 2016 were in-the-money at their respective vesting date.
C.Board Practices

Board of Directors

Director Independence

The Board

Our board of Directorsdirectors believes that, in order to maximize its effectiveness, the Board of Directorsboard must be able to operate independently. A majority of Directorsdirectors must satisfy the applicable tests of independence, such that the Boardboard of Directorsdirectors complies with all independence requirements under applicable corporate and securities laws and stock exchange requirements applicable to the Corporation.us. No Directordirector will be independent unless the Boardboard of Directorsdirectors has affirmatively determined that the Directordirector has no material relationship with the Corporationus or any of itsour affiliates, either directly or indirectly or as a partner, shareholder or officer of an organization that has a relationship with the Corporationus or its Affiliates.our affiliates. Such determinations will be made on an annual basis and, if a Directordirector joins the Boardboard of Directorsdirectors between annual meetings, at such time.

Independent Directors.

Directors

The Board of Directors considers that Mr. Fitzgibbon and Dr. Carter are "independent" within the meaning of NI 52-110 and NASDAQ Stock Market rules.

Directors who are not independent.
The Board of Directors considers that Mr. James S. Hamilton is not "independent" within the meaning of NI 52-110 and NASDAQ rules given that he is President and CEO of Neptune as well as a member of the board of directors of Neptune.
Majority of Directors will be independent.
As of the date of this Annual Report, the Board of Directors considersdetermined that currently two out of three members of the Board of DirectorsMr. Canan, Dr. Carter and Mr. Olds are independent within the meaning of NI 52-110 and NASDAQ Stock Market rules, as it applies to the Boardrules.

Directors Who are Not Independent

The board of Directors. Upon the election of the proposed directors listed in this Annual Report, two out of four members of the Board for the ensuing year will bedetermined that Ms. D’Alvise is not independent within the meaning of NI 52-110 and NASDAQ Stock Market rules, as it applies togiven that she is our President and CEO.

During the Board of Directors.  However,fiscal year ended March 31, 2019, the Corporation is currently searching for an additional independent director nominee which it intends to include on the slateboard of directors being nominatedheld 14 meetings. All directors were in attendance for election at the next Annual General Meeting.

Independent Directors holdeach regularly scheduled closed meetings.
Duringquarterly and annual meeting of the last completed financial year ended February 29, 2016,Board.

Chairman of the independent Directors held at least five (5) scheduled meetings at which non-independent. Directors and members of management were not in attendance.

Attendance record of Directors for Board meetings
During the financial year ended February 28, 2016, the Board of Directors held 8 meetings. Attendance of Directors at the meetings is indicated in the table below:
56

Board Members
Meeting Attendance in
 Person
Telephone Meeting
Attendance
Total Attendance
Jerald J. Wenker4/51/55/5
Roderick N. Carter2/31/33/3
James S. Hamilton2/30/32/3
Adrian T. Montgomery1/54/55/5
Reed V. Tuckson0/55/55/5
CHAIRMAN OF THE BOARD
Mr. Jerald J. Wenker, an independent director, acted

Dr. Carter acts as Chairman of the Board until February 29, 2016.board. His duties and responsibilities consisted inconsist of the oversight of the quality and integrity of the board of directors’ practices.

Board of Directors' practices. Starting March 1, 2016, Dr. Roderick N. Carter acted as Executive Chairman of the Board until the appointment of the Corporation's President and CEO, effective June 1, 2016. As of the date of this Annual Report, Dr. Carter act as Chairman of the Board His duties and responsibilities consisted in the oversight of the quality and integrity of the Board of Directors' practices.

BOARD MANDATE
How the Board delineates its role and responsibilities
Mandate

There is no specific mandate for the Boardboard of Directors,directors, since the Boardboard has plenary power. Any responsibility that is not delegated to senior management or a committee of the Boardboard remains with the full Boardboard of Directors.

POSITION DESCRIPTIONS
How the Board delineates the role and responsibilities of the chair and the chair of each Board committee
directors.

Position Descriptions

No written position description has been developedapproved for the chair of the Boardboard of Directorsdirectors and for the chairs of each committee. The primary role and responsibility of the chair of each committee of the Boardboard of Directorsdirectors is to: (i) in general, ensure that the committee fulfills its mandate, as determined by the Boardboard of Directors;directors; (ii) chair meetings of the committee; (iii) report thereon to the Boardboard of Directors;directors; and (iv) act as liaison between the committee and the Boardboard of Directorsdirectors and, if necessary, management of the Corporation.

How the Board delineates the roleour management.

Orientation and responsibilities of the CEO

The Board of Directors has not developed a written position description for the CEO. The CEO's objectives are discussed and decided during a Board of Directors meeting following the CEO's presentation of the Corporation's annual plan. These objectives include a general mandate to maximize Shareholder value. The Board of Directors approves the CEO's objectives for the Corporation on an annual basis.
ORIENTATION AND CONTINUING EDUCATION
Measures the Board takes to orient new Directors
The Corporation providesContinuing Education

We provide orientation for new appointees to the Boardboard of Directorsdirectors and committees in the form of informal meetings with members of the Boardboard and senior management, complemented by presentations on the main areas of the Corporation'sour business.

Measures the Board takes to ensure that its directors maintain the skill and knowledge necessary to meet their obligations as directors
The Boardboard does not formally provide continuing education to its directors. Thedirectors, as directors are experienced members. The Boardboard of directors relies on professional assistance, when judged necessary, in order to be educated/updated on a particular topic.
ETHICAL BUSINESS CONDUCT

Code of Business Conduct and Ethics

57

The Boardboard of Directorsdirectors adopted a Code of Business Conduct and Ethics, (the "or Code of Conduct,") for itsour directors, officers and employees on May 31, 2007, as amended from time to time, whichtime. Our Code of Conduct can be found on SEDAR at www.sedar.com and on the Corporation'sour web site on www.acastipharma.com.www.acastipharma.com. A copy of the Code of Conduct can also be obtained by contacting theour Corporate Secretary of the Corporation.Secretary. Since its adoption by the Boardboard of Directors,directors, any breach of the Code of EthicsConduct must be brought to the attention of the Boardboard of Directorsdirectors by theour CEO or other senior executive of the Corporation.executives. No material change report has ever been filed which pertains to any conduct of a director or executive officer that constitutes a breach to theour Code of Conduct.

- 69 -
The Board of Directors also adopted the following policies: (i) disclosure policy, (ii) insider trading policy, (iii) majority voting policy, (iv) management compensation policy, and (vi) whistleblower policy.

Steps the Board takes to ensure directors exercise independent judgement

Since the adoption of the Code of Conduct and the following policies, the Boardboard of Directorsdirectors actively monitors compliance with the Code Conduct and promotes a business environment where employees are encouraged to report malfeasance, irregularities and other concerns. The Code of Conduct provides for specific procedures for reporting non-compliant practices in a manner which, in the opinion of the Boardboard of Directors,directors, encourages and promotes a culture of ethical business conduct.

The board of directors also adopted a disclosure policy, insider trading policy, majority voting policy, management and board compensation policies, and a whistleblower policy.

In addition, under the Civil Code of Québec,to which the Corporation iswe are subject as a legal person incorporated under the Business Corporations Act(Québec) (L.R.Q., c. S-31), a director of the Corporation must immediately disclose to the Board of Corporationboard any situation that may place him or her in a conflict of interest. Any such declaration of interest is recorded in the minutes of proceeding of the Boardboard of Directors of the Corporation.directors. The director abstains, except if required, from the discussion and voting on the question. In addition, it is theour policy of the Corporation that an interested director recuse himself or herself from the decision-making process pertaining to a contract or transaction in which he or she has an interest.

NOMINATION OF DIRECTORS
The Board

Nomination of Directors

The board of directors receives recommendations from the GHR Committee,committee, but retains responsibility for managing its own affairs by, among other things, giving its approval for the composition and size of the Boardboard of Directors,directors, and the selection of candidates nominated for election to the Boardboard of Directors.directors. The GHR Committee shallcommittee initially evaluateevaluates candidates for nomination for election as directors, having regard to the background, employment and qualifications of possible candidates.

The selection of the nominees for the Boardboard of Directorsdirectors is made by the other members of the Board,board, based on theour needs of the Corporation and the qualities required to sit onfor the Boardboard of Directors,directors, including ethical character, integrity and maturity of judgment of the candidates; the level of experience of the candidates, their ideas regarding the material aspects of theour business, of the Corporation, the expertise of the candidates in fields relevant to the Corporationus while complementing the training and experience of the other members of the Boardboard of Directors;directors; the will and ability of the candidates to devote the necessary time to their duties to the Boardboard of Directorsdirectors and its committees, the will of the candidates to serve on the Boardboard of Directorsdirectors for numerous consecutive financial periods and finally, the will of the candidates to refrain from engaging in activities which conflict with the responsibilities and duties of a director of the Corporation and its Shareholders.director. The Corporationboard researches the training and qualifications of potential new directors which seem to correspond to the selection criteria of the Boardboard of Directorsdirectors and, depending on the results of said research, organizes meetings with the potential candidates.

In the case of incumbent directors whose terms of office are set to expire, the Corporationboard will review such directors'directors’ overall service to the Corporationus during their term of office, including the number of meetings attended, level of participation, quality of performance and any transactions of such directors with the Corporationus during their term of office.

The Corporation

We may use various sources in order to identify the candidates for the Boardboard of Directors,directors, including itsour own contacts and the references of other directors, officers, advisors of the Corporation and executive placement agencies. The CorporationWe will consider director candidates recommended by Shareholdersshareholders and will evaluate suchthose director candidates in the same manner in which it evaluateswe evaluate candidates recommended by other sources. In making recommendations for director nominees for the annual meeting of Shareholders, the Corporationshareholders, we will consider any written recommendations of director candidates by Shareholdersshareholders received by theour Corporate Secretary of the Corporation not later than 120 days before the anniversary of the previous year'syear’s annual meeting of Shareholders.shareholders. Recommendations must include the candidate'scandidate’s name, contact information and a statement of the candidate'scandidate’s background and qualifications, and must be mailed to the Corporation.

us. Following the selection of the candidates by the Boardboard of Directors, the Corporationdirectors, we will propose a list of candidates to the Shareholders,shareholders, for theour annual meeting of the Corporation.
shareholders.

The Boardboard of Directorsdirectors does not have a nominating committee and has not adopted any formal written director term limit policy.

COMPENSATION
The Proposed nominations of director candidates are evaluated by our GHR Committee has the responsibility of evaluating the compensation, performance incentives as well as the benefits granted to the Corporation's upper management in accordance with their responsibilities and performance as well as to recommend the necessary adjustments to the Board of Directors of the Corporation. This committee also reviews the amount and method of compensation granted to the directors. The committee.

GHR Committee may mandate an external firm in order to assist it during the execution of its mandate. The GHR Committee considers time commitment, comparative fees and responsibilities in determining compensation. With respect to the compensation of the Corporation's officers, see "Report on Executive Compensation" above.

58

The GHR Committee is only composed of independent members within the meaning of NI 52-110 and NASDAQ rules, namely Messrs. Pierre Fitzgibbon and Roderick N. Carter.
OTHER BOARD COMMITTEES
Other than the Audit Committee, the Corporation also has a GHR Committee.

The mandate of the GHR Committeecommittee consists of the evaluation of the proposed nominations of senior executives and director candidates to the Corporation's Boardour board of Directors,directors, recommending for Boardboard approval, if appropriate, revisions of our corporate governance practices and procedures, developing new charters for any new committees established by the Boardboard of Directors,directors, monitoring relationships and communication between management and the Boardboard of Directors,directors, monitoring emerging best practices in corporate governance and oversight of governance matters and assessing the Boardboard of Directorsdirectors and its committees. The GHR Committeecommittee is also in charge of establishing the procedure which must be followed by the Corporation in order for itus to comply with theapplicable guidelines of the TSXV and NASDAQ Stock Market regarding corporate governance.

The GHR committee has the responsibility of evaluating the compensation, performance incentives as well as the benefits granted to our upper management in accordance with their responsibilities and performance as well as to recommend the necessary adjustments to our board of directors. The GHR committee also reviews the amount and method of compensation granted to the directors. The GHR committee may retain an external firm in order to assist it during the execution of its mandate. The GHR committee considers time commitment, comparative fees and responsibilities in determining compensation.

- 70 -
ASSESSMENTS

The BoardGHR committee is composed of Directors,independent members within the meaning of NI 52-110 and NASDAQ Stock Exchange rules, namely Dr. Carter, Mr. Canan and Mr. Olds.

Periodic Assessments

The board of directors, its committees and each director of the Corporation are subject to periodic evaluations of their efficacy and contribution. The evaluation procedure consists in identifying any shortcomings and implementing adjustments proposed by directors at the beginning and during meetings of the Boardboard of Directorsdirectors and of each of its committees. Among other things, these adjustments deal with the level of preparation of directors, management and consultants employed by the Corporation,us, the relevance and sufficiency of the documentation provided to directors and the time allowed to directors for discussion and debate of items on the agenda.

DIRECTOR TERM LIMITS

Director Term Limits

The Board hasboard actively consideredconsiders the issue of term limits for directors and will continuefrom time to do so.time. At this time, the Boardboard does not believe that it is in theour best interests of the Corporation to establish a limit on the number of times a director may stand for election. While such a limit could help create an environment where fresh ideas and viewpoints are available to the Board,board, a director term limit could also disadvantage the Corporationus through the loss of the beneficial contribution of directors who have developed increasing knowledge of, and insight into, the Corporationus and itsour operations over a period of time. As the Corporation operateswe operate in a unique industry, it is difficult to find qualified directors with the appropriate background and experience and the introduction of a director term limit would impose further difficulty.

POLICIES REGARDING THE REPRESENTATION OF WOMEN ON THE BOARD AND AMONGST EXECUTIVE OFFICERS
The Corporation has

Policies Regarding the Representation of Women on the Board and Among Executive Officers

We have not adopted a formal written policy regarding diversity amongst executive officers and members of the Boardboard of Directors,directors, including mechanisms for Boardboard renewal, in connection with, among other things, the identification and nomination of women directors. Nevertheless, the Corporation recognizeswe recognize that gender diversity is a significant aspect of diversity and acknowledges the important role that women with appropriate and relevant skills and experience can play in contributing to the diversity of perspective on the Boardboard of Directors.

directors.

Rather than considering the level of representation of women for directorship and executive officer positions when making Boardboard or executive officer appointments, Acasti considerswe consider all candidates based on their merit and qualifications relevant to the specific role. While Acasti recognizeswe recognize the benefits of diversity at all levels within its organization, it doeswe do not currently have any targets, rules or formal policies that specifically require the identification, consideration, nomination or appointment of candidates for directorship or executive management positions or that would otherwise force the composition of the Corporation's Boardour board of Directorsdirectors and executive management team. Currently, Acasti does notwe have anyone women director who are executive officers or directors.

Chairman of the Board
Mr. Jerald Wenker, an independent director, acts as Chairman of the Board. His duties and responsibilities consist in the oversight of the quality and integrity of the Board of Directors' practices.
Board Mandate
How the Board delineates its role and responsibilities
59

There is no specific mandate for the Board of Directors, since the Board has plenary power. Any responsibility that is not delegated to senior management or a committee of the Board remains with the full Board of Directors.
Position Descriptions
How the Board delineates the role and responsibilities of the chair and the chair of each Board committee
No written position description has been developed for the chair of the Board of Directors and for the chairs of each committee. The primary role and responsibility of the chair of each committee of the Board of Directors is to: (i) in general, ensure that the committee fulfills its mandate, as determined by the Board of Directors; (ii) chair meetings of the committee; (iii) report thereon to the Board to the Board of Directors; and (iv) act as liaison between the committee and the Board of Directors and, if necessary, management of the Corporation.
How the Board delineates the role and responsibilities of the CEO
The Board of Directors has not developed a written position description for the Chief Executive Officer. The Chief Executive Officer's objectives are discussed and decided during a Board of Directors meeting following the Chief Executive Officer's presentation of the Corporation's annual plan. These objectives include a general mandate to maximize Shareholder value. The Board of Directors approves the Chief Executive Officer's objectives for the Corporation on an annual basis
Orientation and Continuing Education
Measures the Board takes to orient new directors
The Corporation provides orientation for new appointees to the Board of Directors and committees in the form of informal meetings with members of the Board and senior management, complemented by presentations on the main areas of the Corporation's business.
Measures the Board takes to ensure that its directors maintain the skill and knowledge necessary to meet their obligations as directors
The Board does not formally provide continuing education to its directors. The directors are experienced members. The Board of Directors relies on professional assistance when judged necessary in order to be educated/updated on a particular topic.
also our CEO.

Audit Committee Information

The Audit Committee

Our audit committee is responsible for assisting the Boardboard of Directorsdirectors in fulfilling its oversight responsibilities with respect to financial reporting, including (i) reviewing the Corporation's procedures for internal control with the Corporation's auditor and management performing financial functions; (ii) reviewing and approving the engagement of the auditor; (iii) reviewing annual and quarterly financial statements and all other material continuous disclosure documents, including the Corporation's annual information form and management's discussion and analysis; (iv) assessing the Corporation's financial and accounting personnel; (v) assessing the Corporation's accounting policies; (vi) reviewing the Corporation's risk management procedures; and (vii) reviewing any significant transactions outside the Corporation's ordinary course of business and any pending litigation involving the Corporation.

including:

·reviewing our procedures for internal control management performing financial functions;

·reviewing and approving the engagement of the auditor;

·reviewing annual and quarterly financial statements and all other material continuous disclosure documents, including our annual information form and management’s discussion and analysis;

·assessing our financial and accounting personnel;

·assessing our accounting policies;

·reviewing our risk management procedures; and

·reviewing any significant transactions outside our ordinary course of business and any pending litigation involving us.

The Audit Committeeaudit committee has direct communication channels with Acasti'sour management performing financial functions and theour external auditor of Acasti to discuss and review such issues as the Audit Committeeaudit committee may deem appropriate.

Until February 29, 2016, the Audit Committee was comprised of Adrian T. Montgomery, acting as chairperson, Roderick N. Carter and Jerald J. Wenker. Following the resignation of Jerald D. Wenker and Adrian Montgomery from the Board, the Audit Committee no longer had three independent members as required by NI 52 110 and NASDAQ rules. As of March 1, 2016,31, 2019, the Audit Committee is comprisedaudit committee was composed of Mr. Pierre Fitzgibbon, actingCanan, as chairperson, Dr. Carter and Roderick N. Carter.Mr. Olds. Each of these individualsMr. Canan, Dr. Carter and Mr. Olds is "financially literate"“financially literate” and "independent"“independent” within the meaning of NI 52-110 and the Exchange Act. See "Risk Factors – General Risks Related toAs of the Corporation - If we fail to meetdate of this annual report, the applicable listing requirements, NASDAQ may delist our securities from trading on its exchange in which casecomposition of the liquidity and market priceaudit committee remains the same as at March 31, 2019.

Compensation Governance

Compensation of our securities could decline."

Compensation Governance
Compensation of executive officers and directors of the Corporation is recommended to the Boardboard of Directorsdirectors by the Governance and Human Resources Committee (the "GHR Committee").GHR committee. In its review process, the GHR Committeecommittee relies on input from management on the assessment of executives and Corporationcorporate performance.
60

During Fiscal 2016,the fiscal year ended March 31, 2019, the GHR Committeecommittee was composed of the following members, each of whom is independent: Dr. Reed V. Tuckson, acting as chairperson,Carter, Mr. Roderick N. CarterCanan and Mr. Jerald J. Wenker.Olds. The GHR Committeecommittee establishes management compensation policies and oversees their general implementation. All members of the GHR Committeecommittee have direct experience which is relevant to their responsibilities as GHR Committeecommittee members. All members are or have held senior executive or director roles within significant businesses, several also having public companies experience, and have a good financial understanding which allows them to assess the costs versus benefits of compensation plans. The members combined experience in the Corporation'sour sector provides them with the understanding of the Corporation'sour success factors and risks, which is very important when determining metrics for measuring success.

- 71 -

Risk management is a primary consideration of the GHR Committeecommittee when implementing its compensation program. It doesWe do not believe that itsour compensation program results in unnecessary or inappropriate risk taking, including risks that are likely to have a material adverse effect on the Corporation.us. Payments of bonuses, if any, are not made unless performance goals are met.

For executives, more than half of target direct compensation (base salary + target STIP (as defined below)awards + target LTIP (as defined below))awards) is considered "at risk"“at risk”. ThisWe believe this mix results in a strong pay-for-performance relationship and an alignment with Shareholdersshareholders and is competitive with other firms of comparable size in similar fields. The CEO (or any person acting in that capacity) makes recommendations to the GHR Committeecommittee as to the compensation of the Corporation'sour executive officers, other than himself or herself, for approval by the Board.board. The GHR Committeecommittee makes recommendations to the Boardboard of Directorsdirectors as to the compensation of the CEO, for approval. The CEO'sCEO’s salary is based on comparable market consideration and the GHR Committee'scommittee’s assessment of his or her performance, with regard to the Corporation'sour financial performance and progress in achieving strategic performance.

goals.

Qualitative factors beyond the quantitative financial metrics are also a key consideration in determination of individual executive compensation payments. How executives achieve their financial results and demonstrate leadership consistent with the Corporation'sour values are key to individual compensation decisions.

D.Employees
Acasti's

Our management consists of professionals experienced in business development, finance and science. The AcastiOur research team includes scientists with expertise in pharmaceutical development, chemistry, manufacturing and controls, nonclinical and clinical studies, pharmacology, regulatory affairs, quality assurance/quality control, intellectual property and strategic alliances. As of FebruaryMarch 31, 2019, we had 28 2016, the Corporation had 11 full-time employees all located in Canada. Acastiemployees. We generally requiresrequire all of itsour employees to enter into an invention assignment, non-disclosure and non-compete agreement. The Corporation relies,We rely, in part on the administrative and other staff of its parent company, Neptune and also reliesrely on consultants from time to time. The Corporation'sOur employees are not covered by any collective bargaining agreement or represented by a trade union. The Corporation places special emphasis on training for its personnel. We consider our relations with our employees to be good and our operations have never been interrupted as the result of a labor dispute.

E.Share Ownership

The following table shows the total number of Common Sharescommon shares beneficially owned by each of our directors and senior managementexecutive officers and the percentage of the total issued and outstanding Common Sharescommon shares that such holdings represent.

 Common shares beneficially owned

Percentage of total issued and

outstanding common shares

Nameas of March 31, 2019as of March 31, 2019(1)
Roderick N. Carter-   - 
Name
Jean-Marie (John) Canan
 
Common Shares beneficially owned
as of February 29, 2016
107,500 
Percentage of total issued and
outstanding Common Shares
as of February 29, 2016(1)
Roderick N. Carter 
0 *
Pierre Fitzgibbon 
Donald Olds
 50038,000 *
James S. Hamilton 
Jan D’Alvise
 052,500 *
Mario Paradis 
 0*
Pierre Lemieux 7,000 *
Laurent HarveyBrian Groch 0- *-
Jean-François Boily--

(1)(1)Based on 10,712,038 Common Shares outstanding.78,132,734 common shares outstanding as of the date of this annual report.
* *Less than 1%.

See "Item 6.B – Compensation"“Item 6.B. Compensation” above for information regarding the share-based, option-based, call-option-based, and warrant-basedwarrant- based awards held by our directors and senior managers.

See "Item 6.B – Compensation" aboveexecutive officers and for a description of our Stock Option Planstock option plan and Equity Incentive Plan.
61

equity incentive plan.

Item 7.Major Shareholders and Related Party Transactions

A.Major Shareholders
As of May 25, 2016, Neptune owns 5,064,694 Common Shares representing approximately 47.28% of the Common Shares issued and outstanding. The Common Shares are voting, participating and have no par value. Neptune also owns a warrant entitling it to acquire 592,500 Common Shares (in order to obtain 1 common share of Acasti, 10 warrants must be exercised). Neptune does not have different voting rights than other beneficial owners of Common Shares.

To the best of our knowledge, there are no other beneficial owners of 5% or more of any class of our voting securities.securities other than Mr. George W. Haywood, who, according to a beneficial ownership report on Schedule 13G/A filed by Mr. Haywood with the U.S. Securities and Exchange Commission (the “Commission”) on February 13, 2019, beneficially owns 7,396,906 of our common shares, representing approximately 9.2% of our issued and outstanding common shares.

- 72 -
On February 10, 2012, Neptune acquired 750,000 Common Shares through a private placement. As a result, Neptune's equity participation in Acasti increased from approximately 56% to approximately 57%.

On July 12, 2013, Neptune announced that it had acquired 6,750,000 Common Shares upon

All common shares are common shares with the exercise of a warrant issued to it by Acasti under the prepayment agreement. The prepayment agreement and the issuance of the 6,750,000 Common Shares to Neptune were approved by the TSX-V and the disinterested shareholders of Acasti (excluding Neptune and non-arm's length parties to Neptune) at the annual meeting of shareholders of Acasti held on June 27, 2013. As a result, Neptune's equity participation in Acasti increased from approximately 57% to approximately 60%.

On December 3, 2013, Neptune acquired 592,500 units (each unit consists of one Common Share and one common share purchase warrant) in our underwritten public unit offering. As a result, Neptune's equity participation in Acasti decreased from approximately 60% to approximately 49.95%.
All Common Shares of the Corporation, including all those held by Neptune, are Common Shares with similarsame voting rights. Based on the records of the Corporation'smost recent information received from our registrar and transfer agent, Computershare Investor Services Inc., as of May 25, 2016, Computershare Trust Companythe date of Canada,this annual report, there wereare approximately 259 registered holders (including DTC)The Depository Trust Company) of the Corporation's Common Sharesour common shares resident in the United States (approximately 10%37.5% of all registered holders).

B.Related Party Transactions

Please see the section entitled "Related“—Related Party Transactions"Transactions” in our MD&A included above

“Item 5. Operating and Financial Review and Prospects”.

C.Interests of Experts and Counsel

Not applicable.

Item 8.Financial Statements

A.ConsolidatedFinancial Statements and Other Financial Information

Financial Statements

See "Item 17 –“Item 17. Financial Statements"Statements” for our audited consolidated financial statements.

Legal Proceedings

Due to the fact that a significant portion of the Corporation'sour intellectual property rights are licensed to itus by Neptune, the Corporation reliesNeptune/Aker, we rely on NeptuneNeptune/Aker to protect a significant portioncertain of the intellectual property rights that it useswe use under such license. Neptune isour license agreement with Neptune/Aker. Neptune/Aker are engaged in a number of legal actions related to itstheir intellectual property.

Former CEO
A

On May 10, 2019 the we announced the settlement regarding legal claims made by our former CEOchief executive officer (“CEO”) with respect to the termination of his employment. Pursuant to the Corporation is claiming the payment of approximately $8,500,000settlement agreement, Acasti agreed to Neptune ans its subsidiaries (including the Corporation) and the issuance of equity instruments. The Corporation's management believes that these claims are not valid and without merit and, as such, no provision has been recognized in the financial statements. As of the date of this Annual Report, no agreement or settlement has been reached withissue 900,000 common shares to the former CEO and also agreed to reimburse the Corporation continuesformer CEO for nominal legal fees. Furthermore, pursuant to defend this claim vigorously.  Neptunethe settlement agreement, the Acasti received a full and its subsidiaries (including the Corporation) also filed an additional claim to recover certain amountsfinal release from the officer.

former CEO on all proceedings in connection with the termination of his employment.

Dividend Policy

We do not anticipate paying any cash dividend on the Common Sharescommon shares in the foreseeable future. We presently intend to retain future earnings to finance the expansion and growth of our business. Any future determination to pay dividends will be at the discretion of the Corporation's Boardour board of Directorsdirectors and will depend on our financial condition, results of operations, capital requirements and other factors the Boardboard of Directorsdirectors deems relevant. In addition, the terms of any future debt or credit facility may preclude us from paying dividends.

62

Item 9.The Offer and Listing
A.Listing Details

Not applicable except for Item 9.A.4 and Item 9.C.

Since March 31, 2011, the Common Sharescommon shares have been listed on the TSX-V under the ticker symbol APO.ACST. Since January 7, 2013, the Common Sharescommon shares have been listed on the NASDAQ Stock Market under the ticker symbol ACST. The following tables set forth, for the periods indicated, the high and low market prices of our Common Shares as reported on the TSX-V and the NASDAQ Stock Market.

(a)For the five most recent full fiscal years:
             
  TSX-V  NASDAQ Stock Market 
Fiscal year ended High $  Low $  High US$  Low US$ 
Feb. 29, 2012  21.50   5.10       
Feb. 28, 2013
  27.60   16.00  39.90  20.00 
Feb. 28, 2014
  43.20   11.50   42.00   10.90 
Feb. 28, 2015
  14.90   11.50   13.40   10.90 
Feb. 29, 2016
  7.60   1.83   6.10   1.30 
(b)For each full financial quarter of the two most recent full fiscal years and any subsequent period:
             
  TSX-V  NASDAQ Stock Market 
Period High $  Low $  High US$  Low US$ 
1st Quarter ended May 31, 2014 
  14.90   8.80   13.40   8.00 
2nd Quarter ended Aug. 31, 2014 
  13.00   8.80   12.20   8.10 
3rd Quarter ended Nov. 30, 2014 
  12.00   4.00   11.10   3.50 
4th Quarter ended Feb. 28, 2015 
  7.80   4.60   6.20   4.00 
1st Quarter ended May 31, 2015 
  7.60   4.00   6.10   5.00 
2nd Quarter ended Aug. 31, 2015 
  5.50   3.50   4.20   3.90 
3rd Quarter ended Nov. 30, 2015 
  4.70   2.65   3.80   2.01 
4th Quarter ended Feb. 29, 2016 
  4.40   1.83   3.20   1.30 
(c)for the most recent six months:
             
  TSX-V  NASDAQ Stock Market 
Period High $  Low $  High US$  Low US$ 
November 2015 
  3.54   2.87   2.75   2.20 
December 2015 
  4.40   2.16   3.20   1.57 
January2016 
  3.50   2.16   2.55   1.50 
February 2016 
  2.20   1.83   1.61   1.30 
March 2016 
  2.45   1.80   1.88   1.42 
April 2016 
  1.96   1.68   1.52   1.30 
May 2016  2.00   1.56   1.67   1.20 
63

The holders of Common Shares are entitled to vote at all meetings of our shareholders except meetings at which only holders of a specified class or series of shares are entitled to vote. The holders of Common Shares are entitled to receive dividends as and when declared by the Board, if any.
No Common Shares have been issued subject to call or assessment. There are no pre-emptive or conversion rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase funds. The Common Shares must be issued as fully-paid and non-assessable, and are not subject to further capital calls by us. All of the Common Shares rank equally as to voting rights, participation in a distribution of the assets of the Corporation on a liquidation, dissolution or winding-up of the Corporation and the entitlement to dividends.
Common shares are transferable at the offices of our transfer agent and registrar in Toronto, Ontario, Canada and Montreal, Québec, Canada.
There are no restrictions in our constating documents on the free transferability of the Common Shares.
B.Plan of Distribution
Not applicable.
C.Markets
Since March 31, 2011, the Common Shares have been listed on the TSX-V under the ticker symbol APO. Since January 7, 2013, the Common Shares have been listed on the NASDAQ Stock Market under the ticker symbol ACST.
D.Selling Shareholders
Not applicable.
E.Dilution
Not applicable.
F.Expenses of the Issuer
Not applicable.

Item 10. Additional Information

Item  10.Additional Information
A.Share Capital

Not applicable.

B.Memorandum and Articles of Association

We were incorporated on February 1, 2002 under Part 1A of the Companies Act (Québec) under the name "9113‑0310“9113-0310 Québec Inc"Inc”. On August 7, 2008, pursuant to a Certificate of Amendment, we changed our name to "Acasti“Acasti Pharma Inc.", our share capital, the provisions regarding the restrictions on securities transfers and theour borrowing powers of the Corporation.powers. On November 7, 2008, pursuant to a Certificate of Amendment, we further revised our provisions regarding our borrowing powers. We became a reporting issuer in the Province of Québec on November 17, 2008. On February 14, 2011, the Business Corporations Act(Québec) came into effect and replaced the Companies Act(Québec). We are now governed by the Business Corporations Act (Québec) (the "BCA").

, or the BCA.

1.Register, Entry Number and Purposes- 73 -

Register, Entry Number and Purposes

Our articles of incorporation, as amended, or Articles, and general by-laws, or By-laws, do not define any of the Corporation'sour objects and purposes. In that respect, the Corporation haswe have no limit on the type of business itwe can carry out.

2.Directors' Powers

Directors’ Powers

Our Articles and By-lawsby-laws do not contain any provision regarding: (a) a director's power to vote on a proposal, arrangement or contract in which the director is materially interested; (b) a director'sdirector’s power in the absence of an independent quorum, to vote compensation to itself or any members of the committees of the Board; (c) borrowing powers exercisable by the directors and how such powers can be varied; (d)board; (b) retirement or non-retirement of directors under an age limit requirement; and (e)(c) number of shares, if any, required for a director'sdirector’s qualification. However, the BCA provides

Our by-laws provide that a director shallmay not vote on a resolution to approve, amend or terminate a contract or transaction in which the director has any financial stake that may reasonably be considered to influence decision-making or be present during deliberations concerning the approval, amendment or termination of such a contract or transaction, unless the contract or transaction: (a) relates primarily to the remuneration of the director or an associate of the director as a director of us or an affiliate of us, (b) relates primarily to the remuneration of the director or an associate of the director as an officer, employee or mandatary of us or an affiliate of us, if we are not a reporting issuer, (c) is for indemnity or liability insurance, or (d) is with an affiliate of us, and the sole interest of the director is as a director or officer of the affiliate. In addition, our by-laws provide that a director must avoid placing himself or herself in aany situation where his or her personal interestinterests would be in conflict with his obligations as a director of the Corporation. If such is the case, the BCA providesours, and that hea director must declaredisclose to the Corporationus any interest he or she has in an enterprisea business or other entityassociation that may place him or her in a situation of conflict of interest.

64

interest and of any right he or she may set up against us, indicating their nature and value, where applicable.

Our Articles provide that the board may, on behalf us, (a) borrow money, (b) issue, reissue, sell or pledge debt instruments, (c)  guarantee the obligations of a third party, and (d) hypothecate all or any of its assets, both present and future, to guarantee the performance of any of our obligations.

The quorum at every meeting of the Boardboard has been set to the minimum number of directors required under our Articles. In the absence of a quorum, a director has no power to make any decision regarding, among other things, compensation to himself or herself or to any member of the committees of the Board.

board.

Our By-lawsby-laws do not contain any requirements with respect to a mandatory retirement age for our directors and the number of shares required for directors'directors’ qualifications.

3.Rights, Preferences and Restrictions Attaching to Each Class of Shares
The Corporation's

Rights, Preferences and Restrictions Attaching to Each Class of Shares

Our authorized capital consists of an unlimited number of no par value Common Sharescommon shares and an unlimited number of no par value Class B, Class C, Class D and Class E preferred shares (collectively, the "Preferred Shares")preferred shares), issuable in one or more series.

As of February 29, 2016,March 31, 2019, there were (i) a total of 10,712,038 Common Shares issued and outstanding and no Preferred Shares issued and outstanding, (ii) 454,151 options to purchase Common Shares issued and outstanding, at a weighted average exercise price of $13.52 per Common Share,(iii) 18,400,000 warrants (including 592,500 warrants held by Neptune) to purchase Common Shares issued and outstanding (in order to obtain 1 common share of Acasti, 10 warrants must be exercised), at a weighted average exercise price of $1.50 USD per Common Share, and (iv) 161,654 warrants to purchase Common Shares issued and outstanding, at a weighted average exercise price of $16.00 per Common Share
were:

(i)a total of 78,132,734 common shares issued and outstanding and no preferred shares issued and outstanding,
(ii)4,046,677 options to purchase common shares issued and outstanding, at a weighted average exercise price of $1.25 per common share,
(iii)$2,000,000 aggregate principal amount of unsecured convertible debentures, maturing on February 21, 2020, issued in our February 2017 private placement and contingent warrants to acquire 1,052,630 common shares (the debentures are convertible into up to 1,052,630 common shares at any time by the holders at a fixed price of $1.90 per common share, except if we pay before the maturity all or any portion of the convertible debentures, in which case the applicable pro rata share of the contingent warrants will be exercisable for the remaining term of the convertible debentures at a fixed price of $1.90 per common share),
(iv)warrants issued in connection with our February 2017 public offering to purchase up to 1,904,034 common shares at an exercise price of $2.15 per common share,
(v)broker warrants issued in connection with our December 2017 public offering to purchase up to 495,050 common shares at an exercise price of US$1.26 per common share,
(vi)warrants issued in connection with our December 2017 public offering to purchase up to 9,801,861 common shares at an exercise price of US$1.26 per common share.
(vii)warrants issued in connection with our May 2018 public offering to purchase up to 10,188,100 common shares at an exercise price of $1.31 per common share.
(viii)broker warrants issued in connection with our May 2018 public offering to purchase up to 547,975 common shares at an exercise price of $1.05 per common share

The following is a brief description of the rights, privileges, conditions and restrictions attaching to the common shares and preferred shares.

Common Shares and Preferred Shares.

Common Shares

Voting Rights

Each Common Sharecommon share entitles its holder to receive notice of, and to attend and vote at, all annual or special meetings of the shareholders of the Corporation.our shareholders. Each Common Sharecommon share entitles its holder to one vote at any meeting of theour shareholders, other than meetings at which only the holders of a particular class or series of shares are entitled to vote due to statutory provisions or the specific attributes of this class or series.

- 74 -

Dividends

Subject to the prior rights of the holders of Preferred Sharespreferred shares ranking before the Common Sharescommon shares as to dividends, the holders of Common Sharescommon shares are entitled to receive dividends as declared by the Board of the Corporation from the Corporation'sboard our funds that are available for the payment of dividends.

Winding-up and Dissolution

In the event of the Corporation'sour voluntary or involuntary winding-up or dissolution, or any other distribution of the Corporation'sour assets among itsour shareholders for the purposes of winding up its affairs, the holders of Common Sharescommon shares shall be entitled to receive, after payment by the Corporationus to the holders of Preferred Sharespreferred shares ranking prior to Common Sharescommon shares regarding the distribution of the Corporation'sour assets in the case of winding-up or dissolution, share for share, the remainder of theour property, of the Corporation, with neither preference nor distinction. The order of priority, applicable to all classes of our shares of the Corporation with respect to the redemption, liquidation, dissolution or distribution of property (the "Orderorder of priority")priority) is as follows: First, the

Class E non-voting shares; Second, the Class D non-voting shares; Third, the Class B multiple voting shares and Class C non-voting shares, pari passu; and Fourth, the Common Shares.

common shares. Notwithstanding the above-mentioned Orderorder of priority, shareholders of a class of shares may renounce the above-mentioned Orderorder of priority by unanimous approval by all shareholders of that class of shares.

Preferred Shares

Class B multiple voting sharesMultiple Voting Shares

Each Class B multiple voting share entitles the holder thereof to ten (10)10 votes per share in all of our shareholder meetings of the Corporation.

65

Dividends
meetings.

Dividends. Holders of Class B multiple voting shares are entitled to receive, as and when such dividends are declared, an annual non-cumulative dividend of five percent (5%)5% on the amount paid for the said shares, payable at the time and in the manner which the directors may determine and subject to the Orderorder of priority.

Participation

Participation. Subject to the provisions of subsection 5.2.2 of theour Articles, holders of Class B multiple voting shares do not have the right to participate in theour profits or surplus assets of the Corporation.

assets.

Conversion

. Holders of Class B multiple voting shares have the right, at their entire discretion, to convert, part or all of the Class B multiple voting shares they hold into Common Sharescommon shares on the basis of one (1) Common Share1 common share for each Class B multiple voting share converted.

Redemption

. Subject to the provisions of the BCA and the Orderorder of priority, holders of Class B multiple voting shares have the right to demand from the Corporation,us, upon a thirty (30) day30 days’ written notice, that the Corporationwe redeem the Class B multiple voting shares at a price equivalent to the amount paid for such shares plus the redemption premium, as defined in subsection 5.2.4.1 of the Articles, and any and all declared but yet unpaid dividends on same.
Liquidation

Liquidation. In the event of theour dissolution or liquidation of the Corporation or any other distribution of itsour property, the Class B voting shareholders shall have the right to be reimbursed for the amount paid onfor their Class B multiple voting shares plus the redemption premium, as defined in subsection 5.2.4.1 of theour Articles as well as the amount of any and all declared but yet unpaid dividends on saidtheir shares, subject to the Orderorder of priority.

Class C Non-Voting Shares

Subject to the provisions of the BCA, holders of Class C non-voting shares are neither be entitled to vote at any meeting of theour shareholders, of the Corporation, nor to receive a notice of any such meeting, nor to attend any such meeting.

Dividends

. Holders of Class C non-voting shares are entitled to receive, as and when such dividends are declared, an annual non-cumulative dividend of five percent (5%)5% on the amount paid for the said shares, plus a redemption premium as defined in subsection 5.3.6.1 of theour Articles, payable at the time and in the manner which the directors may determine and subject to the Orderorder of priority.
Participation

Participation. Subject to the provisions of subsection 5.3.2 of theour Articles, holders of Class C non-voting shares do not have the right to participate in theour profits or surplus assets of the Corporation.

Conversion
assets.

Conversion. Holders of Class C non-voting shares have the right, at their entire discretion, to convert, part or all of the Class C non-voting shares they hold into Common Sharescommon shares on the basis of one (1) Common Share1 common share for each Class C non-voting share converted.

Forced Conversion

. All of the Corporation'sour Class C non-voting shares shall automatically be converted in Common Sharescommon shares upon the request of an unrelated third partythird-party investor in the Corporation,us investing more than $500,000, or any other amount to be determined by the Boardboard of directors of the Corporation, in the Corporationus and requesting as a condition to the investment that the Class C non-voting shares be converted into Common Sharescommon shares on the basis of one Common Share1 common share for each Class C non-voting share converted.

- 75 -

66

Redemption

Redemption. Subject to the provisions of the BCA and the Orderorder of priority, holders of Class C non-voting shares have the right to demand, from the Corporation, upon a thirty (30) day30 days’ written notice, that the Corporationwe redeem thetheir Class C non-voting shares at $0.20 per share,a price equivalent to the amount paid for the shares plus the redemption premium, as defined in subsection 5.3.6.1 of our Articles, and any and all declared but yet unpaid dividends on same.

Liquidation
the shares.

Liquidation. In the event of theour dissolution or liquidation of the Corporation or any other distribution of itsour property, theClass C non-voting shareholders have the right to be reimbursed for the amount paid onfor their Class C non-voting shares plus the redemption premium, as defined in subsection 5.3.6.1 of theour Articles, as well as the amount of any and all declared but yet unpaid dividends on saidtheir shares, subject to the Orderorder of priority.

Class D Non-Voting Shares

Subject to the provisions of the BCA, holders of Class D non-voting shares shallare neither be entitled to vote at any meeting of the shareholders, of the Corporation, nor to receive a notice of any such meeting, nor to attend any such meeting.

Dividends

Dividends. Holders of Class D non-voting shares are entitled to receive, as and when such dividends are declared, a monthly non-cumulative dividend of half of one percent0.5% to two percent (0.5% to 2%) on the amount paid for suchthe shares, plus a redemption premium as defined in subsection 5.4.6.1 of theour Articles, payable at the time and in the manner which the directors may determine and subject to the Orderorder of priority.

 Participation

Participation. Subject to the provisions of subsection 5.4.2 of theour Articles, holders of Class D non-voting shares shalldo not have the right to participate in theour profits or surplus assets of the Corporation.

Conversion
assets.

Conversion. Holders of Class D non-voting shares shall have the right, at their entire discretion, to convert, part or all of thetheir Class D non-voting shares they hold into Common Sharescommon shares on the basis of a number of Common Sharescommon shares equal to the number of Class D non-voting shares converted multiplied by a conversion ratio, calculated as follows:

The product obtained by multiplying a factor to be agreed at the time of the issuance of the Class D non-voting shares by the average amount paid per share for the Class D non-voting shares plus the redemption premium per share, as defined in subsection 5.4.6.1 of our Articles as well as the amount of any and all declared but yet paid

Conversion Ratio=dividends on the shares
Fair market value of the common shares at the date of any conversion of Class D non-voting shares into common shares

Conversion All of our Class D non-voting shares automatically convert into common shares upon the request of an unrelated third party investor in us, investing more than $500,000, or any other amount to be determined by the board of directors, in us and requesting as a condition to the investment that the Class D non-voting shares be converted into common shares in all cases, on the basis of a number of common shares equal to the number of Class D non-voting shares converted multiplied by the conversion ratio, calculated as follows:

Conversion Ratio=The product obtained by multiplying a factor to be agreed at the time of the issuance of the Class D non-voting shares by the average amount paid per share for the Class D non-voting shares plus the redemption premium per share, as defined in subsection 5.4.6.1 of theour Articles as well as the amount of any and all declared but yet paid dividends per saidon the shares
 Fair Market Valuemarket value of the Common Sharescommon shares at the date of any conversion of Class D non-voting shares in Common Sharesinto common shares

Forced Conversion
All of the Corporation's Class C non-voting shares shall automatically be converted in Common Shares upon the request of an unrelated third party investor in the Corporation, investing more than $500,000, or any other amount to be determined by the Board of directors of the Corporation, in the Corporation and requesting as a condition to the investment that the Class C non-voting shares be converted into Common Shares in all cases, on the basis of a number of Common Shares equal to the number of Class D non-voting shares converted multiplied by the conversion ratio, calculated as follows :
 - 76 - 
Conversion Ratio =The product obtained by multiplying a factor to be agreed at the time of the issuance of the Class D non-voting shares by the average amount paid per share for the Class D non-voting shares plus the redemption premium per share, as defined in subsection 5.4.6.1 of the Articles as well as the amount of any and all declared but yet paid dividends per said shares
Fair Market Value of the Common Shares at the date of any conversion of Class D non-voting shares in Common Shares
Redemption

Redemption. Subject to the provisions of the BCA and the Orderorder of priority, holders of Class D non-voting shares have the right to demand, from the Corporation, upon a thirty (30) day30 days’ written notice, that the latterwe redeem thetheir Class D non-voting shares that are held by the shareholder(s) at a price equivalent to the amount paid for saidthe shares plus the redemption premium, as defined in subsection 5.4.6.1 of theour Articles, and any and all declared but yet unpaid dividends on same.

67

Liquidation
the shares.

Liquidation. In the event of theour dissolution or liquidation of the Corporation or any other distribution of itsour property, the Class D non-voting shareholders shall have the right to be reimbursed for the amount paid onfor their Class D non-voting shares plus the redemption premium, as defined in subsection 5.4.6.1 of theour Articles as well as the amount of any and all declared but yet unpaid dividends on saidtheir shares, subject to the Orderorder of priority.

Class E Non-Voting Shares

Subject to the provisions of the BCA, holders of Class E non-voting shares shallare neither be entitled to vote at any meeting of the shareholders, of the Corporation, nor to receive a notice of any such meeting, nor to attend any such meeting.

Dividends

Dividends. Holders of Class E non-voting shares are entitled to receive, as and when such dividends are declared, a monthly non-cumulative dividend of half of one percent0.5% to two percent (0.5% to 2%) on the amount paid for the said shares, payable at the time and in the manner which the directors may determine and subject to the Orderorder of priority.

Participation

Participation. Subject to the provisions of subsection 5.5.2 of theour Articles, holders of Class E non-voting shares shalldo not have the right to participate in the profits or surplus assets of the Corporation.

Conversion
our profits.

Conversion. Holders of Class E non-voting shares shall have the right, at their entire discretion, to convert, part or all of thetheir Class E non-voting shares they hold into Common Sharescommon shares on the basis of a number of Common Sharescommon shares equal to the number of Class E non-voting shares converted multiplied by the conversion ratio, calculated as follows:

Conversion Ratio=The product obtained by multiplying a factor to be agreed at the time of the issuance of the Class E non-voting shares by the average amount paid per share for the Class E non-voting shares plus the amount of any and all declared but yet paid dividends per saidon the shares
 Fair Market Valuemarket value of the Common Sharescommon shares at the date of any conversion of Class E non-voting shares in Common Sharesinto common shares

Redemption
- 77 -

Redemption. Subject to the provisions of the BCA and the Orderorder of priority, the Corporation haswe have the right, to demand from holders of Class E non-voting shares, upon a thirty (30) day30 days’ written notice, that the latterto redeem the Class E non-voting shares that are held by the shareholder(s) at a price equivalent to the amount paid for saidthe shares and any and all declared but yet unpaid dividends on same.

Liquidation
the shares.

Liquidation. In the event of theour dissolution or liquidation of the Corporation or any other distribution of itsour property, the Class E non-voting shareholders shall have the right to be reimbursed for the amount paid onfor their Class E non-voting shares as well as the amount of any and all declared but yet unpaid dividends on saidthe shares, subject to the Orderorder of priority.

4.Procedures to Change the Rights of Shareholders

Procedures to Change the Rights of Shareholders

In order to change the rights attached to all classes of our shares, the vote of at least 66 2/3% of the holders of each class, as the case may be, must be cast at a shareholders meeting called for amending the rights attached to our Common Sharescommon shares or Preferred Shares,preferred shares, as the case may be.

5.Ordinary and Extraordinary Shareholders' Meetings

Ordinary and Extraordinary Shareholders’ Meetings

Our By-lawsby-laws provide that theour annual meeting of shareholders of the Corporation must be held on a yearly basis on such date and on such time as may be fixed by the Board.

68

board. Our By-lawsby-laws provide that special meetings of shareholders may be called at any time as determined by the Board.board. Our shareholders are entitled to call special meetings of shareholders, provided that they hold at least 10% of the issued and outstanding shares entitled to vote at the meeting so called.
Our By-lawsby-laws provide that notice of each annual and special meeting of shareholders must be sent to the shareholders entitled to attend such meetings at least ten (10)not less than 21 days prior toand not more than 60 days before the date fixed for such meeting.
Our By-lawsby-laws provide that during any meeting of the shareholders, the attendance, in person or by proxy, of theat least two shareholders representing ten percent (10%)at least 10% of the Common Shares shallissued and outstanding shares entitled to vote at the meeting will constitute a quorum.
6.Limitations on Rights to Own Securities

Limitations on Rights to Own Securities

There exists no limitation on the right to own our securities.

7.Impediments to Change of Control

Impediments to Change of Control

Neither our Articles nor By-lawsby-laws contain any provision that would have an effect of delaying, deferring or preventing a change in control of the Corporation.

8.Stockholder Ownership Disclosure Threshold in Bylaws
us.

Stockholder Ownership Disclosure Threshold in Bylaws

Our Articles and By-laws do not contain any provision requiring a shareholder to disclose his ownership above a particular threshold.

9.Significant Differences with Applicable U.S. Law
Canadian securities regulations, it is necessary for a shareholder to disclose his ownership above the threshold of 10%. This requirement is less stringent than in the United States where ownership must be reported when a shareholder owns at least 5% of the outstanding voting securities of an issuer. Accordingly, in Canada, it is easier for a shareholder to accumulate a substantial portion of the voting securities of an issuer without reporting it. In widely-held corporations such as ours, we believe that we are at a disadvantage compared to similar US issuers.
10.Special Conditions for Changes in Capital
The conditions imposed by the Corporation's Articles of Incorporation are not more stringent than required under the Business Corporations Act (Québec).
A copy of the Corporation's Articles of Incorporation and By-Laws have been incorporated by reference as exhibits to this Registration Statement.
C.Material Contracts

For the two years preceding the publication of this annual report, we have not entered into any material contracts, other than contracts entered into in the ordinary course of our business.

business and other than the warrant agency agreement relating to the warrants that we issued in connection with our public offering of units in December 2017 and the indenture relating to the warrants that we issued in connection with our public offering of units in May 2018.

D.Exchange Controls

Subject to the following paragraph, there is no law or governmental decree or regulation in Canada that restricts the export or import of capital, or affects the remittance of dividends, interest or other payments to non-resident holders of our subordinate voting shares, other than withholding tax requirements.

There is no limitation imposed by Canadian law or by our Articles or our other charter documents on the right of a non-resident to hold or vote voting shares, other than as provided by the Investment Canada Act(Canada), or Investment Canada Act, the North American Free tradeTrade Agreement Implementation Act(Canada), or North American Free Trade Agreement, and the World Trade Organization Agreement Implementation Act. The Investment Canada Act requires notification and, in certain cases, advance review and approval by the Government of Canada of an investment to establish a new Canadian business by a non-Canadian or of the acquisition by a "non-Canadian"“non-Canadian” of "control"“control” of a "Canadian business"“Canadian business”, all as defined in the Investment Canada Act. Generally, the threshold for review will be higher in monetary terms for a member of the World Trade Organization or North American Free Trade Agreement.

- 78 -

E.Taxation

The following is a summary of certain U.S. federal income tax considerations to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership, and disposition of our Common Sharescommon shares to a U.S. Holder (as defined below) as capital assets.

69

This summary provides only general information and does not purport to be a complete analysis or listing of all potential U.S. federal income tax consequences that may apply to a U.S. Holder as a result of the acquisition, ownership, and disposition of our Common Shares.common shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences applicable to suchthat U.S. Holder. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. Each U.S. Holder should consult its own tax advisor regarding the U.S. federal, U.S. state and local, and non-U.S. tax consequences arising from or relating to the acquisition, ownership, and disposition of our Common Shares.

common shares.

No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service, ("or IRS,") has been requested, or will be obtained, regarding the U.S. federal income tax consequences to U.S. Holders of the acquisition, ownership, and disposition of our Common Shares.common shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken in this summary.

Scope of this Disclosure

Authorities

This summary is based on the Code, U.S. Treasury Regulations promulgated thereunder (whether final, temporary or proposed), published IRS rulings, judicial decisions, published administrative positions of the IRS, and the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the "Canada-U.S. Tax Treaty").Treaty), in each case, as in effect as of the date of this report. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive basis. Unless otherwise discussed, herein, this summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation.

U.S. Holders

For purposes of this summary, a "U.S. Holder"“U.S. Holder” is a beneficial owner of Common Sharescommon shares that, for U.S. federal income tax purposes, is (a) an individual who is a citizen or resident of the U.S.,United States, (b) a corporation, or other entity classified as a corporation for U.S. federal income tax purposes, that is created or organized in or under the laws of the U.S., any state in the U.S.United States or the District of Columbia, (c) an estate if the income of such estate is subject to U.S. federal income tax regardless of the source of such income, or (d) a trust if (i) such trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes or (ii) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust.

U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed

This summary does not address the U.S. federal income tax consequences applicable to U.S. Holders that are subject to special provisions under the Code, including, but not limited to, the following U.S. Holders: (a) U.S. Holders that are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax deferred accounts; (b) U.S. Holders that are financial institutions, insurance companies, real estate investment trusts, or regulated investment companies; (c) U.S. Holders that are dealers in securities or currencies or U.S. Holders that are traders in securities that elect to apply a mark-to-market accounting method; (d) U.S. Holders that have a "functional currency"“functional currency” other than the U.S. dollar; (e) U.S. Holders subject to the alternative minimum tax provisions of the Code; (f) U.S. Holders that own the Common Sharescommon shares as part of a straddle, hedging transaction, conversion transaction, integrated transaction, constructive sale, or other arrangement involving more than one position; (g) U.S. Holders that acquired the Common Sharescommon shares through the exercise of employee stock options or otherwise as compensation for services; (h) U.S. Holders that hold the Common Sharescommon shares other than as a capital asset within the meaning of Section 1221 of the Code; (i) U.S. Holders that beneficially own (directly, indirectly or by attribution) 10% or more of our votingequity securities (by vote or otherwise held 10% or more of the total combined voting power of the Corporation;value); and (j) U.S. expatriates. U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described above, should consult their own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences arising from and relating to the acquisition, ownership, and disposition of the Common Shares.

common shares.

If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes holds Common Shares,common shares, the U.S. federal income tax consequences to suchthat partnership and the partners of suchthat partnership generally will depend on the activities of the partnership and the status of suchthe partners. Partners of entities that are classified as partnerships for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership and disposition of the Common Shares.common shares.

- 79 -

Tax Consequences Other than U.S. Federal Income Tax Consequences Not Addressed

70

This summary does not address the U.S. estate and gift, alternative minimum, state, local or non-U.S. tax consequences to U.S. Holders of the acquisition, ownership, and disposition of the Common Shares.our common shares. Each U.S. Holder should consult its own tax advisor regarding the U.S. estate and gift, alternative minimum, state, local and foreignnon-U.S. tax consequences arising from and relating to the acquisition, ownership, and disposition of the Common Shares.

our common shares.

U.S. Federal Income Tax Considerations of the Acquisition, Ownership, and Disposition of Common Shares

Distributions on Common Shares

Subject to the possible application of the passive foreign investment company ("PFIC") rules described below (see more detailed discussion below at "Passiveunder “—Passive Foreign Investment Company Rules"),Rules” below, a U.S. Holder that receives a distribution, including a constructive distribution or a taxable stock distribution, with respect to the Common Sharescommon shares generally will be required to include the amount of suchthat distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of theour current or accumulated "earnings“earnings and profits" of the Corporationprofits” (as computed for U.S. federal income tax purposes). To the extent that a distribution exceeds theour current and accumulated "earnings“earnings and profits" ofprofits”, the Corporation, such excess amount will be treated (a) first, as a tax-free return of capital to the extent of a U.S. Holder'sHolder’s adjusted tax basis in the Common Sharescommon shares with respect to which the distribution is made (resulting in a corresponding reduction in the tax basis of such Common Shares)those common shares) and, (b) thereafter, as gain from the sale or exchange of such Common Sharesthose common shares (see the more detailed discussion at "Disposition“—Disposition of Common Shares"Shares” below). The Corporation doesWe do not intend to calculate itsour current or accumulated earnings and profits for U.S. federal income tax purposes and, therefore, will not be able to provide U.S. Holders with suchthat information. U.S. Holders should therefore assume that any distribution by the Corporationus with respect to the Common Sharesour common shares will constitute a dividend. However, U.S. Holders should consult their own tax advisors regarding whether distributions from the Corporationus should be treated as dividends for U.S. federal income tax purposes. Dividends paid on the Common Sharesour common shares generally will not be eligible for the "dividends“dividends received deduction"deduction” allowed to corporations under the Code with respect to dividends received from U.S. corporations.

A dividend paid by the Corporationus generally will be taxed at the preferential tax rates applicable to long-term capital gains if, among other requirements, (a) the Corporation iswe are a "qualified“qualified foreign corporation"corporation” (as defined below), (b) the U.S. Holder receiving suchthe dividend is an individual, estate, or trust, and (c) suchthe dividend is paid on Common Sharescommon shares that have been held by suchthe U.S. Holder for at least 61 days during the 121-day period beginning 60 days before the "ex-dividend date"“ex-dividend date” (i.e., the first date that a purchaser of such Common Sharesthe common shares will not be entitled to receive suchthe dividend).

For purposes of the rules described in the preceding paragraph, the Corporationwe generally will be a "qualified“qualified foreign corporation" (a "corporation”, or a QFC,") if (a) the Corporation iswe are eligible for the benefits of the Canada-U.S. Tax Treaty, or (b) the Common Sharesour common shares are readily tradable on an established securities market in the U.S.,United States, within the meaning provided in the Code. However, even if the Corporation satisfieswe satisfy one or more of suchthe requirements, itwe will not be treated as a QFC if it iswe are classified as a PFIC (as discussed below) for the taxable year during which the Corporation payswe pay the applicable dividend or for the preceding taxable year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the application of suchthose rules to them in their particular circumstances. Even if the Corporation satisfieswe satisfy one or more of suchthe requirements, as noted below, there can be no assurance that the Corporationwe will not be a PFIC in the current taxable year, or become a PFIC in the future. Thus, there can be no assurance that the Corporationwe will qualify as a QFC.

Disposition of Common Shares

Subject to the possible application of the PFIC rules described below (see more detailed discussion below at "Passiveunder “—Passive Foreign Investment Company Rules"),Rules” below, a U.S. Holder will recognize gain or loss on the sale or other taxable disposition of Common Sharescommon shares (that is treated as a sale or exchange for U.S. federal income tax purposes) equal to the difference, if any, between (a) the U.S. dollar value of the amount realized on the date of suchthe sale or disposition and (b) suchthe U.S. Holder'sHolder’s adjusted tax basis (determined in U.S. dollars) in the Common Sharescommon shares sold or otherwise disposed of. Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if such Common Sharesthe common shares are held for more than one year. Each U.S. Holder should consult its own tax advisor as to the tax treatment of dispositions of Common Sharescommon shares in exchange for Canadian dollars.

Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. Deductions for capital losses are subject to complex limitations.

- 80 -

Passive Foreign Investment Company Rules

If we are or become a PFIC, the preceding sections of this summary may not describe the U.S. federal income tax consequences to U.S. Holders of the acquisition, ownership, and disposition of our common shares.

Passive Foreign Investment Company RulesStatus.

Special, generally unfavorable, rules apply to the ownership and disposition of the stock of a PFIC. For U.S. federal income tax purposes, a non-U.S. corporation is classified as a PFIC for each taxable year in which either:

·at least 75% of its gross income is "passive"“passive” income (referred to as the "income test"“income test”); or

·at least 50% of the average value of its assets is attributable to assets that produce passive income or are held for the production of passive income (referred to as the "asset test"“asset test”).
71

Passive income generally includes the following types of income:

·dividends, royalties, rents, annuities, interest, and income equivalent to interest; and

·net gains from the sale or exchange of property that gives rise to dividends, interest, royalties, rents, or annuities and certain gains from the commodities transactions.

In determining whether it iswe are a PFIC, the Corporationwe will be required to take into account a pro rata portion of the income and assets of each corporation in which it owns,we own, directly or indirectly, at least 25% by value.

The Corporation has not made

As described above, PFIC status of a determinationnon-U.S. corporation for a taxable year depends on the relative values of certain categories of assets and the relative amount of certain kinds of income. Therefore, our status as a PFIC for any given taxable year depends upon the financial results for such year and upon relative valuations, which are subject to whether it waschange and beyond our ability to predict or control. Based on our most recent financial statements and projections and given uncertainty regarding the composition of our future income and assets, there is a significant risk that we may have been classified as a PFIC for the 2019 taxable year ended February 28, 2015 or whether it willand may be classified as a PFIC for theour current taxable year ending February 28, 2016.and possibly subsequent years. However, PFIC status is fundamentally factual in nature, depends on the application of complex U.S. federal income tax rules (which are subject to differing interpretations), generally cannot be determined until the close of the taxable year in question and is determined annually. Accordingly, there can be no assurance that the Corporation was not a PFIC for the taxable year ended February 28, 2015. Whether the Corporation is a PFIC depends on complex U.S. federal income tax rules that are subject to differing interpretations and whose application to the Corporation is uncertain. Further, since the PFIC status of the Corporation will depend upon the composition of its income and assets and the fair market value of its assets from time to time (including whether the Corporation owns, directly or indirectly, at least 25% by value, of the stock of any subsidiary) and generally cannot be determined until the end of a taxable year, there can be no assurance that the Corporationwe will not be a PFIC for thein our current taxable year. In addition,year or subsequent years. The PFIC rules are complex, and each U.S. Holder should consult its tax advisor regarding the Corporation cannot predict whetherapplication of the compositionPFIC rules to us.

Default PFIC Rules Under Section 1291 of its income and assets (including income and assets held indirectly) or the fair market value of its assets from time to time may result in it being treated as a PFIC in any future taxable year. Accordingly, no assurance can be given that the Corporation is not a PFIC or will not become a PFIC in subsequent taxable years.

Code.

Generally, if the Corporation iswe are or hashave been treated as a PFIC for any taxable year during a U.S. Holder'sHolder’s holding period of Common Shares,common shares, subject to the special rules described below applicable to a U.S. Holder who makes a Mark-to-Market Election or a QEF Election (each as defined below), any "excess distribution"“excess distribution” with respect to the Common Sharescommon shares would be allocated rateablyratably over the U.S. Holder'sHolder’s holding period. The amounts allocated to the taxable year of the excess distribution and to any year before the Corporationwe became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations in suchthat taxable year, as appropriate, and an interest charge would be imposed on the amount allocated to that taxable year. Distributions made in respect of Common Sharescommon shares during a taxable year will be excess distributions to the extent they exceed 125% of the average of the annual distributions on Common Sharescommon shares received by the U.S. Holder during the preceding three taxable years or the U.S. Holder'sHolder’s holding period, whichever is shorter.

In addition, dividends generally will not be qualified dividend income if we are a PFIC in the taxable year of payment or the preceding year.

Generally, if the Corporation iswe are treated as a PFIC for any taxable year during which a U.S. Holder owns Common Shares,common shares, any gain on the disposition of the Common Sharescommon shares would be treated as an excess distribution and would be allocated rateablyratably over the U.S. Holder'sHolder’s holding period and subject to taxation in the same manner as described in the preceding paragraph.

paragraph, and would not be eligible for the preferential long-term capital gains rate.

Certain elections (including the Mark-to-Market Election and the QEF Election, as defined and discussed below) may sometimes be used to mitigate the adverse impact of the PFIC rules on U.S. Holders, but these elections may accelerate the recognition of taxable income and have other adverse results.

- 81 -

Each current or prospective U.S. Holder should consult its own tax advisor regarding potential status of us as a PFIC, the possible effect of the PFIC rules to such holder in their particular circumstances, information reporting required if we were treated as a PFIC and the availability of any election that may be available (includingto the holder to mitigate adverse U.S. federal income tax consequences of holding shares in a "mark-to-market" or "qualifiedPFIC.

QEF Election.

A U.S. Holder of common shares in a PFIC generally would not be subject to the PFIC rules discussed above if the U.S. Holder had made a timely and effective election (a “QEF Election”) to treat us as a “qualified electing fund" election)fund” (a “QEF”). Instead, such U.S. Holder would be subject to U.S. Holdersfederal income tax on its pro rata share of our (i) net capital gain, which would be taxed as long-term capital gain to such U.S. Holder, and (ii) ordinary earnings, which would be taxed as ordinary income to such U.S. Holder, in limited circumstanceseach case regardless of whether such amounts are actually distributed to such U.S. Holder. However, a U.S. Holder that makes a QEF Election may, mitigatesubject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as “personal interest,” which is not deductible.

A U.S. Holder that makes a timely and effective QEF Election generally (a) may receive a tax-free distribution from us to the adverse consequences resulting from PFIC status, particularlyextent that such distribution represents our “earnings and profits” that were previously included in income by such U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in the common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, for U.S. federal income tax purposes, a U.S. Holder that makes a timely QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of the common shares.

A QEF Election will be treated as “timely” if they aresuch QEF Election is made infor the first taxable year during such holder'sin the U.S. Holder’s holding period for the common shares in which we are a PFIC. A U.S. Holder may make a timely QEF election by filing the Corporationappropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such first year. If a U.S. Holder makes a QEF Election after the first taxable year in the U.S. Holder’s holding period for the common shares in which we are a PFIC, then, in addition to filing the QEF Election documents, a U.S. Holder may elect to recognize gain (which will be taxed under the rules discussed under “—Default PFIC Rules Under Section 1291 of the Code”) as if the common shares were sold on the qualification date. The “qualification date” is the first day of the first taxable year in which we are a QEF with respect to such U.S. Holder. The election to recognize such gain can only be made if such U.S. Holder’s holding period for the common shares includes the qualification date. By electing to recognize such gain, such U.S. Holder will be deemed to have made a timely QEF Election. In addition, under very limited circumstances, it is possible that a U.S. Holder might make a retroactive QEF Election if such U.S. Holder failed to file the QEF Election documents in a timely manner. If a U.S. Holder fails to make a QEF Election for the first taxable year in the U.S. Holder’s holding period for the common shares in which we are a PFIC and does not elect to recognize gain as if the common shares were sold on the qualification date, such holder will not be treated as having made a PFIC.“timely” QEF election and will continue to be subject to the special adverse taxation rules discussed above under “—Default PFIC Rules Under Section 1291 of the Code”.

A QEF Election will apply to the taxable year for which such QEF election is made and to all subsequent taxable years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holders shouldHolder makes a QEF Election and, in a subsequent taxable year, we cease to be aware that, for each tax year, if any, that the Corporation is a PFIC, the Corporation canQEF Election will remain in effect (although it will not be applicable) during those taxable years in which we are not a PFIC. Accordingly, if we become a PFIC in another subsequent taxable year, the QEF Election will be effective and the U.S. Holder will be subject to the rules described above during any such subsequent taxable year in which we qualify as a PFIC.

A U.S. Holder cannot make and maintain a valid QEF Election unless we provide no assurances that it willcertain U.S. tax information necessary to make such an election. On an annual basis, we intend to use commercially reasonable efforts to make available to U.S. Holders, upon their written request (a) timely information as to our status as a PFIC, and (b) for each year in which we are a PFIC, information and documentation that a U.S. Holder making a QEF Election with respect to us is required to obtain for U.S. federal income tax purposes. Each U.S. Holder should consult its own tax advisor regarding the information suchavailability of, and procedure for making, a QEF Election with respect to us.

Mark-to-Market Election.

A U.S. Holders requireHolder of common shares in a PFIC would not be subject to the PFIC rules discussed above under “—Default PFIC Rules Under Section 1291 of the Code” if the U.S. Holder had made a timely and effective election to mark the PFIC common shares to market (a “Mark-to-Market Election”).

- 82 -

A U.S. Holder may make a "qualified electing fund" electionMark-to-Market Election with respect to the Corporation.

common shares only if such shares are marketable stock. Such shares generally will be “marketable stock” if they are regularly traded on a “qualified exchange,” which is defined as (a) a national securities exchange that is registered with the Securities and Exchange Commission, (b) the national market system established pursuant to section 11A of the Exchange Act of 1934, or (c) a non-U.S. securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such non-U.S. exchange has trading volume, listing, financial disclosure, surveillance, and other requirements, and the laws of the country in which such non-U.S. exchange is located, together with the rules of such non-U.S. exchange, ensure that such requirements are actually enforced and (ii) the rules of such non-U.S. exchange ensure active trading of listed stocks. Our common shares will generally be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of common shares is traded on a qualified exchange for at least 15 days during each calendar quarter. Each U.S. Holder should consult its own tax advisor with respect to the availability of a Mark-to-Market Election with respect to the common shares.

In general, a U.S. Holder that makes a timely Mark-to-Market Election with respect to the common shares will include in ordinary income, for each taxable year in which we are a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the common shares as of the close of such taxable year over (b) such U.S. Holder’s tax basis in such shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the lesser of (a) the excess, if any, of (i) such U.S. Holder’s adjusted tax basis in the common shares over (ii) the fair market value of such shares as of the close of such taxable year or (b) the excess, if any, of (i) the amount included in ordinary income because of such Mark-to-Market Election for prior taxable years over (ii) the amount allowed as a deduction because of such Mark-to-Market Election for prior taxable years. If a U.S. Holder makes a Mark-to-Market Election after the Corporationfirst taxable year in which we are a PFIC and such U.S. Holder has not made a timely QEF Election with respect to us, the PFIC rules described above under “—Default PFIC Rules Under Section 1291 of the Code” will apply to certain dispositions of, and distributions on, the common shares, and the U.S. Holder’s mark-to-market income for the year of the election. If we were to cease being a PFIC, a U.S. Holder that marked its common shares to market would not include mark-to-market gain or loss with respect to its common shares for any taxable year that we were not a PFIC.

A U.S. Holder that makes a Mark-to-Market Election generally will also adjust such U.S. Holder’s tax basis in his common shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of the common shares subject to a Mark-to-Market Election, any gain or loss on such disposition will be ordinary income or loss (to the extent that such loss does not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior taxable years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior taxable years). A Mark-to-Market Election applies to the taxable year in which such Mark-to-Market Election is made and to each subsequent taxable year, unless the common shares cease to be “marketable stock” or the IRS consents to revocation of such election. Each U.S. Holder should consult its own tax advisor regarding the availability of, and procedure for making, a Mark-to-Market Election with respect to the common shares.

Reporting. If we were to be treated as a PFIC in any taxable year, a U.S. Holder maywill generally be required to file an annual report with the IRS containing such information as the U.S. Treasury Department may require.

Each current or prospective U.S. Holder should consult its own tax advisor regarding theour potential status of the Corporation as a PFIC, the possible effect of the PFIC rules to such holder and information reporting required if the Corporationwe were a PFIC, as well as the availability of any election that may be available to suchthe holder to mitigate adverse U.S. federal income tax consequences of holding shares in a PFIC.

Receipt of Foreign Currency

The amount of a distribution paid in Canadian dollars or Canadian dollar proceeds received on the sale or other taxable disposition of Common Sharescommon shares will generally be equal to the U.S. dollar value of suchthe currency on the date of receipt. If any Canadian dollars received with respect to the Common Sharescommon shares are later converted into U.S. dollars, U.S. Holders may realize gain or loss on the conversion. Any gain or loss generally will be treated as ordinary income or loss and generally will be from sources within the U.S.United States for U.S. foreign tax credit purposes. Each U.S. Holder should consult its own tax advisor concerning the possibility of foreign currency gain or loss if any such currency is not converted into U.S. dollars on the date of receipt.

Foreign Tax Credit

Subject to certain limitations, a U.S. Holder who pays (whether directly or through withholding) Canadian or other foreignnon-U.S. income tax with respect to the Common Sharescommon shares may be entitled, at the election of suchthe U.S. Holder, to receive either a deduction or a credit for such Canadian or other foreignnon-U.S. income tax paid. Dividends paid on Common Sharescommon shares generally will constitute income from sources outside the United States. The foreign tax credit rules (including the limitations with respect thereto) are complex, and each U.S. Holder should consult its own tax advisor regarding the foreign tax credit rules, having regard to such holder'sholder’s particular circumstances.

- 83 -

72

Information Reporting; Backup Withholding

Generally, information reporting and backup withholding will apply to distributions on, and the payment of proceeds from the sale or other taxable disposition of, the Common Sharescommon shares unless (i) the U.S. Holder is a corporation or other exempt entity, or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that suchthe U.S. Holder is not subject to backup withholding.

Backup withholding is not an additional tax. Any amount withheld generally will be creditable against a U.S. Holder'sHolder’s U.S. federal income tax liability or refundable to the extent that it exceeds such liability provided the required information is provided to the IRS in a timely manner.

In addition, certain categories of U.S. Holders must file information returns with respect to their investment in a non-U.S. corporation. For example, certain U.S. Holders must file IRS Form 8938 with respect to certain "specified“specified foreign financial assets"assets” (such as the Common Shares)common shares) with an aggregate value in excess of US$50,000 (and, in some circumstances, a higher threshold). Failure to do so could result in substantial penalties and in the extension of the statute of limitations with respect to such holder'sholder’s U.S. federal income tax returns. Each U.S. Holder should consult its own tax advisor regarding application of the information reporting and backup withholding rules to it in connection with an investment in the Common Shares.

our common shares.

Medicare Contribution Tax

U.S. Holders that are individuals, estates or certain trusts generally will be subject to a 3.8% Medicare contribution tax on, among other things, dividends on, and capital gains from the sale or other taxable disposition of, the Common Shares,common shares, subject to certain limitations and exceptions. Each U.S. Holder should consult its own tax advisor regarding possible application of this additional tax to income earned in connection with an investment in the Common Shares.

our common shares.

F.Dividends and Paying Agents

Not applicable.

G.Statement by Experts

Not applicable.

H.Documents on Display

Any statement in this Annual Reportannual report about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to this Annual Report,annual report, the contract or document is deemed to modify the description contained in this Annual Report.annual report. You must review the exhibits themselves for a complete description of the contract or document.

We are subject to the informational requirements of the Exchange Act and are required to file reports and other information with the SEC. Our SEC filings are available at the SEC'sSEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at the public reference facilities maintained by the SEC at SEC Headquarters, Public Reference Section, 100 F Street, N.E., Washington D.C. 20549. You may obtain information on the operation of the SEC's public reference facilities by calling the SEC at 1-800-SEC-0330.

In addition, we are required by Canadian securities laws to file documents electronically with Canadian securities regulatory authorities and these filings are available on our SEDAR profile at www.sedar.com. Requests for such documents should be directed to our Corporate Secretary.

I.Subsidiary Information

Not applicable.

Item 11.Quantitative and Qualitative Disclosure about Market Risk

Information relating to quantitative and qualitative disclosures about market risks is detailed in our MD&A in "Item 5 -“Item 5. Operating and Financial Review and Prospects" above,Prospects”, as well as in Note 1721 to our audited consolidated financial statements contained in "Item 17 –“Item 17. Financial Statements" below.

73

Statements”.

Item 12.Description of Securities other than Equity Securities

A.Debt Securities

Not applicable.

- 84 -

B.Warrants and Rights

Not applicable.

C.Other Securities

Not applicable.

D.American Depositary Shares

Not applicable.

- 85 -

PART II

Item 13.Defaults, Dividend Arrearages and Delinquencies

None.

Item 14.Material Modification to the Rights of Security Holdings and Use of Proceeds

None.

Item 15.Controls and Procedures Disclosure Controls and Procedures
Disclosure Controls and Procedures

As of the end of the period covered by this annual report, our management, with the participation of the persons acting in the capacity of principal executive officer (CEO)our CEO and principal financial officer (CFO),Vice President Finance, 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 February 29, 2016,March 31, 2019, our existing disclosure controls and procedures were effective. It should be noted that while the CEO and CFOVice President Finance 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, not absolute, assurance that the objectives of the control system are met.

Management's

Management’s Report on Internal Controls over Financial Reporting

Our management, with the participation of our CEO and Vice President Finance, is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of its published consolidated financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management conducted an assessment of the design and operation effectiveness of our internal control over financial reporting as of February 29, 2016.March 31, 2019. In making this assessment, we used the criteria established within the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management has concluded that, as of February 29, 2016,March 31, 2019, our internal control over financial reporting was effective.

Changes in internal controlInternal Control over financial reporting

Financial Reporting

No changes were made to our internal controls over financial reporting that occurred during the three month periodquarter and fiscal year ended February 29, 2016March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

We qualify as an "emerging growth company"are a non-accelerated filer under Section 3(a)(80) of the Exchange Act as a resultand not required to comply with the auditor attestation requirements of enactment of the Jumpstart Our Business Startups Act of 2012, or JOBS Act. Under the JOBS Act, emerging growth companies are exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002, which generally requires that a public company's2002. Therefore, this annual report does not include an attestation report of our registered public accounting firm provide an attestation report relating to management'sregarding our management’s assessment of internal control over financial reporting. We qualify as an emerging growth company and therefore have not included in, or incorporated by reference into, this annual report such an attestation report as of the end of the period covered by this annual report.

74

Item 16.Reserved

Item 16A.Audit Committee Financial Expert

Our board of directors has determined that Mr. Pierre FitzgibbonCanan is the "audit“audit committee financial expert" withinexpert”, as defined by applicable regulations of the meaning of "Item 16A – Audit Committee Financial Expert" of this Annual Report.

Commission. The Commission has indicated that the designation of Mr. Pierre FitzgibbonCanan as an audit committee financial expert does not make Mr. Pierre Fitzgibbonhim an "expert"“expert” for any purpose, impose any duties, obligations or liability on Mr. Pierre FitzgibbonCanan that are greater than those imposed on members of the audit committee and board of directors who do not carry this designation or affect the duties, obligations or liability of any other member of the audit committee or board of directors.

Item 16B.Code of Ethics

The Boardboard of Directorsdirectors adopted a Code of Business Conduct and Ethics for itsour directors, officers and employees on May 31, 2007, which can be found on SEDAR at www.sedar.com and on the Corporation'sour web site on www.neptunebiotech.com.www.acastipharma.com. A copy of the Code of Ethics and Conduct can also be obtained by contacting the Secretary of the Corporation. Since its adoption by the Board of Directors, anyour Corporate Secretary. Any breach of the Code of Ethics must be brought to the attention of the Boardboard of Directorsdirectors by the Chief Executive Officerour CEO or other senior executive of the Corporation.officer. No material change report has ever been filed which pertains to any conduct of a director or executive officer that constitutes a departure frombreach of the Code.Code of Business Conduct and Ethics.

- 86 -

The Boardboard of Directorsdirectors also adopted an Insider Trading Programinsider trading program for its directors, officers and employees and adopted recently a majority voting policy for the election of its proposed director candidates at the Corporation'sour annual Shareholdergeneral shareholders meeting.

Item 16C.Principal Accountant Fees and Services Audit Fees

Audit Fees

"Audit fees"fees” consist of fees for professional services for the audit of our annual financial statements, interim reviews and limited procedures on interim financial statements, securities filings and consultations on accounting or disclosure issues. For the fiscal year ended February 29, 2016, KPMG LLP, our external auditors, billed $77,250 to the Corporation$403,500 for audit fees. Forfees for the fiscal year ended February 28, 2015, KPMG LLP billed $99,500 to the CorporationMarch 31, 2019 and $349,100 for audit fees.
fees for the fiscal year ended March 31, 2018.

Audit-Related Fees

"

Audit-related fees"fees” consist of fees for professional services that are reasonably related to the performance of the audit or review of our financial statements and which are not reported under "Audit Fees"“Audit Fees” above. ForKPMG LLP billed $53,000 for the fiscal year ended February 29, 2016, KPMG LLP, our external auditors, billed $14,675 to the Corporation. ForMarch 31, 2019 and $8,440 for the fiscal year ended February 28, 2015, KPMG LLP billed $10,475 to the Corporation.

March 31, 2018. Audit-related fees include French translation services.

Tax Fees

"

Tax fees"fees” consist of fees for professional services for tax compliance, tax advice and tax planning. KPMG LLP our external auditors, billed a total of $26,600 to the Corporation for tax fees for the fiscal year ended February 29, 2016 and a total of $27,400 to the Corporation$28,100 for tax fees for fiscal year ended February 28, 2015.March 31, 2019 and $57,100 for tax fees for fiscal year ended March 31, 2018. Tax fees include, but are not limited to, preparation of tax returns.

All Other Fees

The "other fees"

“Other fees” include all other fees billed for professional services other than those mentioned hereinabove. KPMG LLP our external auditors, billed no fees as tounder this mattercategory for the fiscal years ended February 29, 2016March 31, 2019 and February 28, 2015.

March 31, 2018.

Pre-Approval Policies and Procedures

The Audit Committeeaudit committee approves all audit, audit-related services, tax services and other non-audit related services provided by the external auditors in advance of any engagement. Under the Sarbanes-Oxley Act of 2002, audit committees are permitted to approve certain fees for non-audit related services pursuant to a de minimus exception prior to the completion of an audit engagement. Non-audit related services satisfy the de minimus exception if the following conditions are met:

75

(a) that the aggregate amount of all non-audit services that were not pre-approved is reasonably expected to constitute no more than five per cent of the total amount of fees paid by the Corporation and its subsidiaries to the Corporation's external auditors during the fiscal year in which the services are provided;
(b) that the Corporation or its subsidiaries, as the case may be, did not recognize the services as non-audit services at the time of the engagement; and
(c) that the services are promptly brought to the attention of the Audit Committee and approved, prior to the completion of the audit, by the Audit Committee or by one or more of its members to whom authority to grant such approvals had been delegated by the Audit Committee.

·the aggregate amount of all non-audit services that were not pre-approved is reasonably expected to constitute no more than five per cent of the total amount of fees paid by us and our subsidiaries to our external auditors during the fiscal year in which the services are provided;

·we or our subsidiaries, as the case may be, did not recognize the services as non-audit services at the time of the engagement; and

·the services are promptly brought to the attention of the audit committee and approved, prior to the completion of the audit, by the audit committee or by one or more of its members to whom authority to grant such approvals had been delegated by the audit committee.

None of the services described above under "Principal“Principal Accountant Fees and Services"Services” were approved by the Audit Committeeaudit committee pursuant to the de minimus exception.

Item 16D.Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

Item 16F.Change in Registrant'sRegistrant’s Certifying Accountant

None.

- 87 -

Item 16G.Corporation Governance

NASDAQ Marketplace Rule 5615(a)(3) permits a foreign private issuer to follow its home country practice in lieu of certain of the requirements of the Rule 5600 Series. A foreign private issuer that follows a home country practice in lieu of one or more provisions of the Rule 5600 Series is required to disclose in its annual report filed with the SEC, or on its website, each requirement of the Rule 5600 Series that it does not follow and describe the home country practice followed by the issuer in lieu of such NASDAQ corporate governance requirements.

We do not follow NASDAQ Marketplace Rule 5620(c), but instead follow our home country practice. The NASDAQ minimum quorum requirement under Rule 5620(c) for a meeting of shareholders is 33.33%

A description of the outstanding shares of common voting stock. Our quorum requirement, assignificant ways in which our governance practices currently differ from those followed by domestic companies pursuant to the Rule 5600 series is set forth in our by-laws, is that a quorum for a meeting of our holders of Common Shares is the attendance, in person or by proxy, of the shareholders representing 10% of our Common shares. The foregoing is consistent with the laws, customs and practices in Québec, Canada, and the rules and policies of the TSX-V.

out below:

·we do not follow NASDAQ Marketplace Rule 5620(c), but instead follow our home country practice. The NASDAQ minimum quorum requirement under Rule 5620(c) for a meeting of shareholders is 33.33% of the outstanding shares of common voting stock. Our quorum requirement, as set forth in our by-laws, is that a quorum for a meeting of our holders of common shares is the attendance, in person or by proxy, of the shareholders representing 10% of our common shares. The foregoing is consistent with the laws, customs and practices in Québec, Canada, and the rules and policies of the TSX-V; and

·we do not follow NASDAQ Stock Market Rule 5635(d), but instead follow our home country practice. NASDAQ Stock Market Rule 5635(d) requires each issuer to obtain shareholder approval for the issuance of securities in connection with a transaction other than a public offering involving certain issuances of common shares in amounts equaling 20% or more of such issuer’s common shares then outstanding. We do not follow this NASDAQ Stock Market Rule and instead comply with the applicable requirements of the TSX-V. The TSX-V requires shareholder approval for any issuance of securities if following such issuance, we would have a new “control person” (i.e. any individual or entity holding greater than 20% of our voting rights).

Item 16H.Mining Safety Disclosure

Not applicable.

PART III

Item 17.Financial Statements
Financial Statements of Acasti Pharma Inc. for the years ended February 29, 2016, 2015 and 2014
76

Financial Statements of

ACASTI PHARMA INC.

For the years ended February 29, 2016 and February 28, 2015 and 2014
77



INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of Acasti Pharma Inc.
We have audited the accompanying

The financial statements of Acasti Pharma Inc., which comprise are located at the end of this annual report, beginning on page F-1.

Item 18.Financial Statements

See Item 17.

Item 19.Exhibits

- 88 -

EXHIBITS INDEX

Exhibit
Number
Description of Document
1.1Articles of Incorporation (incorporated by reference to Exhibit 4.1 from Form S-8 (File No. 333-191383) filed with the Commission on September 25, 2013)
1.2Amended and Restated General By-Law (incorporated by reference to Exhibit 99.1 from Form 6-K (File No. 001-35776) filed with the Commission on February 21, 2017)
1.3Advance 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)
2.1Specimen Certificate for Common Shares of Acasti Pharma Inc. (incorporated by reference to Exhibit 2.1 from Form 20-F (File No. 001-35776) filed with the Commission on June 6, 2014)
2.2Warrant Indenture dated December 3, 2013 between Acasti Pharma Inc. and Computershare Trust Company of Canada (incorporated by reference to Exhibit 99.1 from Form 6-K (File No. 001-35776) filed with the Commission on December 3, 2013)
2.3Warrant Indenture dated February 21, 2017 between Acasti Pharma Inc. and Computershare Trust Company of Canada (incorporated by reference to Exhibit 2.3 from Form 20-F (File No. 001-35776) filed with the Commission on June 27, 2017)
2.4Warrant Agency Agreement dated December 27, 2017 between Acasti Pharma Inc. and Computershare Inc. and its wholly-owned subsidiary, Computershare Trust Company N.A. (incorporated by reference to Exhibit 2.4 from Form 20-F (File No. 001-35776) filed with the Commission on June 29, 2018)
2.5Amended and Restated Warrant Indenture dated May 10, 2018 between Acasti Pharma Inc. and Computershare Trust Company of Canada (incorporated by reference to Exhibit 2.5 from Form 20-F (File No. 001-35776) filed with the Commission on June 29, 2018)
4.1Prepayment Agreement, dated December 4, 2012, between Neptune Technologies & Bioressources Inc. and Acasti Pharma Inc. (incorporated by reference to Exhibit 99.1 from Form 6-K (File No. 001-35776) filed with the Commission on October 29, 2013)
4.2Equity Incentive Plan, as amended June 8, 2017 (incorporated by reference to Exhibit 4.2 from Form 20-F (File No. 001-35776) filed with the Commission on June 27, 2017)
4.3Stock Option Plan, as amended June 8, 2017 (incorporated by reference to Exhibit 4.3 from Form 20-F (File No. 001-35776) filed with the Commission on June 27, 2017)
4.4Employment Agreement with Jan D’Alvise, dated May 11, 2016 (incorporated by reference to Exhibit 10.6 from Form F-1 (File No. 333-220755) filed with the SEC on September 29, 2017)
4.5Employment Agreement with Pierre Lemieux, dated September 26, 2017 (incorporated by reference to Exhibit 10.7 from Form F-1 (File No. 333-220755) filed with the SEC on September 29, 2017)
4.6*Employment Agreement with Brian Groch, dated May 31, 2018
4.7*Employment Agreement with Jean-François Boily, dated September 24, 2018
11.1Code of Business Conduct and Ethics for Directors, Officers and Employees (incorporated by reference to Exhibit 99.4 from Form 40-F (File No. 001-35776) filed with the Commission on May 30, 2013)

- 89 -

12.1*Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1*Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2*Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1*Consent of KPMG LLP
15.2*Consent of Destum Partners, Inc.

* Filed herewith.

- 90 -

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on this Annual Report and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

ACASTI PHARMA INC.
By:/s/ Jan D’Alvise
Name:Jan D’Alvise
Title:Principal Executive Officer

Date: June 26, 2019

- 91 -

Financial Statements of

Acasti pharma inc.

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

F-1

KPMG LLPTelephone(514) 840-2100
600 de Maisonneuve Blvd. WestFax(514) 840-2187
Suite 1500, Tour KPMGInternetwww.kpmg.ca
Montréal (Québec) H3A 0A3
Canada

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

Acasti Pharma Inc.

Opinion on the Financial Statements

We have audited the accompanying statements of financial position of Acasti Pharma, Inc. (the Company) as at February 29, 2016of March 31, 2019 and February 28, 2015,2018, the related statements of earnings and comprehensive loss, changes in equity, and cash flows for eachthe years ended March 31, 2019 and 2018 and the thirteen-month period ended March 31, 2017, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2019 and 2018, and its financial performance and its cash flows for the years inended March 31, 2019 and 2018 and the three-yearthirteen-month period ended February 29, 2016, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statementsMarch 31, 2017, in accordanceconformity with International Financial Reporting Standards as issued by the International Accounting Standards Board,Board.

Material Uncertainty Related to Going Concern

Without qualifying our opinion on the financial statements, we draw attention to Note 2 (c) to the financial statements, which indicates that the Company has incurred operating losses and negative cash flows from operations since inception, and additional funds will be needed in the future for such internal control as management determines isactivities necessary to enableprepare for commercial launch. These events or conditions, along with other matters as set forth in Note 2 (c), indicate that a material uncertainty exists that casts substantial doubt on the preparation ofCompany’s ability to continue as a going concern.

Basis for Opinion

These financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility
the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordanceare a public accounting firm registered with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement, of the financial statements, whether due to frauderror or error. In making those risk assessments,fraud. The Company is not required to have, nor were we considerengaged to perform, an audit of its internal control relevantover financial reporting. As part of our audits, we are required to the entity’s preparation and fair presentationobtain an understanding of theinternal control over financial statements in order to design audit procedures that are appropriate in the circumstances,reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’sCompany’s internal control. An auditcontrol over financial reporting. Accordingly, we express no such opinion.

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
F-2

 

Page 2

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includesincluded evaluating the appropriateness of accounting policiesprinciples used and the reasonableness of accountingsignificant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a reasonable basis for our audit opinion.
78


Opinion
In our opinion, the

Other Matter

The financial statements present fairly, in all material respects, the financial position of Acasti Pharma Inc. as at February 29, 2016for the twelve-month and one-month periods ended February 28, 2015,2017 and its financial performance and its cash flows for each of the years in the three-year period ended February 29, 2016 in accordance with International Financial Reporting StandardsMarch 31, 2017 respectively are unaudited. Accordingly, we do not express an opinion on them.

We have served as issued by the International Accounting Standards Board.

May 25, 2016
Montréal,Company’s auditor since 2009.

Montreal, Canada

June 26, 2019

*CPA auditor, CA, public accountancy permit No. A119178A122596

F-3



79

ACASTI PHARMA INC.

Acasti pharma inc.

Financial Statements


Years

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 29, 2016 and February 28, 2015 and 2014


80Acasti Pharma inc.





ACASTI PHARMA INC.

Statements of Financial Position

February 29, 2016

As at March 31, 2019 and February 28, 2015March 31, 2018

    March 31, 2019   March 31, 2018 
          
(thousands of Canadian dollars) Notes $   $ 
Assets         
          
Current assets:         
Cash and cash equivalents 24 22,521   8,223 
Marketable securities 5 11,865    
Receivables 4 1,586   759 
Other Assets 6 65   104 
Deferred financing costs 14(b) 179    
Prepaid expenses   1,115   406 
Total current assets   37,331   9,492 
          
Marketable securities 5 27   26 
Other Asset 6 557   555 
Equipment 9 2,813   2,821 
Intangible assets 10 7,743   10,065 
          
Total assets   48,471   22,959 
          
          
Liabilities and Equity         
          
Current liabilities:         
Trade and other payables 11 16,429   6,697 
Unsecured convertible debentures 13 1,817    
Total current liabilities   18,246   6,697 
          
Derivative warrant liabilities 12, 14(d)( e) 16,263   6,426 
Unsecured convertible debentures 13    1,612 
Total liabilities   34,509   14,735 
          
Equity:         
Share capital 14 129,318   73,338 
Other equity 14 309   309 
Contributed surplus   8,280   6,956 
Deficit   (123,945)  (72,379)
Total equity   13,962   8,224 
          
Commitments and contingencies 22       
          
Total liabilities and equity   48,471   22,959 
       
 
 
February 29,
  
February 28,
 
 
 
2016
  
2015
 
  
Assets
      
  
Current assets:
      
Cash $3,026,943  $1,310,556 
Short-term investments (note 19 (e))  7,443,115   17,071,344 
Trade and other receivables (note 4)  337,603   384,886 
Receivable from corporation under common control  -   49,658 
Tax credits receivable (note 6)  61,210   419,992 
Inventories (note 7)  -   87,370 
Prepaid expenses  456,539   318,457 
 
  
11,325,410
   
19,642,263
 
  
Restricted short-term investment (note 5(b) and 19(e))
  2,000,000   - 
Equipment (note 8)
  287,136   69,937 
Intangible assets (note 9)
  
14,904,776
   17,495,905 
         
Total assets
 
$
28,517,322
  
$
37,208,105
 
  
Liabilities and Equity
        
  
Current liabilities:
        
Trade and other payables (note 10) $1,125,977  $1,083,847 
Payable to parent corporation (note 5 (e))  14,936   538,531 
 
  
1,140,913
   
1,622,378
 
  
Derivative warrant liabilities (notes 11 (e) and 21)
  156,377   2,357,408 
Total liabilities
  1,297,290   3,979,786 
  
Equity:
        
Share capital (note 11 (a))  61,972,841   61,627,743 
Contributed surplus  4,874,727   4,911,381 
Deficit  (39,627,536)  (33,310,805)
Total equity  27,220,032   33,228,319 
  
Commitments and contingency (note 20)
        
         
Total liabilities and equity $28,517,322  $37,208,105 

See accompanying notes to financial statements.


On behalf of the Board:


/s/ Dr. Roderick Carter/s/Pierre Fitzgibbon Jean-Marie Canan
Roderick CarterPierre FitzgibbonJean-Marie Canan
Executive ChairmanChair of the BoardDirector

F-5

81Acasti Pharma inc.


ACASTI PHARMA INC.

Statements of Earnings and Comprehensive Loss


Years

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 29, 2016 and February 28, 2015 and 20142017

            Thirteen-
months
ended
    Month ended   Twelve-
months
ended
 
    March 31,
2019
   March 31,
2018
   March 31,
2017
   March 31,
2017
   February 28,
2017
 
                (Unaudited)   (Unaudited) 
(thousands of Canadian dollars, except per share data) Notes $   $   $   $   $ 
                      
Research and development expenses, net of government assistance 8 (38,366)  (15,669)  (7,653)  (426)  (7,227)
General and administrative expenses   (6,649)  (4,027)  (3,557)  (292)  (3,265)
Loss from operating activities   (45,015)  (19,696)  (11,210)  (718)  (10,492)
                      
Financial expenses 12, 14 (d)(e), 16 (6,551)  (1,808)  (166)  (51)  (115)
                      
Net loss and comprehensive loss before income tax   (51,566)  (21,504)  (11,376)  (769)  (10,607)
Deferred income tax recovery         129      129 
Net loss and total comprehensive loss   (51,566)  (21,504)  (11,247)  (769)  (10,478)
                      
Basic and diluted loss per share 18 (0.95)  (1.23)  (1.01)  (0.05)  (0.97)
                      
Weighted average number of shares outstanding   54,290,295   17,486,515   11,094,512   14,702,556   10,788,075 
          
  February 29,  February 28,  February 28, 
  2016  2015  2014 
  
Revenue from sales $37,656  $270,615  $500,875 
Cost of sales (note 7)  (81,418)  (235,091)  (291,853)
Gross (loss) profit  (43,762)  35,524   209,022 
             
Research and development expenses,            
   net of tax credits of $168,795 (2015 - $264,270; 2014 - $269,591)  (7,389,415)  (8,856,941)  (6,059,311)
General and administrative expenses  (2,178,241)  (3,573,044)  (4,949,417)
Loss from operating activities  (9,611,418)  (12,394,461)  (10,799,706)
             
Finance income (note 14)  1,095,917   1,919,730   813,842 
Finance costs (note 14)  (2,261)  (4,060)  (1,118,355)
Change in fair value of warrant liabilities (note 21)  2,201,031   8,824,067   (507,430)
Net finance income (cost)  3,294,687   10,739,737   (811,943)
             
Net loss and total comprehensive loss for the year (6,316,731) (1,654,724) (11,611,649)
             
             
Basic and diluted loss per share (note 16) (0.59) $(0.16) (1.38)
             
             
Weighted average number of shares outstanding  10,659,936   10,617,704   8,436,893 
  
  

See accompanying notes to financial statements

F-6


82Acasti Pharma inc.


ACASTI PHARMA INC.

Statements of Changes in Equity


Years

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 29, 2016 and February 28, 2015 and 20142017

    Share capital   Other   Contributed         
    Number   Dollar   equity   surplus   Deficit   Total 
(thousands of Canadian dollars) Notes     $   $   $   $   $ 
                          
Balance, March 31, 2018   25,638,215   73,338   309   6,956   (72,379)  8,224 
                          
Net loss and total comprehensive loss for the period               (51,566)  (51,566)
    25,638,215   73,338   309   6,956   (123,945)  (43,342)
Transactions with owners, recorded directly in equity                         
Contributions by and distributions to equity holders                         
Public offering 14(c)(d) 51,612,000   54,124      283      54,407 
Warrants exercised   772,474   1,733            1,733 
Share-based payment transactions 17 4,167   3      1,041      1,044 
Issuance of shares for payment of interest on convertible debentures 14(g) 105,878   120            120 
Total contributions by and distributions to equity holders   52,494,519   55,980      1,324      57,304 
Balance at March 31, 2019   78,132,734   129,318   309   8,280   (123,945)  13,962 

    Share capital  Other   Contributed         
    Number   Dollar   equity   surplus   Deficit   Total 
(thousands of Canadian dollars) Notes     $   $   $   $   $ 
                          
Balance, March 31, 2017   14,702,556   66,576   309   5,693   (50,875)  21,703 
                          
Net loss and total comprehensive loss for the period               (21,504)  (21,504)
    14,702,556   66,576   309   5,693   (72,379)  199 
Transactions with owners, recorded directly in equity                         
Contributions by and distributions to equity holders                         
Public offering 14(e) 10,667,169   6,169      406      6,575 
Warrants exercised   178,721   456      (72)     384 
Share-based payment transactions 17          929      929 
Issuance of shares for payment of interest on convertible debentures 14(g) 89,769   137             137 
Total contributions by and distributions to equity holders   10,935,659   6,762      1,263      8,025 
Balance at March 31, 2018   25,638,215   73,338   309   6,956   (72,379)  8,224 
                
  Share capital     Contributed       
  Number  Dollar  Warrants  surplus  Deficit  Total 
Balance, February 28, 2015  10,644,440
(1) 
 $61,627,743  $-  $4,911,381  $(33,310,805) $33,228,319 
                         
Net loss and total comprehensive                        
loss for the year  -   -   -   -   (6,316,731)  (6,316,731)
   10,644,440   61,627,743   -   4,911,381   (39,627,536)  26,911,588 
                         
Transactions with owners,                        
recorded directly in equity
                        
Contributions by and distributions                        
to owners
                        
Share-based payment                        
transactions (note 15)
  -   -   -   308,607   -   308,607 
Issuance of shares (note 11 (b))  50,000   101,712   -   (102,500)  -   (788)
Share options exercised (note 15)  250   625   -   -   -   625 
RSUs released (note 15)  17,348   242,761   -   (242,761)  -   - 
Total contributions by and                        
distributions to owners
  67,598   345,098   -   (36,654)  -   308,444 
  
Balance at February 29, 2016  10,712,038  $61,972,841  $-  $4,874,727  $(39,627,536) $27,220,032 
  
  
Balance, February 28, 2014  10,586,258
(1) 
 $61,027,307  $406,687  $3,501,587  $(31,656,081) $33,279,500 
  
Net loss and total comprehensive                        
loss for the year
  -   -   -   -   (1,654,724  (1,654,724)
   10,586,258   61,027,307   406,687   3,501,587   (33,310,805)  31,624,776 
                         
Transactions with owners,                        
recorded directly in equity
                        
Contributions by and distributions                        
to owners
                        
Share-based payment                        
transactions (note 15)
  -   -   -   1,553,543   -   1,553,543 
Share options exercised (note 15)  20,000   50,000   -   -   -   50,000 
RSUs released (note 15)  38,182   550,436   -   (550,436)  -   - 
Expiration of warrants (note 11 (e))  -   -   (406,687)  406,687   -   - 
Total contributions by and                        
distributions to owners
  58,182   600,436   (406,687)  1,409,794   -   1,603,543 
  
Balance at February 28, 2015  10,644,440  $61,627,743  $-  $4,911,381  $(33,310,805) $33,228,319 
(1)Adjusted to give effect to the reverse stock split that occurred on October 15, 2015, as detailed in note 11.

See accompanying notes to financial statements.

F-7
83


ACASTI PHARMA

Acasti pharma INC.

Statements of Changes in Equity, continued


YearsContinued

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 29, 2016 and February 28, 2015 and 20142017

      Share capital   Other   Contributed         
      Number   Dollar   equity   surplus   Deficit   Total 
(thousands of Canadian dollars)  Notes      $   $   $   $   $ 
                            
Balance, February 29, 2016     10,712,038   61,973      4,875   (39,628)  27,220 
                            
Net loss and total comprehensive loss for the twelve-month period (unaudited)                 (10,478)  (10,478)
Net loss and total comprehensive loss for the one-month period (unaudited)                 (769)  (769)
Net loss and total comprehensive loss for the thirteen-month Period                 (11,247)  (11,247)
      10,712,038   61,973      4,875   (50,875)  15,973 
Transactions with owners, recorded directly in equity                           
Contributions by and distributions to equity holders                           
Public offering  14(f)  3,930,518   4,509      144      4,653 
Issue of unsecured convertible debentures, net of deferred income tax expense of $129     13, 20        309         309 
Equity settled non-employee share-based payment     60,000   94            94 
Share-based payment transactions for the twelve-month period (unaudited)  17           588      588 
Share-based payment transactions for the one-month period (unaudited)  17           86      86 
Share-based payment transactions for the thirteen-month period  17           674      674 
Total contributions by and distributions to equity holders for the twelve-month period (unaudited)     3,990,518   4,603   309   732      5,644 
Total contributions by and distributions to equity holders for the one-month period (unaudited)              86      86 
Total contributions by and distributions to equity holders for the thirteen-month period     3,990,518   4,603   309   818      5,730 
Balance at February 28, 2017 (unaudited)     14,702,556   66,576   309   5,607   (50,106)  22,386 
Balance at March 31, 2017     14,702,556   66,576   309   5,693   (50,875)  21,703 
                
  Share capital     Contributed       
  Number  Dollar  Warrants  surplus  Deficit  Total 
  
Balance, February 28, 2013  7,314,538
(1) 
 $28,922,710  $406,687  $438,711  $(20,044,432) $9,723,676 
                         
Net loss and total comprehensive                        
loss for the year  -   -   -   -   (11,611,649)  (11,611,649)
   7,314,538   28,922,710   406,687   438,711   (31,656,081)  (1,887,973)
                         
Transactions with owners,                        
recorded directly in equity                      
Contributions by and distributions                        
to owners                        
Public offering (note 11(b))  1,840,000   12,396,535   -   -   -   12,396,535 
Private placement (note 11 (c))  161,654   2,067,605   -   -   -   2,067,605 
Issuance of shares on                        
royalty prepayment(note 20)  675,000   15,496,000   -   -   -   15,496,000 
Share-based payment                        
transactions (note 15)  -   -   -   3,441,719   -   3,441,719 
Warrants exercised  539,485   1,358,088   -   -   -   1,358,088 
Share options exercised (note 15)  29,650   492,289   -   (84,763)  -   407,526 
RSUs released (note 15)  25,931   294,080   -   (294,080)  -   - 
Total contributions by and                        
distributions to owners  3,271,720   32,104,597   -   3,062,876   -   35,167,473 
                         
Balance at February 28, 2014  10,586,258  $61,027,307  $406,687  $3,501,587  $(31,656,081)  33,279,500 

(1)Adjusted to give effect to the reverse stock split that occurred on October 15, 2015, as detailed in note 11.

See accompanying notes to financial statements.

F-8

84acasti pharma INC.


ACASTI PHARMA INC.

Statements of Cash Flows


Years

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 29, 2016 and February 28, 2015 and 20142017

          Thirteen-
months
ended
  Month ended  Twelve-
months
ended
 
  Notes March 31,
2019
  March 31,
2018
  March 31,
2017
  March 31,
2017
(Unaudited)
  February 28,
2017
(Unaudited)
 
(thousands of Canadian dollars)   $  $  $  $  $ 
Cash flows used in operating activities:    (51,566)  (21,504)  (11,247)  (769)  (10,478)
Net loss for the period                      
Adjustments:                      
Amortization of intangible assets 10  2,322   2,323   2,517   194   2,323 
Depreciation of equipment 9  505   349   221   32   189 
Stock-based compensation 17  1,041   929   674   86   588 
Net financial expenses 16  6,551   1,808   166   51   115 
Realized foreign exchange gain (loss)    581   (7)  48   (12)  60 
Deferred income tax recovery    -   -   (129)  -   (129)
Total adjustments    (40,566)  (16,102)  (7,750)  (418)  (7,332)
Changes in working capital items 19  8,090   3,583   792   (328)  1,120 
Net cash used in operating activities    (32,476)  (12,519)  (6,958)  (746)  (6,212)
Cash flows from (used in) investing activities:                      
Interest received    384   70   150   4   146 
Acquisition of equipment 9, 19  (700)  (455)  (2,527)  (24)  (2,503)
Acquisition of short-term investments    -   -   (12,765)  -   (12,765)
Acquisition of marketable securities    (23,753)  (26)  -   -   - 
Maturity of short-term investments    -   -   22,030   -   22,030 
Maturity of marketable securities    11,933                 
Net cash (used in) investing activities    (12,136)  (411)  6,888   (20)  6,908 
Cash flows from (used in) financing activities:                      
Net proceeds from public offering 14(c)(d)(e)(f)  57,892   11,065   5,010   (34)  5,044 
Net proceeds from private placement 13, 14(f)  -   (40)  1,872   (10)  1,882 
Proceeds from exercise of warrants    1,011   384   -   -   - 
Share based payment    3   -   -   -   - 
Interest paid    (44)  (3)  (18)  -   (18)
Net cash from (used in) financing activities    58,862   11,406   6,864   (44)  6,908 
                       
Foreign exchange (loss) gain on cash and cash equivalents held in foreign currencies    48   (25)  (49)  9   (58)
Net increase (decrease) in cash and cash equivalents    14,298   (1,549)  6,745   (801)  7,546 
Cash and cash equivalents, beginning of period    8,223   9,772   3,027   10,573   3,027 
Cash and cash equivalents, end of period    22,521   8,223   9,772   9,772   10,573 
                       
Cash and cash equivalents is comprised of:                      
Cash    1,896   1,583   6,778   6,778   7,584 
Cash equivalents    20,625   6,640   2,994   2,994   2,989 
          
  February 29,  February 28,  February 28, 
  2016   2015   2014 
            
            
Cash flows used in operating activities:           
Net loss for the year  (6,316,731)  (1,654,724)  (11,611,649)
Adjustments:            
         Depreciation of equipment  58,809   3,654   5,337 
         Amortization of intangible asset  2,335,668   2,331,569   1,768,500 
         Impairment loss related to intangible assets  339,106   -   - 
         Stock-based compensation  308,607   1,553,543   3,441,719 
         Net finance (income) cost  (3,294,687)  (10,739,737)  811,943 
         Realized foreign exchange gain (loss)  36,656   1,606   (92,944)
   (6,532,572)  (8,504,089)  (5,677,094)
Changes in non-cash operating working capital items:            
   Changes in non-cash operating items (note 17)  (41,969)  1,306,404   (1,127,443)
Net cash used in operating activities  (6,574,541)  (7,197,685)  (6,804,537)
  
Cash flows from (used in) investing activities:            
Interest received  113,727   40,995   98,132 
Acquisition of equipment  (276,008)  (34,650)  (25,000)
Acquisition of intangible assets  (91,572)  (51,270)  (123,610)
Acquisition of short-term investments  (11,954,050)  (14,478,186)  (25,395,800)
Maturity of short-term investments  20,436,500   22,149,888   6,000,000 
Net cash from (used in) investing activities  8,228,597   7,626,777   (19,446,278)
             
Cash flows from (used in) financing activities:            
Net proceeds from public offering (note 11 (b))  -   -   21,953,200 
Net proceeds from private placement (note 11 (c))  -   -   2,067,605 
Proceeds from exercise of warrants and options  625   50,000   972,177 
Share issue costs (note 11(b))  (788)  -   (29,000)
Interest paid  (2,261)  (4,060)  (975)
Net cash from (used in) financing activities  (2,424)  45,940   24,963,007 
             
Foreign exchange gain on cash held in foreign currencies  64,755   160,034   766,730 
Net increase (decrease) in cash  1,716,387   635,066   (521,078)
             
Cash, beginning of year  1,310,556   675,490   1,196,568 
             
             
Cash, end of year  3,026,943   1,310,556   675,490 


See accompanying notes to financial statements.

F-9

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

85

ACASTI PHARMA INC.
Notes to Financial Statements

Years ended February 29, 2016 and February 28, 2015 and 2014





1.Reporting entity
1.Reporting entity

Acasti Pharma Inc. (the "Corporation"(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 545, Promenade du Centropolis, Laval, Québec, H7T 0A3. The Corporation is a subsidiary of Neptune Technologies and Bioressources Inc. (“Neptune”). The Corporation, the parent and Biodroga Inc., a sister corporation, are collectively referred to as the “group”.

On August 7, 2008, the Corporation commenced operations after having acquired from Neptune an exclusive worldwide license to use its intellectual property to develop, clinically study and market new pharmaceutical products to treat human cardiovascular conditions. Neptune’s intellectual property is related to the extraction of particular ingredients from marine biomasses, such as krill. The eventual products are aimed at applications in the over-the-counter medicine, medical foods and prescription drug markets.
Operations essentially consist in the development of new products and the conduct of clinical research studies on animals and humans.  Almost all research and development, administration and capital expenditures incurred by the Corporation since the start of the operations are associated with the project described above.

The Corporation is subject to a number of risks associated with the successful development of new products and their marketing,its ongoing priorities, including the conduct of its clinical studiesprogram and theirits results, the meeting of development objectives set by Neptune in its license agreement, and the establishment of strategic alliances. alliances and the development of new pharmaceutical products and their marketing. The Corporation’s current product in development requires approval from the U.S Food and Drug Administration and equivalent regulatory organizations in other countries before their sale can be authorized. Certain risks have been reduced for the longer term with the outcome of the Corporation’s actions, including its intellectual property strategy execution with filed patent applications in more than 20 jurisdictions, with more than 20 issued patents and with numerous additional patent applications pending.

The Corporation has incurred significant operating losses and negative cash flows from operations since inception. To date, the Corporation has financed its operations through the public offering and private placement of common shares,Common Shares, units consisting of Common Shares and warrants and convertible debt, the proceeds from research grants and research tax credits, and the exercises of warrants, rights and options and research tax credits.options. To achieve the objectives of its business plan, the CorporationAcasti plans to establish strategic alliances and raise the necessary capital. It is anticipated thatfunds through additional securities offerings and the products developed by the Corporation will require approval from the U.S Foodestablishment of strategic alliances as well as additional research grants and Drug Administration and equivalent organizations in other countries before their sale can be authorized.research tax credits. The ability of the Corporation to complete the needed financing and ultimately achieve profitable operations is dependent on a number of factors outside of the Corporation’s control.

Refer to note 2(d) for the basis of preparation of the financial statements.

2.Basis of preparation

2.Basis of preparation

(a)Statement of compliance:

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Beginning in fiscal 2017, the Corporation’s fiscal year end is on March 31. Fiscal 2017 is a transition year, and includes thirteen months of operations, beginning on March 1, 2016 and ending on March 31, 2017. As a result, for comparative purposes the above financial statements and corresponding notes to financial statements include two unaudited periods: the one-month period ended March 31, 2017 and the twelve-month period ended February 28, 2017. The Canadian Securities regulator permits, in the transition year, the presentation of a thirteen-month period for the financial year ended March 31, 2017.

The financial statements were approved by the Board of Directors on May 25, 2016.

June 26, 2019.

(b)(b)Basis of measurement:

The financial statements have been prepared on the historical cost basis, except for:

·Stock-based compensation which is measured pursuant to IFRS 2, Share-based payments (Note 3(f) (ii) (Note 3(e) (ii)); and,

·Derivative warrant liabilities measured at fair value on a recurring basis (Note 21)(Note 12).

(c)Going concern uncertainty:

The Corporation has incurred operating losses and negative cash flows from operations since inception. The Corporation’s current assets of $37.3 million as at March 31, 2019 include cash and cash equivalents totaling $22.5 million, and marketable securities of $11.9 million mainly generated by the net proceeds from the recent Public Offerings. The Corporation’s current liabilities total $18.2 million at March 31, 2019 and are comprised primarily of amounts due to or accrued for creditors. Management projects that additional funds will be needed in the future, after TRILOGY phase 3 clinical trials, for activities necessary to prepare for commercial launch, including the scale up of our manufacturing operations, the completion of the potential regulatory (NDA) submission package (assuming positive Phase 3 clinical results), and the expansion of business development and US commercial launch activities. The Corporation is working towards development of strategic partner relationships, as well as actively seeking additional non-dilutive funds in the future, but there can be no assurance as to when or whether Acasti will complete any strategic collaborations or succeed in identifying non-dilutive funding sources. Consequently, the Corporation may need to raise additional equity capital in the future to fund these activities. In particular, raising additional capital is subject to market conditions and is not within the Corporation’s control. If the Corporation does not raise additional funds or find one or more strategic partners, it may not be able to realize its assets and discharge its liabilities in the normal course of business. As a result, there exists a material uncertainty that casts substantial doubt about the Corporation’s ability to continue as a going concern and, therefore, realize its assets and discharge its liabilities in the normal course of business.

F-10

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

2.Basis of preparation (continued):

(c)Going concern uncertainty (continued):

The financial statements have been prepared on a going concern basis, which assumes the Corporation will continue its operations in the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the ordinary course of business. These financial statements do not include any adjustments to the carrying values and classification of assets and liabilities and reported expenses that may be necessary if the going concern basis was not appropriate for these financial statements. If the Corporation was unable to continue as a going concern, material write-downs to the carrying values of the Corporation’s assets, including the intangible asset, could be required.

(d)Functional and presentation currency:

These financial statements are presented in Canadian dollars, which is the Corporation’s functional currency.

(e)(d)Use of estimates and judgments:

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

Estimates are based on the management’s best knowledge of current events and actions that the Corporation 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.



86



ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014



2.Basis of preparation (continued):
(d)Use of estimates and judgments (continued):

Critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements include the following:

·Identification of triggering events indicating that the intangible assets might be impaired (Note 3 (e) (ii)).
·The use of the going concern basis of preparation of the financial statements. At the end of each reporting period, management assesses the basis of preparation of the financial statements. These financial statements have been prepared on a going concern basis in accordance with IFRS. The going concern basis of presentation assumes that the Corporation will continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business.(Note 2(c)).

Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year include the following:

··Measurement of derivative warrant liabilities (Note 21)(note 12) and stock-based compensation (Note 15).
·Determination of the recoverable amount of the Corporation’s cash generating unit (“CGU”) (Note 3 (e) (ii)(note 17).

(f)Use of estimates and judgments (continued):

Also, management uses judgment to determine which research and development (“R&D”) expenses qualify for R&D 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.Significant accounting policies:
3.Significant accounting policies:

The accounting policies set out below have been applied consistently to all yearsperiods presented in these financial statements.

(a)(a)Financial instruments:

A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party.

(i)Non-derivative financial assets:

The Corporation has the following non-derivative financial assets: cash, short-term investments including a restricted short-term investmentcash equivalents, marketable securities and receivables.

The Corporation initially recognizes loans and receivables ondetermines the date that they are originated.
The Corporation derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewardsclassification of ownership of the financial asset are transferred. Any interest in transferredits financial assets that is created or retained by the Corporation is recognized as a separate asset or liability.
at initial recognition. The subsequent measurement of financial assets depends on their classification.

Financial assets and liabilities are offset and the net amount presented in the statements of financial position when, and only when, the Corporation has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses.
Loans and receivables comprise

Cash, cash short-term investments including a restricted short-term investment,equivalents, marketable securities and receivables with maturities of less than one year.

year are classified at amortized cost as they meet both of the following conditions; they are held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cashflows that are solely payments of principal and interest on the principal amount outstanding. Cash and cash equivalents comprise cash balances and highly liquid investments purchased three months or less from maturity, unless the investment is held for investment purposes rather than meeting short-term cash commitments.  Bank overdrafts that are repayable on demand form an integral part of the Corporation’s cash management and are included as a component of cash and cash equivalents for the purpose of the statements of cash flows.maturity.

F-11

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

87


ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




3.

3.Significant accounting policies (continued):
(a)Financial instruments (continued):

(ii)Non-derivative financial liabilities:
The Corporation initially recognizes debt securities issued and subordinated liabilities on the date that they are originated.
The Corporation derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.

The Corporation has the following non-derivative financial liabilities: trade and other payables and payable to parent corporation.payables. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.

The Corporation derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.

(iii)Compound financial instruments:

Compound financial instruments are instruments that can be converted to share capital at the option of the holder, and the number of shares to be issued is fixed.

The unsecured convertible debentures are compound instruments and have been separated into liability and equity components. The liability component is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.

(iv)Share capital:

Common shares

Shares

Class A common sharesCommon Shares are classified as equity. Incremental costs directly attributable to the issue of common sharesCommon Shares and share options are recognized as a deduction from equity,share capital, net of any tax effects.

(iv)(v)Derivative financial instruments:

The Corporation has issued liability-classified derivatives over its own equity. Derivatives are recognized initially at fair value; attributable transaction costs are recognized in profit and loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and all changes in their fair value are recognized immediately in profit or loss.

loss as a component of finance expense (income).

(v)(vi)Other equity instruments:

Warrants, options and rights over the Corporation’s equity issued outside of share-based payment transactions that do not meet the definition of a liability instrument are recognized in equity.

(b)Inventories:
Inventories are measured at the lower of cost and net realizable value. The cost of raw materials is based on the weighted-average cost method. The cost of finished goods and work in progress includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition, as well as production overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
(c)Equipment:

(i)Recognition and measurement:

Equipment is measured at cost less accumulated depreciation and accumulated impairment losses.

losses, if any.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any otherasset, including all costs directly attributable toincurred in bringing the assetsasset to a working condition for their intended use, the costs of dismantlingits present location and removing the items and restoring the site on which they are located and borrowing costs on qualifying assets.

condition.

Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.

When parts of an equipment have different useful lives, they are accounted for as separate items (major components) of equipment.

Gains and losses on disposal of equipment are determined by comparing the proceeds from disposal with the carrying amount of equipment, and are recognized net within ''other income or expenses'' in profit or loss.

88

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




3.Significant accounting policies (continued):
(c)Equipment (continued):

(ii)Subsequent costs:

The cost of replacing a part of an equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Corporation, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of equipment are recognized in profit or loss as incurred.

F-12

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

3.Significant accounting policies (continued):

(iii)Depreciation:

Depreciation is recognized in profit or loss on either a straight-line basis or a declining basis over the estimated useful lives of each part of an item of equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

Items of equipment are depreciated from the date that they are available for use or, in respect of assets not yet in service, from the date they are ready for their intended use.

The estimated useful lives and rates for the current and comparative yearsperiods are as follows:

Assets Method Period/Rate
 Furniture and office equipment Declining balance 20%to30%
Computer equipment Declining balance  30% 
Laboratory equipment Declining balance  30% 
Production equipment (in years) Straight-line  10 
Assets
Method
Period/Rate
Furniture and office equipment
Declining balance
20% to 30%
Computer equipment
Straight-line
3 - 4 years
Laboratory equipment
Declining balance
30%


Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted prospectively if appropriate.

(c)(d)Intangible assets:

(i)Research and development:

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Corporation intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalized includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and borrowing costs on qualifying assets. Other development expenditures are recognized in profit or loss as incurred.

Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses. As of the reporting yearsperiods presented, the Corporation has not capitalized any development expenditure.

(ii)Other intangible assets:

Patent costs

Patents for technologies that are no longer in the research phase are recorded at cost. Patent costs include legal fees to obtain patents and patent application fees. When the technology is still in the research and development phase, those costs are expensed as incurred.

Licenses

Licenses that are acquired by the Corporation and have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses.

89

ACASTI PHARMA INC.
Notes to Financial Statements, continued
Years ended February 29, 2016 and February 28, 2015 and 2014




3.Significant accounting policies (continued):
(d)Intangible assets (continued):

(iii)Subsequent expenditure:

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditure on internally generated goodwill and brands, are recognized in profit or loss as incurred.

(iv)Amortization:

Amortization is calculated over the cost of the intangible asset less its residual value.

F-13

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

3.Significant accounting policies (continued):

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative yearsperiods are as follows:

Assets Period (in years)
Patents  20 
License 8to14

(d)
Assets
Period
Patents
20 years
License
8 to 14 years

(e)Impairment:

(i)Financial assets (including receivables):assets:
A financial asset not carried at fair value through profit or loss is assessed

The Corporation assesses at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that athe expected credit loss event has occurred after the initial recognitionfor calculating impairment of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Corporation on terms that the Corporation would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active marketand recognizes expected credit losses as loss allowances for a security.
The Corporation considers evidence of impairment for receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.
In assessing collective impairment, the Corporation uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.
An impairment loss in respect of a financial assetassets measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against receivables. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
90

ACASTI PHARMA INC.
Notes to Financial Statements, continued
Years ended February 29, 2016 and February 28, 2015 and 2014




3.Significant accounting policies (continued):
(e)Impairment (continued):
cost.

(ii)Non-financial assets:

The carrying amounts of the Corporation’s non-financial assets other than inventories and tax credits receivable are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit, or “CGU”).

The Corporation’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss.

Impairment losses recognized in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(e)(f)Employee benefits:

(i)Short-term employee benefits:

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Corporation has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

F-14

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

3.Significant accounting policies (continued):

(ii)Share-based payment transactions:

The grant date fair value of share-based payment awards granted to employees is recognized as an employee expense, with a corresponding increase in contributed surplus, over the period that the employees unconditionally become entitled to the awards. The grant date fair value takes into consideration market performance conditions when applicable. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date.

Share-based payment arrangements in which the Corporation receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Corporation.
Share-based payment transactions include those initiated by Neptune for the benefit of administrators, officers, employees and consultants that provide services to the consolidated group.  The Corporation is under no obligation to settle these arrangements and, therefore, also accounts for them as equity-settled share-based payment transactions.
The expense recognized by the Corporation under these arrangements corresponds to the estimated fraction of services that the grantees provide to the Corporation out of the total services they provide to the Neptune group of corporations.
91

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




3.Significant accounting policies (continued):
(f)Employee benefits (continued):

(iii)Termination benefits:

Termination benefits are recognized as an expense when the Corporation is committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Corporation has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting year, then they are discounted to their present value.

(f)(g)Provisions:

A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as a component of finance cost.

expense (income).

(i)Onerous contracts:

A provision for onerous contracts is recognized when the expected benefits to be derived by the Corporation from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Corporation recognizes any impairment loss on the assets associated with that contract.

(ii)Contingent liability:

A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not within the control of the Corporation; or a present obligation that arises from past events (and therefore exists), but is not recognized because it is not probable that a transfer or use of assets, provision of services or any other transfer of economic benefits will be required to settle the obligation; or the amount of the obligation cannot be estimated reliably.

(g)(h)Revenue:
Sale of goods:
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.
The timing of the transfers of risks and rewards varies depending on the individual terms of the contract of sale.
92

ACASTI PHARMA INC.
Notes to Financial Statements, continued
Years ended February 29, 2016 and February 28, 2015 and 2014




3.Significant accounting policies (continued):
(i)Government grants:

Government grants are recorded as a reduction of the related expense or cost of the asset acquired. Government grants are recognized when there is reasonable assurance that the Corporation has met the requirements of the approved grant program and there is reasonable assurance that the grant will be received.

Grants that compensate the Corporation for expenses incurred are recognized in profit or loss in reduction thereof on a systematic basis in the same years in which the expenses are recognized. Grants that compensate the Corporation for the cost of an asset are recognized in profit or loss on a systematic basis over the useful life of the asset.

(h)(j)Lease payments:

Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each year during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Contingent lease payments are accounted for in the year in which they are incurred.

(i)(k)Foreign currency:

Transactions in foreign currencies are translated into the functional currency at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslatedtranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Foreign currency differences arising on retranslationtranslation are recognized in profit or loss.

(l)F-15

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

3.Significant accounting policies (continued):

(j)Finance income and finance costs:expense:

Finance income comprises interest income on funds invested. Interest income is recognized as it accrues in profit or loss, using the effective interest method.

Finance costs comprise interest expense, accretion on borrowings, unwinding of the discount on provisions, and impairment losses recognized on financial assets.assets, transaction costs for issuance of derivative warrant liabilities and changes of fair value of derivative warrant liabilities. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest method.

Foreign currency gains and losses are reported on a net basis.

The Corporation recognizes interest income as a component of investing activities and interest expense as a component of financing activities in the statements of cash flows.

(k)(m)Income tax:

Income tax expense comprises current and deferred taxes. Current and deferred taxes are recognized in profit or loss except to the extent that they relate to items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

93

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




3.Significant accounting policies (continued):
(m)Income tax (continued):

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for temporary differences arising from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates, enacted or substantively enacted, that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(l)(n)Earnings per share:

The Corporation presents basic and diluted earnings per share (“EPS”) data for its Class A shares.shares (or “Common Shares”). Basic EPS is calculated by dividing the profit or loss attributable to the holders of Class A shares (Common Shares) of the Corporation by the weighted average number of common sharesCommon Shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to the holders of Class A shares (Common Shares) and the weighted average number of Class A shares (Common Shares) outstanding adjusted for own shares held, for the effects of all dilutive potential common shares,Common Shares, which comprise warrants, rights and share options granted to employees.

(m)(o)Segment reporting:

An operating segment is a component of the Corporation that engages in business activities from which it may earn revenues and incur expenses. The Corporation has one reportable operating segment: the development and commercialization of pharmaceutical applications of its licensed rights for cardiovascular diseases. The majority of the Corporation’s assets are located in Canada, and all the sales for the years ended February 29, 2016 and February 28, 2015 and 2014 were made to customerswhile one major production unit, with a carrying value of $1,831 (March 31, 2018 - $2,077), is located in the United States.

France.

(p)F-16

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

3.Significant accounting policies (continued):

(n)Change in accounting policy:

Adoption of new accounting standards

The accounting policies used in these annual financial statements are consistent with those applied by the Corporation in its March 31, 2018 annual financial statements except for the amendments to certain accounting standards which are relevant to the Corporation and were adopted by the Corporation as of April 1, 2018 as described below.

(i)Financial instruments:

IFRS 9, Financial Instruments, replaces IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 introduces a revised approach for the classification of financial assets based on how an entity manages financial assets and the characteristics of the contractual cash flows of the financial assets replacing the multiple rules in IAS 39. Most of the requirements in IAS 39 for classification and measurement of financial liabilities have been carried forward in IFRS 9. IFRS 9 also introduces a new hedge accounting model that is more closely aligned with risk-management activities and a new expected credit loss model for calculating impairment on financial assets replacing the incurred loss model in IAS 39. The Corporation adopted IFRS 9 as of April 1, 2018 and assessed the impact of the adoption on its financial statements, and determined there was no material impact. The Corporation does not apply hedge accounting.

(ii)Amendments to IFRS 2 – Classification and Measurement of Share-Based Payment Transactions:

On June 20, 2016, the IASB issued amendments to IFRS 2, Share-Based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments provide requirements on the accounting for: the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; share-based payment transactions with a net settlement feature for withholding tax obligations; and a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. The Corporation adopted the amendments to IFRS 2 as of April 1, 2018 and assessed the impact of the adoption of IFRS 2 on its financial statements, and determined that there was no material impact.

Future accounting change:

The following new standard,standards, and amendmentamendments to standards and interpretations, isare not yet effective for the yearperiod ended February 29, 2016,March 31, 2019, and hashave not been applied in preparing these financial statements.

Financial instruments:
On July 24, 2014,

New standards and interpretations not yet adopted:

(i)Leases – IFRS 16

IFRS 16, Leases (“IFRS 16”) In January 2016, the International Accounting Standards Board (IASB)IASB issued IFRS 16, a new standard that replaces IAS 17, Leases. IFRS 16 is a major revision of the final versionway in which companies account for leases and will no longer permit off balance sheet leases. Adoption of IFRS 9, Financial Instruments, which addresses the classification16 is mandatory and measurement of financial assets and liabilities, impairment and hedge accounting, replacing IAS 39, Financial Instruments: Recognition and Measurement.  IFRS 9 iswill be effective for annual periodsthe Corporation’s fiscal year beginning on or after JanuaryApril 1, 2018, with earlier adoption permitted.2019. The Corporation has not yet assessedis assessing the impact of adoption of IFRS 9,16, and does not intendcurrently there is only one lease that will be impacted by this new standard and the impact is expected to early adopt IFRS 9 in its financial statements.be minimal.

94

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




4.Trade and other receivables:
       
  February 29,  February 28, 
  2016  2015 
  
Trade receivables $-  $250,313 
Sales taxes receivable  181,742   134,573 
Government assistance  155,861   - 
  $337,603  $384,886 

The Corporation’s exposure to credit and currency risks related to trade and other receivables is presented in Note 19.

5.Related parties:

4.Receivables:

    March 31, 2019  March 31, 2018 
  Notes $  $ 
Sales tax receivables    618   470 
Government assistance and tax credits receivable 8  872   282 
Interest receivable    80   - 
Other receivables    16   7 
Total receivables    1,586   759 

F-17

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

5.Marketable Securities

The corporation holds various marketable securities with maturities greater than 90 days at the time of purchase as follows:

  March 31, 2019  March 31, 2018 
  $  $ 
       
Term deposit issued in US currency [US $20], earning interest at 2.23% and maturing on March 13, 2019  -   26 
Term deposits issued in US currency [US $2,020], earning interest at 2.50% and maturing on various dates from April 8, 2019 to March 12, 2020  2,696   - 
Treasury bills issued in CAD currencyearning interest at rates ranging from 1.83% to 1.90% and maturing on various dates from April 2, 2019 to July 25, 2019  9,196   - 
Total Marketable securities  11,892   26 
         
Current marketable securities  11,865   - 
Marketable securities  27   26 

6.Other Assets

During the year, the Corporation owned a reserve of krill oil in which amounts are expensed as it is being used. The following table summarizes information regarding activities of amounts of the krill oil usage in the R&D production processes and for NKPL66 manufacturing for the year (see note 7 (a)):

  March 31, 2019  March 31, 2018 
  $  $ 
Balance – beginning of year  659   - 
Purchased  68   970 
Used  (105)  (311)
Balance – end of year  622   659 
         
Current other asset  65   104 
Other asset  557   555 

7.Related parties:

Neptune Technologies (Neptune) Acasti’s former parent company, owned approximately 6.5% of the issued and outstanding Class A shares (Common Shares) of the Corporation as at March 31, 2019. Neptune’s ownership reduced below a control position, following Acasti’s U.S. public financing activities in December 2017 and January 2018.

(a)Administrative and research and development expenses:

The Corporation has significantly reduced its reliance on the support of Neptune for a portion of its general and administrative needs; however, it will continue to utilize their IT support for the near term. The Corporation was charged by Neptune for the purchase of research supplies and for certain costs incurred by Neptune for the benefit of the Corporation, and for royalties, as follows:

F-18

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

7.Related parties (continued):

        Thirteen-
months ended
  Month ended  Twelve-months
ended
 
  March 31,
2019
  March 31,
2018
  March 31,
2017
  March 31,
2017
  February 28,
2017
 
           (Unaudited)  (Unaudited) 
  $  $  $  $  $ 
                
Research and development expenses                    
Supplies and incremental costs  -   7   -   -   - 
Shared service agreement  -   20   60   1   59 
Total  -   27   60   1   59 
                     
General and administrative expenses                    
Supplies and incremental costs  211   239   293   16   277 
Shared service agreement  34   121   325   25   300 
Total  245   360   618   41   577 
Total related parties expenses  245   387   678   42   636 
          
  February 29,  February 28,  February 28, 
  2016  2015  2014 
          
Research and development expenses $368,991  $188,281  $23,866 
General and administrative expenses  485,486   225,980   127,504 
Royalties (note 20)  -   -   228,219 
  $854,470  $414,261  $379,589 

Where Neptune incurs specific incremental costs for the benefit of the Corporation, it charges those amounts directly. Costs that benefit more than one entityNeptune provides Acasti with the services of personnel for certain administrative work as part of a shared service agreement. The employees’ salaries and benefits are charged proportionally to the time allocation agreed upon within the shared service agreement. Effective September 30, 2017, the laboratory support, the corporate affairs and the public company reporting services previously provided by Neptune as part of the shared service agreement were discontinued. The Corporation is now incurring incremental costs and expects to do so in the future, partially offset by reduced shared service fees. The account payable to Neptune group are charged by allocating a fraction of costs incurred by Neptune thatamounted to $2 at March 31, 2019 and $44 at March 31, 2018, is commensurate to the estimated fraction of services or benefits received by each entity for those items.

non-interest bearing and has no specified maturity date. These charges do not represent all charges incurred by Neptune that may have benefited the Corporation. Also, these charges do not necessarily represent the cost that the Corporation would otherwise need to incur, should it not receive these services or benefits through the shared resources of Neptune.

Historically, Neptune or receive financinghas provided the Corporation with the krill oil needed to produce CaPre for Acasti’s clinical programs, including all of the krill oil projected to be needed for its Phase 3 clinical study program. However, Neptune discontinued its krill oil production and sold its krill oil inventory to Aker on August 7, 2017. In 2017 Acasti purchased a reserve of krill oil from Neptune.

Aker that will be used in the production of CaPre capsules for its Phase 3 clinical trials (see also note 6). The Corporation is currently evaluating alternative suppliers of krill oil. At March 31, 2019, a reserve of krill oil owned by the Corporation was physically stored at Neptune’s facility.

(b)(b)Interest revenue:

On January 7, 2016 Neptune announced the acquisition of Biodroga Nutraceuticals Inc. As part of this transaction, the Corporation has pledged an amount of 2$2 million dollars(“Committed Funds”) to partly guarantee the financing for the said transaction. Consequently, the corresponding amount shall be considered as a restricted short-term investment until released by the lender or reduced by Neptune.transaction (“Pledge Agreement”). Neptune hashad agreed to pay Acasti an annual fee on the Committed Funds outstanding at an annual rate of (i) 9% during the first six months and (ii) 11% for the remaining term of the Pledge Agreement. On September 20, 2016, Neptune fully released the pledged amount. The Corporation recognized interest revenue inof nil for the amount of $26,558 duringyears ended March 31, 2019 and 2018, $89 for the yearthirteen-month period ended March 31, 2017, nil (unaudited) for the month ended March 31, 2017, and $89 (unaudited) for the twelve-month period ended February 29, 2016.




95

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




5.Related parties (continued):
2017.

(c)F-19Revenue from royalties:
On January 7, 2016, the Company entered into an initial three year non-exclusive licencing agreement with the parent company, Neptune, for the distribution of the product Onemia® in the field of over-the-counter medicine and medical foods. As consideration, Neptune will pay a royalty rate of 17.5% on net sales. No revenue from royalties has been recognized during the year ended February 29, 2016.

(d)Payable

acasti pharma INC.

Notes to parent corporation:Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

Payable to parent corporation has no specified maturity date for payment or reimbursement and does not bear interest.

7.(e)Related parties (continued):

(c)Key management personnel compensation:

The key management personnel are the officers of the Corporation areand the members of the Board of Directors and certain officers.of the Corporation. They control in the aggregate less than 1% of the voting shares of the Corporation (2%(less than 1% in 20152018 and 2014)2% in 2017).

Key management personnel compensation includes the following for the years ended February 29, 2016March 31, 2019 and 2018, the thirteen-month and one-month periods ended March 31, 2017 and the twelve-month period ended February 28, 20152017.

        Thirteen-
months ended
  Month ended  Twelve-months
ended
 
  March 31,
2019
  March 31,
2018
  March 31,
2017
  March 31,
2017
  February 28,
2017
 
           (Unaudited)  (Unaudited) 
  $  $  $  $  $ 
                
Compensation  1,641   1,754   1,510   146   1,364 
Share-based compensation costs  940   826   619   78   541 
Total key management personnel compensation  2,581   2,580   2,129   224   1,905 

8.Government assistance:

        Thirteen-
months ended
  Month ended  Twelve-months
ended
 
  March 31,
2019
  March 31,
2018
  March 31,
2017
  March 31,
2017
  February 28,
2017
 
           (Unaudited)  (Unaudited) 
  $  $  $  $  $ 
Investment tax credit  588   409   103   8   95 
Government grant  7   -   227   37   190 
Total government assistance  595   409   330   45   285 

Government assistance is comprised of a government grant from the federal government and 2014:

          
  February 29,  February 28,  February 28, 
  2016  2015  2014 
          
Short-term benefits $687,740  $741,639  $680,319 
Severance  102,900   174,950   - 
Share-based compensation costs  120,295   1,339,361   2,439,254 
  $910,935  $2,255,950  $3,119,573 
6.Tax credits receivable:
Tax credits comprise research and development investment tax credits receivable from the 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.

Unrecognized federal tax credits may be used to reduce future income tax and expire as follows:

  $ 
2029  11 
2030  30 
2031  45 
2032  431 
2033  441 
2034  436 
2035  519 
2036  286 
2037  315 
2038  324 
2039  329 
   3,167 

F-20
     
2029
 
$
11,000
 
2030
  
30,000
 
2031
  
45,000
 
2032
  
431,000
 
2033
  
441,000
 
2034
  
436,000
 
2035
  
534,000
 
2036
  
318,000
 
  $2,246,000 

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

9.Equipment:

  Furniture and
office equipment
  Computer
equipment
  Laboratory
equipment
  Production
equipment
  Total 
  $  $  $  $  $ 
                
Cost:                    
Balance at February 29, 2016  59   3   336   -   398 
Additions for the twelve-month period (Unaudited)  -   8   186   2,484   2,678 
Balance at February 28, 2017 (Unaudited)  59   11   522   2,484   3,076 
Additions for the one-month period (Unaudited)  -   -   -   43   43 
Additions for the thirteen-month period  -   8   186   2,527   2,721 
Balance at March 31, 2017  59   11   522   2,527   3,119 
Additions  4   6   192   181   383 
Balance at March 31, 2018  63   17   714   2,708   3,502 
Additions  5   13   219   260   497 
Balance at March 31, 2019  68   30   933   2,968   3,999 
                     
Accumulated depreciation:                    
Balance at February 29, 2016  52   3   56   -   111 
Depreciation for the twelve-month period (Unaudited)  7   1   129   52   189 
Balance at February 28, 2017 (Unaudited)  59   4   185   52   300 
Depreciation for the one-month period (Unaudited)  -   -   11   21   32 
Depreciation for thirteen-month period  7   1   140   73   221 
Balance at March 31, 2017  59   4   196   73   332 
Depreciation  -   3   107   239   349 
Balance at March 31, 2018  59   7   303   312   681 
Depreciation  1   7   180   317   505 
Balance at March 31, 2019  60   14   483   629   1,186 
                     
Net carrying amounts:                    
March 31, 2018  4   10   411   2,396   2,821 
March 31, 2019  8   16   450   2,339   2,813 


7.Inventories:
For the year ended February 29, 2016, the cost of sales of $81,418 ($235,091 in 2015 and $291,853 in 2014) was comprised of inventory costs of $21,433 ($233,821 in 2015 and $284,410 in 2014) which consisted of raw materials, changes in work in progress and finished goods, an inventory write-down of $59,696 (nil in 2015 and 2014) and other costs of $289 ($1,270 in 2015 and $7,443 in 2014).
96

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




8.Equipment:
             
  Furniture and  Computer  Laboratory    
  office equipment  equipment  equipment  Total 
Cost:            
Balance at February 28, 2013 $58,706  $3,691  $-  $62,397 
Additions  -   -   25,000   25,000 
Balance at February 28, 2014  58,706   3,691   25,000   87,397 
Additions  -   -   34,650   34,650 
Balance at February 28, 2015  58,706   3,691   59,650   122,047 
Additions  -   -   276,008   276,008 
Balance at February 29, 2016  58,706   3,691   335,658   398,055 
                 
Accumulated depreciation:                
Balance at February 29, 2013  39,733   3,386   -   43,119 
Depreciation for the year  5,032   305   -   5,337 
Balance at February 28, 2014  44,765   3,691   -   48,456 
Depreciation for the year  3,654   -   -   3,654 
Balance at February 28, 2015  48,419   3,691   -   52,110 
Depreciation for the year  2,664   -   56,145   58,809 
Balance at February 28, 2016 $51,083  $3,691  $56,145  $110,919 
                 
Net carrying amounts:                
   February 28, 2015 $10,287  $-  $59,650  $69,937 
   February 29, 2016  7,623   -   279,513   287,136 

Depreciation expense for the yearsperiods end March 31, 2019 and 2018, the thirteen-month and one-month periods ended March 31, 2017 and twelve-month period ended February 29, 2016, February 28, 2015 and 20142017 has been recorded in “research and development expenses” in the statements of earnings and comprehensive loss.

F-21

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)


97

ACASTI PHARMA INC.
Notes
10.Intangible assets :

In December 2012, the Corporation entered into a prepayment agreement with Neptune pursuant to Financial Statements, continued

Years ended February 29, 2016which the Corporation exercised its option under the License Agreement to pay in advance all of the future royalties payable. The license allows the Corporation to exploit the intellectual property rights in order to develop novel active pharmaceutical ingredients (“APIs”) into commercial products for the prescription drugs market. The license Agreement, together with the Corporation own IP, allows the “freedom to operate” for CaPre, which is currently the Corporation’s only prescription drug candidate in development. The Corporation believes that upon the expiry of the last licensed Neptune patent in 2022, the Corporation’s expanding patent portfolio will cover CaPre, and February 28, 2015 and 2014that it will not require any license from Neptune to support the commercialization of CaPre.

  Patents  License  Total 
  $  $  $ 
          
Cost:            
Balance at February 29, 2016, February 28, 2017 (Unaudited) and March 31, 2017  362   24,330   24,692 
Additions  -   -   - 
Balance at March 31, 2018  362   24,330   24,692 
Additions  -   -   - 
Balance at March 31, 2019  362   24,330   24,692 
             
Accumulated amortization:            
Balance at February 29, 2016  362   9,425   9,787 
Amortization for the twelve-month period (Unaudited)  -   2,323   2,323 
Balance at February 28, 2017 (Unaudited)  362   11,748   12,110 
Amortization for the one-month period (Unaudited)  -   194   194 
Amortization for the thirteen-month period  -   2,517   2,517 
Balance at March 31, 2017  362   11,942   12,304 
Amortization for the year  -   2,323   2,323 
Balance at March 31, 2018  362   14,265   14,627 
Amortization for the year  -   2,322   2,322 
Balance at March 31, 2019  362   16,587   16,949 
             
Net carrying amounts:            
March 31, 2018  -   10,065   10,065 
March 31, 2019  -   7,743   7,743 




9.Intangible assets:
          
  Patents  License  Total 
Cost:         
February 28, 2013 $103,068  $9,200,000  $9,303,068 
Additions (note 20)  123,610   15,129,932   15,253,542 
Balance at February 28, 2014  226,678   24,329,932   24,556,610 
Additions (note 20)  51,270   -   51,270 
Balance at February 28, 2015  277,948   24,329,932   24,607,880 
Additions  83,645   -   83,645 
Balance at February 29, 2016  361,593   24,329,932   24,691,525 
             
Accumulated amortization:            
Balance at February 28, 2013  -   3,011,906   3,011,906 
Amortization for the year  906   1,767,594   1,768,500 
Balance at February 28, 2014  906   4,779,500   4,780,406 
Amortization for the year  8,741   2,322,828   2,331,569 
Balance at February 28, 2015  9,647   7,102,328   7,111,975 
Amortization for the year  12,840   2,322,828   2,335,668 
Impairment loss  339,106   -   339,106 
Balance at February 29, 2016 $361,593  $9,425,156  $9,786,749 
  
Net carrying amounts:            
   February 28, 2015 $268,301  $17,227,604  $17,495,905 
   February 29, 2016  -   14,904,776   14,904,776 




Amortization expense and impairment loss for the yearsperiod ended March 31, 2019 and 2018, the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 29, 2016, February 28, 2015 and 20142017 have been recorded in “research and development expenses” in the statements of earnings and comprehensive loss. During the year, the Corporation recorded an asset impairment loss of $339,106 relating to the patents. The Company determined that the recoverable amount of these costs was nil as it is no longer probable that sufficient future economic benefits will accumulate to the Company due to uncertainties related to project level revenues.

F-22

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

10.Trade and other payables:
11.Trade and other payables:

  March 31, 2019  March 31, 2018 
       
  $  $ 
       
Trade payables  4,064   3,420 
Accrued liabilities and other payables  10,319   2,479 
Employee salaries and benefits payable  1,054   754 
Legal settlement expected to be paid via common shares (note 25)  990   - 
Payable to Neptune  2   44 
Total trade and other payables  16,429   6,697 
       
  February 29,  February 28, 
  2016  2015 
Trade payables $375,203  $246,516 
Accrued liabilities and other payables  543,253   661,625 
Employee salaries and benefits payable  207,521   175,706 
  $1,125,977  $1,083,847 

The Corporation’s exposure to currency and liquidity risks related to trade and other payables is presented in Note 19.21.



98

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




11.Capital and other components of equity

12.Derivative warrant liabilities:

The warrants issued as part of the public offering of units composed of Common Share and Common Share purchase warrants on both May 9, 2018 and May 14, 2018 (see note 14) are derivative liabilities (“Derivative Warrant Liabilities”) given the warrant indenture contains certain contingent provisions that allow for cash settlement.

Warrants issued as part of a public offering of units composed of class A share (Common Share) and Common Share purchase warrants on both December 27, 2017 and December 3, 2013 are derivative liabilities (“Derivative warrant liabilities”) given the currency of the exercise price is different from the Corporation’s functional currency.

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 following tables:

  Warrant liabilities issued
May 2018
  Warrant liabilities issued
December 27, 2017
  Warrant liabilities issued
December 3, 20131
 
  March 31,
2019
  March 31,
2018
  March 31,
2019
  March 31,
2018
  March 31,
2019
  March 31,
2018
 
  $  $  $  $  $  $ 
Balance – beginning of period  -   -   6,405   -   21   209 
Issued during period  4,272   -   -   5,873   -   - 
Exercised during period  (722)  -   -   -   -   - 
Change in fair value of derivative warrant liabilities  4,696   -   1,612   532   (21)  (188)
Balance – end of period  8,246   -   8,017   6,405   -   21 
                         
Fair value per share issuable  0.81   -   0.82   0.65   -   0.01 

(1) In order to obtain one Common Share, 10 warrants must be exercised. All unexercised warrants expired on December 3, 2018.

F-23

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

12.Derivative warrant liabilities (continued):

The fair value of the derivative warrant liabilities was estimated using the Black-Scholes option pricing model and based on the following assumptions:

  Warrant liabilities issued
May 2018
  Warrant liabilities issued
December 27, 2017
  

Warrant liabilities issued

December 3, 2013 1

 
  March 31,
2019
  March 31,
2018
  March 31,
2019
  March 31,
2018
  March 31,
2019
  March 31,
2018
 
Exercise price $1.31   -   US $1.26   US $1.26   -   US $1.50 
Share price $1.35   -   US $1.02   US $1.02   -   US $1.02 
Risk-free interest  1.52%  -   2.23%  2.56%  -   2.19%
Estimated life (in years)  4.11   -   3.75   4.75   -   0.68 
Expected volatility  94.58%  -   107.57%  95.15%  -   133.86%

(1) In order to obtain one Common Share, 10 warrants must be exercised. All unexercised warrants expired on December 3, 2018.

13.Unsecured convertible debentures

Concurrent with the Public Offering described in note 14, on February 21, 2017, the Corporation issued $2,000 aggregate principal amount of unsecured convertible debentures maturing February 21, 2020 and contingent warrants to acquire up to 1,052,630 Common Shares (the “Private Placement”). The principal may be prepaid, in whole or in part, at any time and from time to time, in cash, at the sole discretion of the Corporation. The debentures are convertible into Common Shares at any time by the holder at a fixed price of $1.90 per Common Share except if the Corporation pays before the maturity, all or any portion of the convertible debentures. Should the Corporation pay all or any portion of the convertible debenture before maturity, then warrants become exercisable at $1.90 per Common Share for the equivalent convertible debenture amount prepaid. The contingent warrants will be exercisable for the remaining term of the convertible debt for the same price as the conversion options. The unsecured convertible debentures were issued at a discount of 3.5% to the principal amount, for aggregate gross proceeds of $1,930.

The convertible debentures provide the Corporation an accelerated conversion right whereby the Corporation may, at any time at least four months after the date of issuance of the convertible debentures, accelerate the conversion of the debentures to Common Shares in the event that the volume weighted average price of the Corporation’s Common Shares on the TSX Venture Exchange is equal to or exceeds $2.65, subject to customary adjustment provisions, during 20 consecutive trading days.

The interest to be paid on the convertible debentures under the terms of the agreement is 8% per annum, payable on a quarterly basis in cash or Common Shares of the Corporation or a combination thereof, commencing on March 31, 2017. The decision to pay the interest due in cash or shares is at the discretion of the Corporation and the number of Common Shares to be issued will be calculated at the current market price as at the close of business on the day before the interest payment is to be made. Payment in shares shall be at a floor price of $0.10 per share, with the difference between the amount payable and the amount computed at floor price payable in cash.

The proceeds of the Private Placement were split between the liability and the equity at the time of issuance of the Private Placement. Both the conversion option and contingent warrants are considered the equity component of the Private Placement. The fair value of the liability component was determined through a discounted cash flow analysis using a discount rate of 20% that was set based on a similar debt and maturity considering the Corporation’s credit risk excluding the conversion option and contingent warrants. The amount allocated to the equity component is the residual amount after deducting the fair value of the financial liability component from the fair value of the entire compound instrument. Subsequent to initial recognition, the liability is measured at amortized cost calculated using the effective interest rate method and will accrete up to the principal balance at maturity. The interest accretion is presented as a financial expense. The equity component is not re-measured. Transaction costs were allocated to the components in proportion to their initial carrying amounts. The portion allocated to the liability was recognized as a reduction of the debt whereas the portion allocated to other equity was recognized as a reduction to other equity.

F-24

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

13.Unsecured convertible debentures (continued):

The split between the liability and equity component portions of the Private Placement are summarized below:

  Liability component  Equity component  Total Private
Placement
 
  $  $  $ 
Balance at March 31, 2017  1,406   309   1,715 
Effective interest for the twelve-month period  366   -   366 
Interest payable during the period  (160)  -   (160)
Balance at March 31, 2018  1,612   309   1,921 
Effective interest during the period  365   -   365 
Interest payable during the period  (160)  -   (160)
Balance at March 31, 2019  1,817   309   2,126 

14.Capital and other components of equity

(a)Share capital:
All share information for current and comparative periods presented in these financial statements has been adjusted to give effect to the reverse split that occurred on October 15, 2015, as described below:
On October 15, 2015, the Corporation proceeded with the following transactions affecting its capital structure:
The Corporation consolidated all classes of its capital stock on a 10:1 basis.
The exercise price in effect in the case of incentive stock options, warrants and other securities convertible into Common Shares (the “Convertible Securities”) increased proportionally to reflect the Consolidation. The number of Common Shares subject to a right of purchase under such Convertible Securities also decreased proportionally to reflect the Consolidation, provided that no fractional Common Share shall be issued or otherwise provided theretofore upon the exercise of any Convertible Securities.

Authorized capital stock:

Unlimited number of shares:

ØClass A shares (Common Shares), voting (one vote per share), participating and without par value

ØClass B shares, voting (ten votes per share), non-participating, without par value and maximum annual non-cumulative dividend of 5% on the amount paid for said shares. Class B shares are convertible, at the holder’s discretion, into Class A shares (Common Shares), on a one-for-one basis, and Class B shares are redeemable at the holder’s discretion for $0.80 per share, subject to certain conditions. (1) There are non issued and outstanding.

ØClass C shares, non-voting, non-participating, without par value and maximum annual non-cumulative dividend of 5% on the amount paid for said shares. Class C shares are convertible, at the holder’s discretion, into Class A shares (Common Shares), on a one-for-one basis, and Class C shares are redeemable at the holder’s discretion for $0.20 per share, subject to certain conditions. (1)There are non issued and outstanding.

ØClass 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 for said shares. Class D and E shares are convertible, at the holder’s discretion, into Class A shares (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. (1)There are non issued and outstanding.
(1) None issued and outstanding

(b)Issuance of shares:“At-the-market” (“ATM”) sales agreement

On February 5, 2016, 50,00014, 2019, the Corporation entered into an “at-the-market” (“ATM”) sales agreement with an underwriter B. Riley FBR, Inc. (B. Riley), pursuant to which the Corporation’s common shares were issuedmay be sold from time to time for aggregate gross proceeds of up to US $30 million, with sales only being made on the settlementNASDAQ Stock Market. The common shares would be issued at market prices prevailing at the time of the sale and, as a liability. An amountresult, prices may vary between purchasers and during the period of $101,712, netdistribution. The ATM provides the Company with a flexible alternative for raising additional capital. The ATM has a 3 year term, and requires the company to pay a 3% fee to B. Riley when any sales are made. As at March 31, 2019, no securities have been issued in relation to the ATM. Costs incurred in connection to the ATM of share issuance costs of $788, was$179 have been recorded in share capital.

as deferred financing costs.

(c)Public offering:Offerings – October 2018:

On December 3, 2013,October 9, 2018, the Corporation closed a U.S. public offering of 16,600,000 Common Shares at a price of US$1.00 per share. In addition, the underwriters fully exercised their over-allotment option to purchase 2,490,000 additional Common Shares at the same public offering price. This offering generated gross proceeds of $24.7 million (US$19.1 million), which resulted in net proceeds to the Corporation of $22.6 million (US$17.4 million) and a total of 19,090,000 Common Shares issued.

F-25

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

14.Capital and other components of equity (continued):

On October 23, 2018, the Corporation closed a Canadian public offering of 18,750,000 Common Shares at a price of $1.28 per share. In addition, the underwriters fully exercised their over-allotment option to purchase 2,812,500 additional Common Shares at the same public offering price. This offering generated gross proceeds of $27.6 million, which resulted in net proceeds to the Corporation of approximately $25.4 million and a total of 21,562,500 Common Shares issued.

(d)Public Offering – May 2018:

On May 9, 2018 the Corporation closed a Canadian public offering issuing 1,840,0009,530,000 units of Acasti (“Units”) at a price of US$12.50$1.05 per Unit for gross proceeds of $24,492,700 (US$23,000,000).$10 million. The units issued consist of 9,530,000 Common Shares and 9,530,000 Warrants. Each unit consists of one class A share and ten common share purchase warrants (“Warrants”).  In order to obtain one Common share, 10 warrants must be exercised.  Each 10 WarrantsWarrant entitles the holder thereof to purchaseacquire one Class A shareCommon Share of the Corporation at an exercise price of US$15.00, subject to adjustment,$1.31 at any time until May 9, 2023.

On May 14, 2018, the underwriters exercised their over-allotment option by purchasing an additional 1,429,500 units at a price of $1.05 per Unit, for additional gross proceeds of $1.5 million. The units issued consist of 1,429,500 Common Shares and 1,429,500 warrants. Each Warrant entitles the holder thereof to acquire one Common Share of the Corporation at an exercise price of $1.31 at any time until May 9, 2023.

The warrant component of these Units are Derivative Warrant Liabilities for accounting purposes due to the warrant agreement, which contains certain contingent provisions that allow for cash settlement (note 12). The proceeds of the offering are required to be split between the Derivative Warrant Liabilities and the equity-classified Common shares at the time of issuance of the Units. The fair value of the Derivative Warrant Liabilities at the time of issuance was determined to be $4.3 million and the residual of the proceeds of $6.2 million were allocated to the Common Shares. Issuance costs related to this transaction totaled approximately $1.8 million and have been allocated between the Derivative Warrant Liabilities and Common shares based on relative value. Resulting from this allocation, $0.7 million has been allocated to the Derivative Warrant Liability and is recognized in finance costs in the Statements of Earnings and Comprehensive Loss, whereas the remaining portion of $1.1 million in issuance costs was allocated to the Common Shares and recognized as a reduction to share capital, in the Statements of Financial Position.

The fair value of the public offering warrants at issuance was estimated using to the Black-Scholes option pricing model and was based on the following weighted average assumptions:

  May 2018 
Exercise price $1.31 
Share price $0.82 
Risk-free interest  2.21%
Estimated life (in years)  5 
Expected volatility  87.40%

The weighted average fair value of the public offering warrants issued in May 2018 was determined to be $0.39 per warrant. Changes in the subsequent measurement of fair value of the Warrants are recognized in financial expenses.

As part of the transaction, the Corporation also issued broker warrants to purchase up to 547,975 Common Shares. Each broker warrant entitles the holder thereof to acquire one Common Share of the Corporation at an exercise price of $1.05, at any time until May 9, 2023. The broker warrants are considered to be compensation to non-employees under IFRS 2, as stock-based compensation, and are thus accounted for at fair value at issuance date and not subsequently revalued. To determine the fair value of these broker warrants, a Black-Scholes options pricing model was used based on the following assumptions:

  May 2018 
Exercise price $1.05 
Share price $0.81 
Risk-free interest  2.20%
Estimated life (in years)  5 
Expected volatility  87.40%

The total value associated with the broker warrants amounted to $283 and was recorded in contributed surplus.

F-26

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

14.Capital and Other Components of Equity (continued):

(e)Public offering – December 27, 2017

On December 3, 2018.

27, 2017, the Corporation closed a U.S. public offering issuing 9,900,990 units of Acasti at a price of US$1.01 per Unit for gross proceeds of $12.6 million (US$10 million). The units issued consist of 9,900,990 Common Shares and 8,910,891 warrants with the right to purchase one Common Share of Acasti. As part of this closing, the underwriters’ also partially exercised for nil consideration the over-allotment option for warrants, which were issued for a right to purchase 892,044 Common Shares at an exercise price of US$1.26.

The Warrants forming part of the Units are derivative liabilities (“Derivative warrant liabilities”)Warrant Liabilities for accounting purposes due to the currency of the exercise price being different from the Corporation’s functional currency. The proceeds of the offering are required to be split between the Derivative warrant liabilitiesWarrant Liabilities and the equity-classified Class A shareCommon Share at the time of issuance of the Units. The fair value of the Derivative warrant liabilitiesWarrant Liabilities at the time of issuance was determined to be $10,674,045$5.9 million and the residual of the proceeds was allocated to the Class A share.Common Shares. Total issueissuance costs related to this transaction amounted to $2,539,500.totaled approximately $2.5 million. The issueissuance costs have been allocated between the Warrants and Class A sharesCommon Shares based on relative value. The portion allocated to the Warrants was recognized in finance costs in the Statements of Earnings and Comprehensive Loss, whereas the portion allocated to Class A sharesCommon Shares was recognized as a reduction to share capital.



99

ACASTI PHARMA INC.
Notescapital, in the Statements of Financial Position.

The fair value of the public offering Warrants at issuance was estimated according to Financial Statements, continued


Years ended February 29, 2016the Black-Scholes option pricing model and February 28, 2015 and 2014




11.Capital and other components of equity (continued):
based on the following assumptions:

(d)Private placement 2014:December 27,
2017
Exercise priceUS $1.26
Share priceUS $0.97
Risk-free interest2.22%
Estimated life (in years)5
Expected volatility93.52%

The fair value of the public offering Warrants issued was determined to be $0.60 per warrant as at December 27, 2017. Changes in the fair value of the Warrants are recognized in finance income or expenses.

As part of the transaction, the Corporation also issued broker warrants to purchase up to 495,050 Common Shares. Each broker warrant entitles the holder thereof to acquire one Common Share of the Corporation at an exercise price of US$1.2625, at any time until December 27, 2022. The broker warrants are considered for compensation to non-employees under IFRS 2, stock-based compensation, and are accounted for at fair value. To determine the fair value of the Broker Warrants, a Black-Scholes option pricing model was used based on the following assumptions:

December 27,
2017
Exercise priceUS $1.2625
Share priceUS $0.97
Risk-free interest2.22%
Estimated life (in years)5
Expected volatility93.52%

The total cost associated with the Broker Warrants amounted to $406 and was recorded in contributed surplus.

F-27

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

On

14.Capital and Other Components of Equity (continued):

(f)Public offering - February 21, 2017:

Concurrent with the private placement described in Note 12, on February 7, 2014,21, 2017, the Corporation closed a private placement financingpublic offering (“Public Offering”) issuing 3,930,518 units of Acasti (“Units”) at a price of $1.45 per Unit for gross proceeds of $2,150,000 from The Fiera Capital QSSO II Investment Fund Inc. for 161,654 Units at $13.30 per Unit.$5,699. Each Unit consists of one Classclass A share (Common Share) and one Common Sharehalf of one class A or common share purchase warrant (“Warrant”) of Acasti.warrant. Each Warrantwhole warrant entitles the holder thereof to purchase one Class Acommon share at an exercise price of $16.00, subject to adjustment,$2.15 per common share, at any time until December 3, 2018.February 21, 2022. The Class A sharesUnits issued as part of the public offering are considered equity instruments. The transaction costs associated with the Public Offering amounted to $1,190. The proceeds and Warrants are equity-classified for accounting purposes.  The proceedstransaction costs were allocated to share capital.

As part of the transaction, the Corporation also issued broker warrants (the “Broker Warrants”) to purchase up to 234,992 Common Shares. Each Broker Warrant entitles the holder thereof to acquire one Common Share Capital.  Total issueof the Corporation at an exercise price of $2.15 per common share, at any time until February 21, 2018. The broker warrants are considered for compensation to non-employees under IFRS 2, stock-based compensation, and are accounted for at fair value through contributed surplus. To determine the fair value of the Broker Warrants, the Black-Scholes pricing model was used. The total costs associated with the Broker Warrants amounted to $144 and were allocated to share capital.

The warrants issued as part of the Units of the Public Offering and the broker warrants include an “Acceleration Right”, related to this transactionthe Corporation’s right to accelerate the expiry date of the warrants. The Acceleration Right clause means the right of the Corporation to accelerate the expiry date to a date that is not less than 30 days following delivery of the acceleration notice if, at any time at least four months after the effective date, the volume weighted average trading price of the common shares equals or exceeds $2.65 for a period of 20 consecutive trading days on the TSXV.

Furthermore, as part of the February 2017 Public Offering and convertible debt transactions, a total of 60,000 Common Shares were issued as equity settled share-based payments for services received from an employee of the previous parent at a price of $1.57 per share for a total cost of $94. The equity settled share-based payment costs have been allocated to share capital for a cost that amounted to $82,395$85 and were recognizedto debt for a cost that amounted to $9 based on relative value.

The value of the broker warrants was estimated using a Black-Scholes option pricing model and based on the following assumptions:

  February 21, 2017 
    
Exercise price $2.15 
Share price $1.70 
Dividend  - 
Risk-free interest  0.79%
Estimated life (in years)  1.00 
Expected volatility  112.09%

The total cost associated with the Broker Warrants amounted to $144 and was recorded as a reductioncontributed surplus.

(g)Issuance of shares:

The following table summarizes the shares issued to settle the payment of accrued interest on the unsecured convertible debentures with the corresponding amount recorded to share capital.

 

Accrued interest as at

 

 

Share issuance date

 

 

Number of shares

  

Amount

$

 
         
March 31, 2017 April 7, 2017  9,496   17 
June 30, 2017 August 15, 2017  23,885   40 
September 30, 2017 December 27, 2017  22,783   40 
December 31, 2017 March 27, 2018  33,605   40 
March 31, 2018 June 6, 2018  30,348   40 
June 30, 2018 August 21, 2018  51,807   40 
September 30, 2018 October 31, 2018  23,723   40 
     195,647   257 
(e)F-28

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

14.Capital and other components of equity (continued):

(h)Warrants:

The warrants of the Corporation are composed of the following as at February 29, 2016March 31, 2019, March 31, 2018, March 31, 2017 and February 28, 2015 and 2014:2017:

  March 31, 2019  March 31, 2018  March 31, 2017  

February 28, 2017

(Unaudited)

 
  Number
outstanding
  

 

Amount

  Number
outstanding
  

 

Amount

  Number
outstanding
  

 

Amount

  Number
outstanding
  

 

Amount

 
     $     $     $     $ 
Liability                                
May 2018 Public offering Warrants 2018 (i)  10,188,100   8,246   -   -   -   -   -   - 
Series December 2017 US Public offering Warrants 2017 (ii)  9,801,861   8,017   9,802,935   6,405   -   -   -   - 
Series 8 Public offering Warrants December 2013 (iii)  -   -   18,400,000   21   18,400,000   209   18,400,000   187 
   19,989,961   16,263   28,202,935   6,426   18,400,000   209   18,400,000   187 
Equity                                
Public offering warrants                                
Public offering broker warrants May 2018 (iv)  547,975   283   -   -   -   -   -   - 
Public offering U.S. broker warrants December 2017 (v)  495,050   406   495,050   406   -   -   -   - 
Public offering warrants February 2017 (vi)  1,904,034   -   1,904,034   -   1,965,259   -   1,965,259   - 
Private Placement- contingent warrants                                
2017 unsecured convertible debenture conversion option and contingent warrants (vii)  1,052,630   309   1,052,630   309   1,052,630   309   1,052,630   309 
Series 9 Private Placement warrants 2013 (viii)  -   -   161,654   -   161,654   -   161,654   - 
Series 2017 BW Broker warrants (ix)  -   -   -   -   234,992   144   234,992   144 
   3,999,689   998   3,613,368   715   3,414,535   453   3,414,535   453 

(i)Warrant to acquire one Common Share of the Corporation at an exercise price of $1.31, expiring on May 9, 2023.
(ii)Warrant to acquire one Common Share of the Corporation at an exercise price of US$1.26, expiring on December 27, 2022.
(iii)In order to obtain one Common Share of the Corporation at an exercise price of US$15.00, 10 warrants must be exercised. Warrants expired on December 3, 2018.
(iv)Warrant to acquire one Common Share of the Corporation at an exercise price of $1.05, expiring on May 9, 2023.
(v)Warrant to acquire one Common Share of the Corporation at an exercise price of US$1.2625, expiring on December 27, 2022.
(vi)Warrant to acquire one Common Share of the Corporation at an exercise price of $2.15, expiring on February 21, 2022.
(vii)Warrant to acquire one Common Share of the Corporation at an exercise price of $1.90 expiring on February 21, 2020, net of deferred tax expense of $129. Exercisable only for any portion of or all debentures paid by the Corporation prior to maturity.
(viii)Warrant to acquire one Common Share of the Corporation at an exercise price of $13.30, expired on December 3, 2018.
(ix)Warrant to acquire one Common Share of the Corporation at an exercise price of 2.15 expiring on February 21, 2018. 117,496 warrants amounted to $71 were exercised in November 2017 and 117,496 warrants expired on February 21, 2018

F-29

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

                   
     February 29,     February 28,     February 28, 
     2016     2015     2014 
  
  Number     Number     Number    
  outstanding  Amount  outstanding  Amount  outstanding  Amount 
  
Liability                  
Series 8 Public offering                  
warrants 2014 ((c) and Note 21)  18,400,000  $156,377   18,400,000  $2,357,408   18,400,000  $11,181,475 
                         
   18,400,000  $156,377   18,400,000  $2,357,408   18,400,000  $11,181,475 
                         
                         
Equity                        
Private placement warrants                        
Series 9 Private placement                        
warrants 2014 (d)  161,654  $-   161,654  $-   161,654  $- 
Series 6 warrants - expired                        
unexercised February 10, 2015  -   -   -   -   37,500   306,288 
Series 7 warrants - expired                        
unexercised February 10, 2015  -   -   -   -   37,500   100,399 
                         
   161,654  $-   161,654  $-   236,654  $406,687 

12.Change in classification:

14.Capital and other components of equity (continued):

(h)Warrants (continued):

Warrants exercise:

During the current year 771,400 warrants offered as part of the Corporation modifiedMay 2018 public offering were exercised at an exercise price of $1.31 per Common Share of the StatementsCompany, resulting in $1.0 million of Earnings and Comprehensive Loss classification on amortization expensecash proceeds. In addition, 4,455 warrants offered as part of equipment and intangible assetsthe December 2017 U.S. public offering were exercised in a cashless manner to acquire 1,074 Common Shares of the Company.  A total of 772,474 Common Shares were issued as wella result of 775,855 warrants being exercised. During the year ended December 31, 2017, 178,721 warrants offered as certain legal fees from “general and administrative expenses” to “research and development expenses” to reflect more appropriatelypart of the wayFebruary 2017 public offering were exercised at an exercise price of $2.15 per Common Share of the Company, resulting in which economic benefits are derived from the use$384 of these expenses. Comparative amounts in the Statements of Earnings and Comprehensive Loss were reclassified for consistency, which resulted in $2,335,224 and $1,762,116 being reclassed in 2015 and 2014, respectively, from “general and administrative expenses” to “research and development expenses.”cash proceeds.

15.Personnel expenses:

        Thirteen-
months ended
  Month ended  Twelve-month
period ended
 
  March 31,
2019
  March 31,
2018
  March 31,
2017
  March 31,
2017
(Unaudited)
  February 28,
2017
(Unaudited)
 
  $  $  $  $  $ 
Salaries and other short-term employee benefits  4,144   3,281   2,491   214   2,277 
Share-based compensation costs  1,041   929   674   86   588 
Total personnel expenses  5,185   4,210   3,165   300   2,865 

16.Financial expenses:

        Thirteen-
months ended
  Month ended  Twelve-month
period ended
 
  March 31,
2019
  March 31,
2018
  March 31,
2017
  March 31,
2017
(Unaudited)
  February 28,
2017
(Unaudited)
 
  $  $  $  $  $ 
                
Interest income  475   72   125   6   119 
Foreign exchange gain (loss)  279   (32)  (180)  (3)  (177)
Interest payable on convertible debenture  (160)  (160)  (17)  (14)  (3)
Accretion of interest on convertible debenture  (205)  (206)  (22)  (17)  (5)
Transaction costs related to derivative warrant liabilities  (653)  (1,134)  -   -   - 
Change in fair value of warrant liabilities  (6,287)  (344)  (53)  (22)  (31)
Other charges  -   (4)  (19)  (1)  (18)
                     
Financial expenses  (6,551)  (1,808)  (166)  (51)  (115)

F-30

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

Since the amounts are reclassifications within the operating activities in the Statement of Earnings and Comprehensive Loss, this reclassification did not have any effect on the statements of financial position.

100

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




13.Personnel expenses:
           
    February 29,  February 28,  February 28, 
   2016  2015  2014 
  
Salaries and other short-term employee benefits $1,901,742  $1,553,687  $1,417,891 
Share-based compensation  308,607   1,553,543   3,423,243 
Severance  210,149   171,364   - 
    $2,420,498  $3,278,594  $4,841,134 
              
14. Finance income and finance costs:
            
              
(a)Finance income:            
              
    February 29,  February 28,  February 28, 
    2016   2015   2014 
              
Interest income $73,495  $87,009  $32,256 
Foreign exchange gain  1,022,422   1,832,721   781,586 
    $1,095,917  $1,919,730  $813,842 
              
(b)Finance costs:            
              
    February 29,  February 28,  February 28, 
    2016   2015   2014 
  
Interest charges $(2,261) (4,060) $(975)
Warrants issue costs (Note 11 (b))  -   -   (1,117,380)
    $(2,261) (4,060) (1,118,355)
15.Share-based payments:
17.Share-based payments:

At February 29, 2016,March 31, 2019, the Corporation has the following share-based payment arrangements:

arrangement:

(a)(a)Corporation stock option plan:

The Corporation has establishedin place a stock option plan for directors, officers, employees and consultants of the Corporation.Corporation (“Stock Option Plan”). An amendment of the Plan was approved by shareholders on August 28, 2018. The amendment provides for an increase to the existing limits for Common Shares reserved for issuance under the Stock Option Plan as well as certain changes to the minimum vesting period applicable to options granted to directors and employees under the Stock Option Plan. The plan providescontinues to provide for the granting of options to purchase Acasti Class A shares.Common Shares. The exercise price of the stock options granted under this amended plan is not lower than the closing price of the shares listed on the eveTSXV at the close of markets the day preceding the grant. Under this plan, theThe maximum number of optionsCommon Shares that canmay be issued is 10%upon exercise of options granted under the numberamended Stock Option Plan was increased from 2,940,511, representing 20% of Acasti Class A sharesthe issued and outstanding from timeCommon Shares of the Company as of March 31, 2017, to time.5,494,209 representing 15% of the issued and outstanding Common Shares of the Company as of June 27, 2018. The terms and conditions for acquiring and exercising options are set by the Corporation’s Board of Directors, subject among others, to the following limitations: the term of the options cannot exceed ten years and every stock option(i) all options granted under the stock option planto a director will be subject to conditions no less restrictive than a minimum vesting period of 18 months, a gradual and equal acquisition of vesting rights at leastvested evenly on a quarterly basis.  basis over a period of at least eighteen (18) 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 shares issued to a single personany one consultant within any twelve-month period cannot exceed 5%2% of the Corporation’s total issued and outstanding shares with(on a non-diluted basis). The Corporation is not authorized to grant within any twelve-month period such number of options under the maximum beingstock option plan that could result in a number of Common Shares issuable pursuant to options granted to (a) related persons exceeding 2% forof the Corporation’s issued and outstanding Common Shares (on a non-diluted basis) on the date an option is granted, or (b) any one consultant.


101

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016eligible person in a twelve-month period exceeding 2% of the Corporation’s issued and February 28, 2015 and 2014outstanding Common Shares (on a non-diluted basis) on the date an option is granted.

The following tables summarize information about activities within the stock option plan:

       
  March 31, 2019  March 31, 2018 
  Weighted average
exercise price
  Number of
options
  Weighted average
exercise price
  Number of
options
 
  $     $    
Outstanding at beginning of year  1.81   2,284,388   2.58   1,424,788 
Granted  0.77   2,173,523   1.75   1,121,500 
Exercised  0.77   (4,167)  -   - 
Forfeited  1.84   (407,067)  1.89   (199,800)
Expired  -   -   18.06   (62,100)
Outstanding at end of year  1.25   4,046,677   1.81   2,284,388 
                 
Exercisable at end of year  1.56   1,613,200   1.92   591,113 


  Thirteen-month period
ended
March 31, 2017
  Month ended
March 31, 2017
  Twelve-month period
ended
February 28, 2017
 
  Weighted
average
exercise price
  Number
of options
  Weighted
average
exercise price
  Number
of options
  Weighted
average
exercise price
  Number
of options
 
  $     $     $    
Outstanding at beginning of period  13.52   454,151   2.59   1,427,288   13.52   454,151 
Granted  1.69   1,300,400   -   -   1.69   1,300,400 
Forfeited  13.27   (190,138)  11.50   (2,500)  13.29   (187,638)
Expired  15.38   (139,625)  -   -   15.38   (139,625)
Outstanding at end of period  2.58   1,424,788   2.58   1,424,788   2.59   1,427,288 
                         
Exercisable at end of period  6.44   238,482   6.44   238,482   6.49   240,982 



15.Share-based payments (continued):

F-31

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

17.Share-based payments (continued):

(a)Corporation stock option plan (continued):

        Thirteen-month
period ended
  Twelve-month
Period ended
 
  March 31,
2019
  March 31,
2018
  March 31,
2017
  February 28, 2017
(Unaudited)
 
Weighted average fair value of the options granted to employees and directors of the Corporation $0.51  $1.22  $1.40  $1.40 
Activities within

There were no options granted during the month ended March 31, 2017 and no options granted to consultants during the thirteen-month period ended March 31, 2017. 4,167 options were exercised during the period ended March 31, 2019 (nil for period ended March 31, 2018 and nil for the thirteen-month period ended March 31, 2017). Stock-based compensation recognized under this plan are detailed as follows:

       
  Year ended  Year ended 
   February 29, 2016   February 28, 2015 
  Weighted average  Number of  Weighted average  Number or 
  exercise price  options  exercise price  options 
  
Outstanding at beginning of year $15.33   429,625  $15.72   491,100 
Granted  4.65   109,188   9.51   51,250 
Exercised  2.50   (250)  2.50   (20,000)
Forfeited  9.40   (66,912)  14.90   (22,750)
Expired  18.57   (17,500)  18.00   (10,000)
Cancelled (note 20)  -   -   17.50   (60,000)
Outstanding at end of year $13.52   454,151  $15.33   429,625 
  
Exercisable at end of year $15.28   375,563  $15.48   332,039 
  
  
  
  
          Year ended 
           February 28, 2014 
         Weighted average  Number or 
          exercise price  options 
  
Outstanding at beginning of year         $15.51   521,625 
Granted          22.31   29,750 
Exercised          13.74   (29,650)
Forfeited          20.56   (30,625)
Outstanding at end of year         $15.72   491,100 
  
Exercisable at end of year         $13.86   341,217 
  
  
  
  
     2016 
  Options outstanding  Exercisable options 
  Weighted      Weighed     
  remaining  Number of  average  Number of 
  contractual life  options  exercise price  options 
Exercise price outstanding  outstanding  $   exercisable 
  
  
$2.50 - $4.65  4.59   95,800   2.50   43,000 
$4.66 - $13.00  3.31   54,726   10.27   28,938 
$13.01 - $14.50  0.30   150,875   14.00   150,875 
$14.51 - $21.50  1.07   139,750   20.92   139,750 
$21.51 - $27.50  0.19   13,000   22.79   13,000 
   1.80   454,151   15.28   375,563 
102

ACASTI PHARMA INC.
Notesfor the period ended March 31, 2019 was $1,041 (March 31, 2018 amounted to Financial Statements, continued

Years$929, thirteen-month and one-month periods ended March 31, 2017 amounted to $674 and $86 (unaudited), respectively and amounted to $588 (unaudited) for the twelve-month period ended February 29, 201628, 2017).

The fair value of options granted was estimated using the Black-Scholes option pricing model, resulting in the following weighted average assumptions for options granted during the periods ended:

        Thirteen-month
period ended
  Twelve-month
Period ended
 
  March 31, 2019  March 31, 2018  March 31, 2017  February 28, 2017
(Unaudited)
 
             
Exercise price $0.77  $1.75  $1.69  $1.69 
Share price $0.73  $1.75  $1.69  $1.69 
Dividend  -   -   -   - 
Risk-free interest  2.10%  1.21%  0.87%  0.87%
Estimated life (in years)  5.78   5.89   4.94   4.94 
Expected volatility  85.35   82.4%  123.5%  123.5%

The expected life of the stock options is based on historical data and February 28, 2015current expectation and 2014is 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.

The following tables summarize the status of the outstanding and exercisable options of the Corporation:

    March 31, 2019 
    Options outstanding  Exercisable options 
Exercise price Weighted remaining
contractual life
outstanding
  Number of options
outstanding
  Weighted average
exercise price
$
  Number of options
exercisable
 
               
$0.77-$0.77  9.26   1,898,523  $0.77   348,197 
$0.78-$1.58  5.86   775,000  $1.50   518,750 
$1.59-$1.71  7.90   273,333  $1.65   233,333 
$1.72-$1.88  8.21   790,833  $1.77   292,500 
$1.89-$6.50  3.97   308,988  $2.57   220,420 
     7.91   4,046,677  $1.56   1,613,200 




15.Share-based payments (continued):

F-32

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

17.Share-based payments (continued):

(a)Corporation stock option plan (continued):

Share-based payment transactions and broker warrants:

The fair value of options granted has been estimated according toshare-based payment transaction is measured using the Black-Scholes option pricing modelmodel. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility), weighted average expected life of the instruments (based on historical experience and based ongeneral option holder behaviour unless no entity-specific information exists in which case the weighted average of the following assumptions for options granted duringvesting and contractual periods is used), and the year:

          
  2016  2015  2014 
          
Exercise price $4.65  $9.51  $22.31 
Share price $4.39  $9.20  $18.79 
Dividend  -   -   - 
Risk-free interest  0.66%  1.14%  1.11%
Estimated life 4.20 years  3.00 years  2.49 years 
Expected volatility  65.63%  60.34%  64.81%
The weighted average ofrisk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions, if any, are not taken into account in determining fair value of the options granted to employees during the year ended February 29, 2016 is $2.14 (2015 - $3.52 and 2014 - $6.69).  There were no options granted to non-employees during the years ended February 29, 2016, 2015 and 2014.

The weighted average share price at the date of exercise for share options exercised during the year ended February 29, 2016 was $4.20 (2015 - $9.20 and 2014 - $37.70).  Stock-based compensation recognized under this plan amounted to $233,871 for the year ended February 29, 2016 (2015 - $525,826 and 2014 - $501,479).
value.

(b)(b)Corporation equity incentive plan:

The Corporation established an equity incentive plan for employees, directors and consultants of the group.consultants. The plan provides for the issuance of restricted share units (“RSU”), performance share units, restricted shares, deferred share units and other share-based awards, subject to restricted conditions as may be determined by the Board of Directors. Upon fulfillmentThere are no such awards outstanding as of March 31, 2019 and March 31, 2018, and no stock-based compensation was recognized for the period ended March 31, 2019 and March 31, 2018 (nil for the one-month and thirteen-month periods ended March 31, 2017).

18.Loss per share:

Diluted loss per share was the same amount as basic loss per share, as the effect of options, RSUs and warrants would have been anti-dilutive, because the Corporation incurred losses in each of the restricted conditions, asperiods presented. All outstanding options, RSUs and warrants could potentially be dilutive in the case may be, the plan provides for settlement of the outstanding awards through shares.future.

The Corporation’s RSUs vest gradually over time with an expiry date of no later than January 15, 2017, based on a specific rate, depending on each holder’s category.  The fair value of the APO RSUs is determined to be the share price at date of grant and is recognized as stock-based compensation, through contributed surplus, over the vesting period.  The fair value of the RSUs granted was $28.90 per unit.
Activities within the plan are detailed as follows:
             
   2016   2015   2014 
RSUs outstanding at beginning of year  18,398   77,494   - 
Granted  -   -   106,000 
Released  (17,348)  (38,182)  (25,931)
Forfeited  (1,050)  (1,831)  (2,575)
Cancelled (note 20)  -   (19,083)  - 
RSUs outstanding at end of year  -   18,398   77,494 
Stock-based compensation recognized under this plan amounted to $64,387 for the year ended February 29, 2016 (2015 – $466,370 and 2014 -$745,556).
103

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




15.Share-based payments (continued):

(c)Neptune stock-based compensation plan:
Neptune maintains various stock-based compensation plans for the benefit of directors, officers, employees and consultants that provide services to its consolidated group, including the Corporation.  The Corporation records as stock-based compensation expense a portion of the expense being recorded by Neptune that is commensurate to the fraction of overall services that the grantees provide directly to the Corporation.  Stock-based compensation recognized under these plans amounted to $10,349 for the year ended February 29, 2016 (2015 - $561,347 and 2014 - $2,194,684).
16.Loss per share:
19.Diluted loss per share was the same amount as basic loss per share, as the effect of options, RSUs and warrants would have been anti-dilutive, because the Corporation incurred losses in each of the years presented. All outstanding options, RSUs and warrants could potentially be dilutive in the future.Supplemental cash flow disclosure:
17. Supplemental cash flow disclosure:

(a)(a)Changes in non-cash operatingworking capital items:

        Thirteen-
months ended
  Month ended  Twelve-months
ended
 
  March 31,
2019
  March 31,
2018
  March 31,
2017
  March 31,
2017
(Unaudited)
  February 28,
2017
(Unaudited)
 
     $  $  $  $ 
                
Receivables  (738)  (553)  193   (40)  233 
Prepaid expenses  (709)  (103)  247   (33)  280 
Other Assets  37   (659)  -   -   - 
Deferred financing costs  (179)  -   -   -   - 
Trade and other payables  9,679   4,898   352   (255)  607 
Total changes in working capital items  8,090   3,583   792   (328)  1,120 


          
  February 29,  February 28,  February 28, 
  2016  2015  2014 
  
Trade and other receivables $47,283  $534,485  $(468,533)
Receivables from corporation under common control  49,658   47,140   (47,140)
Tax credits receivable  358,782   (285,872)  201,381 
Inventories  87,370   174,061   (39,306)
Prepaid expenses  (138,082)  385,040   (686,806)
Trade and other payables  50,057   (86,981)  463,945 
Payable to parent corporation  (497,037)  538,531   (417,167)
Royalties payable to parent corporation  -   -   (133,817)
  $(41,969) $1,306,404   (1,127,443)

F-33

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

19.Supplemental cash flow disclosure (continued):

(b)Non-cash transactions:

        Thirteen-months
ended
  Month ended  Twelve-months
ended
 
  March 31,
2019
  March 31,
2018
  March 31,
2017
  March 31,
2017
(Unaudited)
  February 28, 2017
(Unaudited)
 
  $  $  $  $  $ 
Issuance of shares for interest on convertible debt  120   137   94   -   94 
Issuance of broker warrants included in net proceeds from public offering  283   406   144   -   144 
Public offering transaction costs included in trade and other payables  -   132   381   381   416 
Interest receivable included in receivables  96   7   -   -   - 
Reduction in share issue costs from reduction in trade and other payables  -   -   109   -   109 
Private Placement transaction costs included in trade and other payables  -   -   40   40   50 
Equipment included in trade and other payables  12   216   288   288   269 
Interest payable included in trade and other payables  40   40   18   18   4 

F-34

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

  
  February 29,  February 28,  February 28, 
   2016   2015   2014 
  
Issuance of shares on settlement of a liability (Note 11 (b)) $102,500  $-  $- 
Issuance of common shares  -   -   15,525,000 
Royalties settled through issuance of shares  -   -   395,068 
Acquisition of intangible asset  -   -   15,129,932 
Exercise of warrants by Neptune applied against payable  -   -   793,437 
Intangible assets included in trade and other payables  -   7,927   - 
Interest receivable included in payable to parent corporation  26,558   -   - 

104

ACASTI PHARMA INC.
Notes to Financial Statements, continued
Years ended February 29, 2016 and February 28, 2015 and 2014




18.Income taxes:
20.Income taxes:

Deferred tax (recovery) expense:

        Thirteen-months
ended
  Month
ended
  Twelve-months
ended
 
  March 31,
2019
  March 31,
2018
  March 31,
2017
  March 31,
2017
(Unaudited)
  February 28,
2017
(Unaudited)
 
  $  $  $  $  $ 
                
Origination and reversal of temporary differences  11,599   5,241   2,240   163   2,077 
Change in unrecognized deductible temporary differences  (11,599)  (5,241)  (2,369)  (163)  (2,206)
Deferred tax (recovery) expense  -   -   (129)  -   (129)

Reconciliation of effective tax rate:

        Thirteen-months
ended
  Month
ended
  Twelve-months
ended
 
  March 31,
2019
  March 31,
2018
  March 31,
2017
  March 31,
2017
(Unaudited)
  February 28,
2017
(Unaudited)
 
  $  $  $  $  $ 
Loss before income taxes  (51,566)  (21,504)  (11,376)  (769)  (10,607)

Basic combined Canadian statutory income tax rate 1

  26.68%  26.78%  26.87%  26.80%  26.88%
Computed income tax recovery  (13,758)  (5,759)  (3,057)  (206)  (2,851)
Increase resulting from:                    
Change in unrecognized deductible temporary differences  11,599   5,241   2,369   162   2,207 
Non-deductible stock-based compensation  279   248   178   23   155 
Non-deductible change in fair value  1,677   92   14   6   8 
Permanent differences and other  203   178   166   12   154 
Change in statutory income tax rate  -   -   201   3   198 
Total tax (recovery) expense  -   -   (129)  -   (129)

1 The Canadian combined statutory income tax rate has decreased due to a reduction in the provincial statutory income tax rate.

F-35

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

  
  2016  2015  2014 
  
Origination and reversal of temporary differences $2,065,378  $2,221,229  $1,932,370 
Change in unrecognized deductible temporary differences  (2,065,378)  (2,221,229)  (1,932,370)
Deferred tax expense $-  $-  $- 
  
Reconciliation of effective tax rate:            
  
   2016   2015   2014 
  
Loss before income taxes $(6,316,731) $(1,654,724)  $(11,611,649)
  
Income tax at the combined Canadian statutory rate of 26.9% $(1,699,201) $(445,121) $(3,123,534)
Increase resulting from:            
     Change in unrecognized deductible temporary differences  2,065,378   2,221,229   1,932,370 
     Non-deductible stock-based compensation  83,015   417,903   925,823 
     Non-deductible change in fair value  (592,077)  (2,373,674)  136,499 
     Permanent differences and other  142,885   179,663   128,842 
Total tax expense $-  $-  $ ‒ 

20.Income taxes (continued):

Unrecognized deferred tax assets:

At February 29, 2016March 31, 2019, 2018, and February 28, 2015,2017, the net deferred tax assets, which have not been recognized in these financial statements because the criteria for recognition of these assets were not met, were as follows:

  

 

March 31, 2019

  

 

March 31, 2018

  

 

March 31, 2017

 
  $  $  $ 
Deferred tax assets            
Tax losses carried forward  23,695   12,670   8,293 
Research and development expenses  5,362   4,927   4,220 
Property, plan and equipment and intangible assets  766   567   435 
Financing expenses  1,852   116   - 
Other deductible temporary differences  378   768   522 
Deferred tax assets  32,053   19,048   13,470 
 Deferred tax liabilities            
Tax basis of unsecured convertible debentures in excess of carrying value  13   67   122 
Deferred tax liabilities  13   67   122 
Net deferred tax assets  32,040   18,981   13,348 
         
   2016   2015 
  
Tax losses carried forward $6,020,000  $4,492,000 
Research and development expenses  3,866,000   3,332,000 
Property, plant and equipment and intangible assets  340,000   282,000 
Other deductible temporary differences  388,000   441,000 
Unrecognized deferred tax assets $10,614,000  $8,547,000 

105

ACASTI PHARMA INC.
Notes

On initial recognition of the unsecured convertible debenture equity component on February 21, 2017, a deferred tax liability of $129 was recognized with the corresponding entry recognized directly in Other equity. Consequently, an equal amount of deferred tax asset related to Financial Statements, continued


Years ended February 29, 2016unrecognized tax losses was recognized with the offsetting entry in the Corporation statement of earnings and February 28, 2015 and 2014




18.Income taxes (continued):
comprehensive loss.

As at February 29, 2016,March 31, 2019, the amounts and expiry dates of tax attributes and temporary differences, which are available to reduce future years’ taxable income, were as follows:

  March 31, 2019 
  Federal  Provincial 
   $   $ 
Tax losses carried forward        
2029  714   714 
2030  1,627   1,620 
2031  2,071   2,063 
2032  2,262   2,241 
2033  1,854   1,825 
2034  3,598   3,598 
2035  4,595   4,459 
2036  5,494   5,494 
2037  8,584   8,456 
2038  17,340   17,270 
2039  41,447   41,447 
   89,586   89,187 
         
Research and development expenses, without time limitation  19,617   21,036 
         
Other deductible temporary differences, without time limitation  30,875   32,294 
F-36

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

       
  Federal  Provincial 
       
       
Tax losses carried forward      
2029 $714,000  $714,000 
2030  1,627,000   1,620,000 
2031  2,071,000   2,063,000 
2032  2,262,000   2,241,000 
2033  1,854,000   1,825,000 
2034  3,597,000   3,597,000 
2035  4,459,000   4,459,000 
2036  5,823,000   5,823,000 
  $22,407,000  $22,342,000 
         
Research and development expenses, without time limitation $13,883,000  $14,986,000 
         
Other deductible temporary differences, without time limitation $2,700,000  $2,700,000 



19.Financial instruments:
21.Financial instruments:

This note provides disclosures relating to the nature and extent of the Corporation’s exposure to risks arising from financial instruments, including credit risk, foreign currency risk, interest rate risk and liquidity risk, and how the Corporation manages those risks.

(a)(a)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. The Corporation has credit risk relating to cash and short-term investments including a restricted short-term investment,cash equivalents and marketable securities, which it manages by dealing only with highly-rated Canadian institutions. The carrying amount of financial assets, as disclosed in the statements of financial position, represents the Corporation’s credit exposure at the reporting date.

(b)(b)Currency risk:

The Corporation is 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 the Corporation's business transactions denominated in currencies other than the Canadian dollar. Fluctuations related to foreign exchange rates could cause unforeseen fluctuations in the Corporation's operating results.

All of the Corporation’s revenues are in US dollars.

A portion of the expenses, mainly related to research contracts and purchase of production equipment, is madeincurred in US dollars.dollars and in Euros. There is a financial risk involvedrelated to the fluctuation in the value of the US dollar and the Euro in relation to the Canadian dollar. In order to minimize the financial risk related to the fluctuation in the value of the US dollar in relation to the Canadian dollar.


106

ACASTI PHARMA INC.
Notesdollar, funds continue to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




19.Financial instruments (continued):
 (b)Currency risk (continued):
be invested as short-term investments in the US dollar.

The following table provides an indication of the Corporation’s significant foreign exchange currency exposures as stated in Canadian dollars at the following dates:

     March 31, 2019     March 31, 2018 
Denominated in US
$
  Euro  US
$
  Euro 
             
Cash and cash equivalents  3,369   -   7,024   - 
Marketable securities  2,696   -   26   - 
Receivables  16   -   6   - 
Trade and other payables  (13,251)  (131)  (3,924)  (627)
   (7,170)  (131)  3,132   (627)

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

             
     March 31, 2019     March 31, 2018 
  Average  Reporting  Average  Reporting 
             
CA$ per US$  1.3122   1.3349   1.2834   1.2900 
CA$ per Euro  1.5192   1.4975   1.5008   1.5898 
         
    February 29, 2016  February 28, 2015 
    US$   US$ 
         
Cash   2,871,358    1,102,908 
Short-term investments   7,442,050    15,007,176 
Trade and other receivables   1,396    250,313 
Trade and other payables   (275,092)   (398,648)
    10,039,712    15,961,749 
           
           
The following exchange rates are those applicable to the following periods and dates: 
           
           
    February 29,   February 28, 
    2016    2015 
Average Reporting Average Reporting 
           
US$ per CAD1.3071  1.3531 1.1266  1.2503 

Based on the Corporation’s foreign currency exposures noted above, varying the above foreign exchange rates to reflect a 5% strengthening of the US dollar and Euro would have increased thean increase (decrease) in net profitloss as follows, assuming that all other variables remain constant:

  March 31, 2019  March 31, 2018 
  $  $ 
         
Increase (decrease) in net loss  364   (88)

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

           
 February 29,February 28,
     20162015
 US$US$
           
Increase in net profit370,989638,317

107

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




19.Financial instruments (continued):
constant.

F-37

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

21.Financial instruments (continued):

(c)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.

The Corporation’s exposure to interest rate risk as at February 29, 2016March 31, 2019 and February 28, 2015March 31, 2018 is as follows:

  
Cash
and cash equivalents
Short-term fixed interest rate
Short-term investmentsMarketable SecuritiesShort-term fixed interest rate
Unsecured convertible debenturesLong-term fixed interest rate

The capacity of the Corporation 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 that the risk that the Corporation will realize a loss as a result of the decline in the fair value of its short-term investmentscash equivalents is limited because these investments have short-term maturities and are generally held to maturity.

(d)(d)Liquidity risk:

Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall due. The Corporation manages liquidity risk through the management of its capital structure and financial leverage, as outlined in Note 22.24. 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.

Refer to Note 2(c).

The following are the contractual maturities of financial liabilities as at February 29, 2016March 31, 2019 and February 28, 2015:March 31, 2018:

             March 31, 2019 
Required payments per year   Total  Carrying amount  Less than 1 year  1 to 3 years 
  Notes $  $  $  $ 
               
Trade and other payables 11  16,429   16,429   16,429   - 
Unsecured convertible debentures 13  2,143   1,817   2,143   - 
     18,572   18,246   18,572   - 

             March 31, 2018 
Required payments per year   Total  Carrying amount  Less than 1 year  1 to 3 years 
  Notes $  $  $  $ 
               
Trade and other payables 11  6,697   6,697   6,697   - 
Unsecured convertible debentures 13  2,303   1,612   160   2,143 
     9,000   8,309   6,857   2,143 
          
        February 29, 
        2016 
Required payments per year    Carrying  Less than 
(in thousands of dollars) Total  amount  1 year 
  
Trade and other payables $1,126  $1,126  $1,126 
Payable to parent corporation  15   15   15 
  $1,141  $1,141  $1,141 
          
        February 28, 
        2015 
Required payments per year    Carrying  Less than 
(in thousands of dollars) Total  amount  1 year 
          
Trade and other payables $1,084  $1,084  $1,084 
Payable to parent corporation  538   538   538 
  $1,622  $1,622  $1,622 



The Derivative warrant liabilities are excluded from the above tables as they willexpected to be settled in shares and not by the use of liquidities.

108

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




19.Financial instruments (continued):

22.(e)Short-term investmentsCommitments and contingencies:
As at February 29, 2016, a short-term investment consisting of a term deposit totaling $7,443,115 (US - $5,500,000) is with a Canadian financial institution having a high credit rating.  The short-term investment has a maturity date of March 29, 2016, bearing an interest rate of 0.33% per annum, cashable at any time at the discretion of the Corporation, under certain conditions. The restricted short-term investment has a maturity date of March 14, 2016, bearing an interest rate of 1.08% per annum, pledged to partly guarantee the financing for the acquisition of Biodroga Inc. by Neptune.
As at February 28, 2015, short-term investments consisting of term deposits were with a Canadian financial institution having a high credit rating. Short-term investments included two investments with maturity dates from June 30, 2015 to September 2, 2015, bearing an interest rate from 0.15% to 1.05% per annum, cashable at any time at the discretion of the Corporation, under certain conditions.

20.Commitments and contingency:
License agreement:
The Corporation was initially committed under a license agreement to pay Neptune until the expiration of Neptune’s patents on licensed intellectual property, a royalty in relation to sales of products in the licensed field.  In fiscal 2014, the Corporation exercised its option under the License Agreement to pay in advance all of the future royalties payable under the license by issuing 675,000 Class A shares, at a price of $23.00 per share to Neptune.
The value of the prepayment, determined with the assistance of outside valuations specialists, using the pre-established formula set forth in the license agreement (adjusted to reflect the royalties of $395,068 accrued from December 4, 2012, the date at which the Corporation entered into the prepayment agreement to July 12, 2013, the date of issuance of the shares) totalling $15,129,932, was recognized as an intangible asset.  The shares issued as a result of this transaction corresponded to an increase in share capital of $15,525,000, net of $29,000 of share issue costs.  The Corporation no longer has a royalty payment commitment under the License Agreement.

Research and development contracts and contract research organizations agreements:

In

The Corporation utilizes contract manufacturing organizations related to the normal coursedevelopment and production of business,clinical material and clinical research organizations to perform services related to the Company’s clinical trials. Pursuant to these agreements with manufacturing and contract research organizations, the Corporation has signedthe right to terminate the agreements with various partners and suppliers for themeither without penalties or under certain penalty conditions. For agreements which contain penalty conditions, the Company would be required to execute research projects and to produce and market certain products.  The Corporation has reserved certain rights relating to these projects.

The Corporation initiated research and development projects that will be conducted over a 12 to 24 month period for a total costpay penalties of $7,776,061, of which an amount of $1,966,950 has been paid to date.  As at February 29, 2016, an amount of $450,931 is included in ''Trade and other payables'' in relation to these projects.
approximately $109.

During the year,Fiscal 2018, the Corporation entered into a contract to purchaselease agreement, for its research and development equipment for $2,271,267 to be usedand quality control laboratory facility located in Sherbrooke, Québec, resulting in a commitment of $79 over the remaining lease term, which is committed in the clinicalnext year.

Contingencies:

The Corporation evaluates contingencies on an ongoing basis and future commercial supply of CaPre®.

Contingency:
A former CEOestablishes loss provisions for matters in which losses are probable and the amount of the Corporation is claiming the payment of approximately $8,500,000 and the issuance of equity instruments. As the Corporation’s management believes that these claims are not valid, no provision has been recognized. As of the date of these financial statements, no agreement has been reached. Neptune and its subsidiaries also filed an additional claimloss can be reasonably estimated. Refer to recover certain amounts from the officer. All outstanding share-based payments held by the former CEO have been cancelled during the year ended February 28, 2015.Note 25, Subsequent Events.

F-38

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Canadian dollars, except where noted and for share and per share amounts)

109

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




21.Determination of fair values:
23.Determination of fair values:

Certain of the Corporation’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods.

Financial and non-financial assets and liabilities:

In establishing fair value, the Corporation uses a fair value hierarchy based on levels as defined below:

·Level 1: defined as observable inputs such as quoted prices in active markets.
·Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly observable.
·Level 3: defined as inputs that are based on little or no little observable market data, therefore requiring entities to develop their own assumptions.

The Corporation has determined that the carrying values of its short-term financial assets and liabilities (cash and cash equivalents, marketable securities and trade and other payables) approximate their fair value given the short-term nature of these instruments. The carryingfair value of the restricted short-term investment also approximates itsliability component of the convertible debenture is determined by discounting future cash flows using a rate that the Corporation could obtain for loans with similar terms, conditions and maturity dates. The fair value givenof this liability at March 31, 2019 approximates the short-term maturity of the reinvested funds.

carrying amount and was measured using level 3 inputs.

Derivative warrant liabilities:

The Corporation measured its Derivativederivative warrant liabilities at fair value on a recurring basis. These financial liabilities were measured using a level 3 input.

The fair value was estimated according toinputs (Note 12).

As at March 31, 2019, the Black-Scholes option pricing model and based on the following assumptions:

       
  February 29, 2016  February 28, 2015 
       
Exercise price US $1.50  US $1.50 
Share price(1)
 US $1.50  US $5.50 
Dividend  -   - 
Risk-free interest  0.87%  1.20%
Estimated life 2.76 years  3.76 years 
Expected volatility  76.34%  62.94%

 (1) In order to obtain one share of Acasti, 10 warrants must be exercised.
The fair value of the Warrants issued was determined to be $0.09 per warrant as at February 29, 2016 ($1.30 per warrant – 2015).
The effect of an increase or a decrease of 5% of the volatility used, which is the significant unobservable input in the fair value estimate, would result in a loss of $58,636$569 or a gain of $48,812,$598, respectively.
The reconciliation

As at March 31, 2019, the effect of changesa 5% strengthening of the US dollar, would result in level 3 fair value measurementsa loss of financial liabilities for$405. An assumed 5% weakening of the year ended February 29, 2016 and February 28, 2015 is presented in the following table:

       
  2016  2015 
Balance – beginning of year
 $2,357,408  $
11,181,475
 
Change in fair value of derivative warrant liabilities
  (2,201,031)  
(8,824,067
)
Closing balance
 $
156,377
  $
2,357,408
 

110

ACASTI PHARMA INC.
Notes to Financial Statements, continued

Years ended February 29, 2016 and February 28, 2015 and 2014




21.Determination of fair values (continued):

Share-based payment transactions:
The fair value of share-based payment transaction is measured basedforeign currency would have an equal but opposite effect on the Black-Scholes valuation model.  Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions, if any, are not taken into account in determining fair value.basis that all other variables remained constant.


24.Capital management:

22.Capital management:

Since inception, the Corporation’s objective in managing capital is to ensure sufficient liquidity to finance its research and development activities, general and administrative expenses, expenses associated with intellectual property protection and its overall capital expenditures. The Corporation is not exposed to external requirements by regulatory agencies or third parties regarding its capital.
capital, except for certain covenants included within the convertible debentures (Note 13).

Since the beginning of its operations, the Corporation has primarily financed its liquidity needs from funding provided by athrough public offering, aofferings, private placement, its parent corporation,placements, from the exercise of warrants that were distributed to its parent corporation’srelated party’s shareholders, from a rights offering and from the issuance of options to employees. The Corporation attempts to optimize its liquidity needs with non-dilutive sources whenever possible, including from research and development tax credits or government assistance.

The Corporation defines capital to include total shareholders’ equity, and derivative warrant liabilities.
liabilities and unsecured convertible debentures. The Corporation’s policy is to maintain a minimal level of debt.

The following table summarizes the cash and cash equivalents of the Corporation:

  March 31, 2019  March 31, 2018 
  $  $ 
Cash  1,896   1,583 
         
Cash equivalents        
Term deposits issued in CAD currency  12,100   - 
Term deposits issued in US currency [US - $3,250]  -   4,193 
Commercial papers issued in CAD currency  5,693   - 
Commercial papers issued in US currency [US - $1,099]  -   1,418 
Promissory notes issued in CAD currency  498   - 
Promissory notes issued in US currency [US - $798]  -   1,029 
Bankers acceptance  2,334     
Total Cash equivalents  20,625   6,640 
         
Total Cash and cash equivalents  22,521   8,223 
As of February 29, 2016, cash amounted to $3,026,943, short-term investments amounted to $7,443,115 and tax credits receivable amounted to $61,210, for a total of $10,531,268.
111
111

Item 18.Financial Statements
See Item 17.
Item 19.Exhibits

112

EXHIBITS INDEX
 
Exhibit
Number
Description of Document
F-39 

  1.1Articles

acasti pharma INC.

Notes to Financial Statements

For the years ended March 31, 2019, 2018 and the thirteen-month and one-month periods ended March 31, 2017, and the twelve-month period ended February 28, 2017

(thousands of Incorporation (incorporated by reference to Exhibit 4.1 from Form S-8 (File No. 333-191383) filed with the Commission on September 25, 2013)

  1.2Bylaw No. 1 (incorporated by reference to Exhibit 4.2 from Form S-8 (File No. 333-191383) filed with the Commission on September 25, 2013)
  1.3Bylaw 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)
  2.1Specimen CertificateCanadian dollars, except where noted and for Common Shares of Acasti Pharma Inc. (incorporated by reference to Exhibit 2.1 from Form 20-F (File No. 001-35776) filed with the Commission on June 6, 2014)
  2.2Warrant Indenture dated December 3, 2013 between Acasti Pharma Inc.share and Computershare Trust Company of Canada (incorporated by reference to Exhibit 99.1 from Form 6-K (File No. 001-35776) filed with the Commission on December 3, 2013)
  4.1Prepayment Agreement, dated December 4, 2012, between Neptune Technologies & Bioressources Inc. and Acasti Pharma Inc. (incorporated by reference to Exhibit 99.1 from Form 6-K (File No. 001-35776) filed with the Commission on October 29, 2013)
  4.2Equity Incentive Plan (incorporated by reference to Exhibit 4.4 from Form S-8 (File No. 333-191383) filed with the Commission on September 25, 2013)
  4.3Stock Option Plan (incorporated by reference to Exhibit 4.5 from Form S-8 (File No. 333-191383) filed with the Commission on September 25, 2013)
11.1Code of Business Conduct and Ethics for Directors, Officers and Employees (incorporated by reference to Exhibit 99.4 from Form 40-F (File No. 001-35776) filed with the Commission on May 30, 2013)
12.1*Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1*Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2*Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002per share amounts)

*- filed herewith


113


SIGNATURES
The registrant hereby certifies that it meets all
24.Capital management (continued):

As at March 31, 2019, the term deposits, commercial paper, promissory note and bankers acceptance have maturity dates of ranging between April 1, 2019 and June 25, 2019, bearing interest rates ranging from 1.76% and 2.40% per annum, cashable at any time at the discretion of the requirementsCorporation, under certain conditions.

As at March 31, 2018, the term deposits, commercial paper and promissory note have maturity dates of ranging between April 2, 2018 and May 11, 2018, bearing interest rates ranging from 1.26% and 1.72% per annum, cashable at any time at the discretion of the Corporation, under certain conditions.

25.Subsequent events

On April 15, 2019 the Corporation announced the annual grant of stock options to its employees, executives and directors of its stock option plan (the “Stock Option Plan”). The stock options were granted by the Board of Directors as part of the Corporation’s annual performance review in accordance with the Corporation’s Long-Term Incentive Program (LTIP). An aggregate of 644,117 stock options were granted to certain employees, executives and directors of the Corporation under the Corporation’s Stock Option Plan. Subject to the terms and conditions of the Stock Option Plan, options granted to directors will vest in equal quarterly installments over a period of 18 months and options granted to executives and employees will vest in equal quarterly installments over a period of 36 months. Each option will entitle the holder to purchase one common share of the Corporation at a price of CDN$1.28, until April 15, 2029. 

On May 10, 2019 the Corporation announced the settlement regarding legal claims made by its former chief executive (“CEO”) officer with respect to the termination of his employment. Pursuant to the settlement agreement, the Corporation has agreed to issue 900,000 common shares at $1.10 per share to the former CEO.  In addition, the Corporation has agreed to reimburse the former CEO for filinglegal fees of $64. Furthermore, pursuant to the settlement agreement, the Corporation receives a full and final release from the former CEO on this Annual Reportall procedures in connection with the termination of his employment. This settlement has been accrued as at March 31, 2019 and that it has duly causedthe expense of $1,054 is included as part of General and authorized the undersigned to sign this Annual Report on its behalf.administrative expenses.

ACASTI PHARMA INC.
By:
/s/ Pierre Lemieux
Name:Pierre Lemieux
Title:Principal Executive Officer
Date: May 30, 2016



114