COSCIENS Biopharma 6K Management’s Discussion and Analysis of Financial Condition and Results of Operations | CSCI 12 Nov 24

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Exhibit 99.2

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars)

(Unaudited)

Condensed Interim Consolidated Statements of Financial Position	2
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity	3
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss	4
Condensed Interim Consolidated Statements of Cash Flows	5
Notes to the Condensed Interim Consolidated Financial Statements	6

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Condensed Interim Consolidated Statements of Financial Position

(In thousands of US dollars)

(Unaudited)

	As of September 30, 2024			As of December 31, 2023
	$			$
ASSETS
Current assets
Cash and cash equivalents		19,998			6,678
Trade and other receivables		1,892			290
Inventories (note 5)		3,306			4,009
Income taxes receivable		123			-
Prepaid expenses and other assets (note 6)		2,902			290
Total current assets		28,221			11,267
Non-current assets
Restricted cash and cash equivalents		126			8
Investment tax credit receivable		729			743
Property and equipment (note 7)		11,807			11,645
Intangible assets (note 8)		1,807			7
Deferred tax assets		1,079			75
Total non-current assets		15,548			12,478
Total assets		43,769			23,745

LIABILITIES
Current liabilities
Payables and accrued liabilities (note 9)		4,817			1,012
Provisions		504			-
Income taxes payable		113			-
Current portion of deferred revenues (note 4)		46			-
Current portion of lease liabilities		405			299
Warrant liability (note 11)		2,143			-
DSU liability (note 12)		139			-
Total current liabilities		8,167			1,311
Non-current liabilities
Deferred revenues (note 4)		1,924			-
Lease liabilities		1,211			1,399
Employee future benefits (note 10)		12,453			-
Total non-current liabilities		15,588			1,399
Total liabilities		23,755			2,710
Shareholders’ equity
Share capital (note 13)		22,388			13,517
Contributed surplus		4,337			3,874
Retained earnings		(5,158	)		4,356
Accumulated other comprehensive loss		(1,553	)		(712	)
Total Shareholders’ equity		20,014			21,035
Total liabilities and shareholders’ equity		43,769			23,745

Commitments (note 18)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Approved by the Board of Directors

/s/ Ronnie Miller		/s/ Pierre Labbé
Ronnie Miller, Chair of the Board		Pierre Labbé, Director

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

For the nine months ended September 30, 2024, and 2023

(In thousands of US dollars)

(Unaudited)

	$		$		$			$			$
	Share capital		Contributed surplus		Retained earnings			Accumulated other comprehensive loss			Total
	$		$		$			$			$
Balance – January 1, 2024		13,517		3,874		4,356			(712	)		21,035
Net loss		-		-		(8,578	)		-			(8,578	)
Other comprehensive loss:
Foreign currency translation adjustments		-		-		-			(841	)		(841	)
Actuarial loss on defined benefit plan (note 10)		-		-		(936	)		-			(936	)
Comprehensive loss						(9,514	)		(841	)		(10,355	)
Acquisition of Aeterna Zentaris Inc. (note 3)		8,485		9		-			-			8,494
Share-based compensation costs		-		454		-			-			454
Exercise of warrants (note 11)		386		-		-			-			386
Balance – September 30, 2024		22,388		4,337		(5,158	)		(1,553	)		20,014

	Share capital	Contributed surplus		Retained earnings		Accumulated other comprehensive loss		Total
	$	$		$		$		$
Balance – January 1, 2023	13,496	3,690		7,841		(1,204	)	23,823
Balance	13,496	3,690		7,841		(1,204	)	23,823
Net loss	-	-		(1,921	)	-		(1,921	)
Other comprehensive loss:
Foreign currency translation adjustments	-	-		-		(22	)	(22	)
Comprehensive income				(1,921	)	(22	)	(1,943	)
Exercise of options	21	(8	)	-		-		13
Share-based compensation costs	-	176		-		-		176
Balance – September 30, 2023	13,517	3,858		5,920		(1,226	)	22,069
Balance	13,517	3,858		5,920		(1,226	)	22,069

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Condensed Interim Consolidated Statements of Loss and Comprehensive Loss

For the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data)

(Unaudited)

	2024			2023			2024			2023
	Three months ended						Nine months ended
	September 30,						September 30,
	2024			2023			2024			2023
	$			$			$			$
Revenues (note 4)		1,871			1,952			6,265			5,929
Cost of sales		(914	)		(1,147	)		(3,585	)		(3,139	)
Gross profit		957			805			2,680			2,790

Research and development		2,799			436			5,391			1,551
Selling, general and administrative		2,992			1,480			7,702			3,832
Impairment of intangible assets (note 8)		1,459			-			1,459			-
Loss from operations		(6,293	)		(1,111	)		(11,872	)		(2,593	)

Gain due to changes in foreign currency		(55	)		-			(13	)		-
Finance costs		(22	)		(23	)		(106	)		(113	)
Other income		231			146			389			260
Change in fair value of warrant and DSU liabilities		272			-			2,026			-
Other income		426			123			2,296			147

Loss before income taxes		(5,867	)		(988	)		(9,576	)		(2,446	)

Income tax recovery		112			212			998			525
Net loss		(5,755	)		(776	)		(8,578	)		(1,921	)

Other comprehensive loss:
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation adjustments		(334	)		(568	)		(841	)		(22	)
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on defined benefit plans		(936	)		-			(936	)		-
Comprehensive loss		(7,025	)		(1,344	)		(10,355	)		(1,943	)

Basic and diluted loss per share (note 16)		(1.85	)		(0.42	)		(3.58	)		(1.04	)

Weighted average number of shares outstanding (basic and diluted)		3,106,503			1,847,678			2,394,927			1,847,068

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Condensed Interim Consolidated Statements of Cash Flows

For the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars)

(Unaudited)

	2024			2023			2024			2023
	Three months ended						Nine months ended
	September 30,						September 30,
	2024			2023			2024			2023
	$			$			$			$
Cash flows from operating activities
Net loss for the period		(5,755	)		(776	)		(8,578	)		(1,921	)
Items not affecting cash and cash equivalents:
Depreciation and amortization		479			363			1,215			1,084
Share-based compensation costs		427			33			454			176
Impairment of intangible assets (note 8)		1,459			-			1,459			-
Employee future benefits		135			-			178			-
Amortization of deferred revenues		(39	)		-			(39	)		-
Change in fair value of warrant and DSU liabilities		(271	)		-			(2,026	)		-
Other non-cash items		23			-			34			-
Income tax recovery		(112	)		(212	)		(998	)		(525	)
Changes in operating assets and liabilities (note 15)		(4,125	)		736			(3,268	)		(311	)
Net cash used in operating activities		(7,779	)		144			(11,569	)		(1,497	)

Cash flows from financing activities
Exercise of stock options		-			12			-			13
Payments on exercise of DSUs		(74	)		-			(74	)		-
Payments on lease liabilities		(114	)		(71	)		(312	)		(205	)
Net cash used in financing activities		(188	)		(59	)		(386	)		(192	)

Cash flows from investing activities
Acquisition of Aeterna Zentaris Inc. (note 3)		-			-			26,037			-
Purchase of property and equipment		(131	)		(50	)		(852	)		(135	)
Changes in restricted cash equivalents		214			-			214			-
Net cash provided by (used) in investing activities		83			(50	)		25,399			(135	)
Effect of exchange rate changes on cash and cash equivalents		78			(209	)		(124	)		(2	)

Net change in cash and cash equivalents		(7,806	)		(174	)		13,320			(1,826	)
Cash and cash equivalents – Beginning of period		27,804			8,538			6,678			10,190
Cash and cash equivalents – End of period		19,998			8,364			19,998			8,364

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

1. Business overview

Summary of business

COSCIENS Biopharma Inc. (“the Company”) is a specialty biopharmaceutical company developing and commercializing a diversified portfolio of products for the cosmeceutical, nutraceutical and pharmaceutical markets. Such products being produced using the Company’s proprietary technologies. The Company’s patented technologies include the Pressurized Gas eXpanded (PGX) technology, which is a technology that generates high-value yields of active ingredients from natural plant resources for use in novel cosmeceutical, nutraceutical and therapeutics products. The Company's two value-driving products, oat beta glucan and avenanthramides, are found in many household name cosmetic and personal care brands. These products are manufactured from the Company’s proprietary oat extraction manufacturing technology and are known for their well-documented health benefits.

In addition to our portfolio of nutraceutical and cosmeceutical products and programs, the Company is also conducting a Phase 1/2a clinical trial with the goal of developing our avenanthramides product as an anti-inflammatory. The Company’s lead commercial pharmaceutical product, macimorelin (Macrilen®; Ghryvelin®), is the first and only U.S. FDA and European Commission approved oral test indicated for the diagnosis of adult growth hormone deficiency (AGHD).

During the three-month period ended September 30, 2024, the Company made a strategic decision to discontinue its AIM Biological, Amyotrophic Lateral Sclerosis (ALS), and Delayed Clearance Parathyroid Hormone programs. This decision was influenced by several factors, including increasingly challenging timelines and costs associated with reaching the next value inflection point in pre-clinical development.

These unaudited condensed interim consolidated financial statements were approved by the Board of Directors (the “Board”) on November 11, 2024.

Transaction

On December 14, 2023, Aeterna Zentaris Inc. (“Aeterna”) and Ceapro Inc. (“Ceapro”) entered into a binding arrangement agreement pursuant to which Aeterna would acquire all of the issued and outstanding common shares of Ceapro (the “Transaction”) by way of a plan of arrangement pursuant to which, at closing, each outstanding Ceapro common share would be exchanged for 0.02360 of a Aeterna common share (the “Plan of Arrangement”). Additionally, as part of the Transaction, Aeterna would issue to its shareholders immediately prior to the closing of the Transaction, 0.47698 of a share purchase warrant (“New Warrant”) for each Aeterna common share or warrant held. On March 12, 2024, the shareholders of both Ceapro and Aeterna approved the Plan of Arrangement at their respective special meetings. On March 28, 2024, the Court of Kings Bench of Alberta approved the Plan of Arrangement. The Transaction was consummated on June 3, 2024.

In conjunction with the transaction, at the annual general meeting on July 16, 2024, the shareholders approved a special resolution authorizing the Board to change the company name from “Aeterna Zentaris Inc.” to “COSCIENS Biopharma Inc.” On August 6, 2024, the company filed articles of amendment pursuant to the Canada Business Corporations Act to effect this name change.

Following the closing of the Transaction, former shareholders of Ceapro owned approximately 50% of the Aeterna common shares on a fully diluted basis and former shareholders of Aeterna owned approximately 50% of the Aeterna common shares on a fully diluted basis. For financial reporting and accounting purposes, Ceapro is the acquirer of Aeterna in the Transaction. The consolidated financial statements of COSCIENS Biopharma Inc. as of September 30, 2024 and December 31, 2023 and for the three and nine months ended September 30, 2024 and 2023 reflect the results of operations and financial position of Ceapro for the periods presented and includes the results of operations of Aeterna subsequent to the Transaction, which was completed on June 3, 2024. Refer to Note 3 for additional information.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

The accompanying consolidated financial statements include the accounts of COSCIENS Biopharma Inc., an entity incorporated under the Canada Business Corporations Act, and its wholly owned subsidiaries (the “Group”). COSCIENS Biopharma Inc. is the ultimate parent company of the Group. The Company currently has six wholly-owned direct and indirect subsidiaries, Ceapro Inc. and its wholly-owned subsidiaries Ceapro (P.E.I.) and Juvente^DC Inc., based in Canada, Aeterna Zentaris GmbH (“AEZS Germany”) and its wholly-owned subsidiary Zentaris IVF GmbH, based in Frankfurt, Germany, and Aeterna Zentaris, Inc., an entity incorporated in the state of Delaware and with offices in Summerville, South Carolina, in the US.

The registered office of the Company is located at 222 Bay Street, Suite 3000, P.O. Box 53, Toronto, Ontario M5K 1E7, Canada.

The Company’s common shares are listed on both the Toronto Stock Exchange under the symbol CSCI (previously AEZS) and on the NASDAQ Capital Market under the symbol CSCI (previously AEZS).

2. Basis of presentation

These unaudited condensed interim consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting as issued by the International Accounting Standards Board.

The unaudited condensed interim consolidated financial statements do not include all the notes normally included in annual consolidated financial statements. The unaudited condensed interim consolidated financial statements reflect all normal and reoccurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Accordingly, these unaudited condensed interim consolidated financial statements should be read in conjunction with the Ceapro’s annual consolidated financial statements as of and for the year ended December 31, 2023.

The accounting policies used in these condensed interim consolidated financial statements are consistent with those presented in Ceapro’s annual consolidated financial statements, except for the accounting policies as described below:

Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date when control is transferred. The consideration transferred for the acquisition of a business is the fair value of the assets transferred, and any liability and equity interests issued by the Company to the former owners of the acquired business on the acquisition date. Identifiable assets acquired and liabilities assumed in a business combination are generally measured initially at their fair values at the acquisition date. Acquisition-related costs other than those associated with the issue of debt or equity securities, and other direct costs of a business combination are not considered part of the business acquisition transaction and are expensed as incurred.

Foreign currency

Effective June 3, 2024, Ceapro has changed its reporting currency from Canadian dollars to U.S. dollars. This change in reporting currency has been applied retrospectively such that all amounts in the consolidated financial statements of the Company and the accompanying notes thereto are expressed in U.S. dollars. References to “$” are to U.S. dollars and references to “CA $” are to Canadian dollars. For comparative purposes, historical consolidated financial statements of Ceapro were recast in U.S. dollars by translating assets and liabilities at the closing exchange rate in effect at the end of the respective period, revenues, expenses and cash flows at the average exchange rate in effect for the respective period and equity transactions at historical exchange rates. Translation gains and losses are included in the cumulative foreign currency translation adjustment, which is reported as a component of shareholders’ equity under accumulated other comprehensive loss.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

Post-employment benefits

The Company has partially funded and unfunded defined benefit multi-employer pension plans, namely the DUPK pension plan and the RUK 1990 and 2006 pension plans, (the “Pension Benefit Plans”) and unfunded post-employment benefit plans in Germany. Provisions for pension obligations are established for benefits payable in the form of retirement, disability and surviving dependent pensions. The Company also provides defined contribution plans to some of its employees.

For defined benefit pension plans and other post-employment benefits, net periodic pension expense is actuarially determined on a quarterly basis using the projected unit credit method. The cost of pension and other benefits earned by employees is determined by applying certain assumptions, including discount rates, rate of pension benefit increases, the projected age of employees upon retirement and the expected rate of future compensation.

The employee future benefits liability is recognized at its present value, which is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related future benefit liability. Actuarial gains and losses that arise in calculating the present value of the defined benefit obligation are recognized in other comprehensive loss, net of tax, and simultaneously reclassified in the deficit in the consolidated statement of financial position in the year in which the actuarial gains and losses arise and without recycling to the consolidated statement of loss and comprehensive loss in subsequent periods.

Revenue

The Company generates revenue from supply agreements and licensing agreements with customers for the sale of certain finished goods, semi-finished goods and active pharmaceutical ingredients. The license is generally combined with other promises to supply goods to the customer, and revenue from the combined performance obligation is satisfied at a point in time, which occurs upon shipment. The transaction price for the combined performance obligation includes the license non-refundable non-creditable upfront payment, regulatory milestones, royalties and the selling price of each good supplied. Milestone payments, which are oftentimes payable upon the successful achievement of development or regulatory events, and royalties are included in the transaction price using the most likely amount method only if the milestones are considered probable of being reached and the Company concludes it is highly probable that a significant revenue reversal will not occur. Milestone payments and royalties that are not within the control of the Company or the licensee, such as regulatory approvals, are generally not considered probable of being achieved until those approvals or subsequent sales are received. The Company allocates the transaction price to the projected units that the Company expects to supply pursuant to the contract, estimated based on current projections and anticipated market demand.

Intangible assets

Intangible assets, consisting of patents, that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses. Patents are amortized on their respective remaining patent life and are expiring between 2027 and 2041.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

Warrant liabilities

Warrant liabilities are derivative financial instruments. They are initially measured at fair value. Subsequent to initial recognition, they are measured at fair value, and changes therein are recognized in profit or loss.

Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation. In the consolidated statement of financial position, trade receivables of $126 and other receivable of $164 were classified to trade and other receivables. In the consolidated statements of loss for the nine months ended September 30, 2023, the general and administration expenses of $3,807 (for the three months ended September 30, 2023 - $1,471) and the sales and marketing expenses of $25 (for the three months ended September 30, 2023 - $9) were reclassified within Selling, general and administrative expenses.

New standards and amendments

Several amendments apply for the first time for reporting periods beginning after January 1, 2024, but do not have an impact on the interim condensed consolidated financial statements of the Company. The IASB has published several new, but not yet effective, standards, amendments to existing standards, and interpretations. None of these standards, amendments to existing standards, or interpretations have been early adopted by the Company, and management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. No pronouncements have been disclosed as they are not expected to have a material impact on the Company’s condensed interim consolidated financial statements.

Critical accounting estimates and judgements

The preparation of condensed interim consolidated financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions about the future that affect the reported amounts of the Company’s assets, liabilities, revenues, expenses and related disclosures. Judgements, estimates and assumptions are based on historical experience, expectations, current trends and other factors that management believes to be relevant at the time at which the Company’s condensed interim consolidated financial statements are prepared.

Management reviews, on a regular basis, the Company’s accounting policies, assumptions, estimates and judgements in order to ensure that the condensed interim consolidated financial statements are presented fairly and in accordance with IFRS applicable to interim financial statements. Revisions to estimates are recognized prospectively. Critical accounting estimates and assumptions are those that have a significant risk of causing material adjustment and are often applied to matters or outcomes that are inherently uncertain and subject to change. As such, management cautions that future events often vary from forecasts and expectations and that estimates routinely require adjustment.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

Critical accounting estimates and assumptions, as well as critical judgements used in applying accounting policies in the preparation of the Company’s condensed interim consolidated financial statements, were the same as those applied to Ceapro’s annual consolidated financial statements as of and for the year ended December 31, 2023, except for as described below:

	●	Measurement of defined benefit obligations: key actuarial assumptions (note 10); and
	●	Business acquisition: identification of the acquirer, determination of the fair value of the consideration transferred and fair value of some of the assets acquired and liabilities assumed (note 3); and
	●	Impairment of intangible assets: recoverable value of the intangible assets was based on a fair value less costs of disposal (note 8).

3. Acquisition of Aeterna Zentaris Inc.

As discussed in Note 1, Business Overview, as a result of the Transaction, Ceapro acquired control of Aeterna Zentaris Inc. on June 3, 2024. Aeterna is a specialty biopharmaceutical company commercializing and developing therapeutics and diagnostic tests. Aeterna’s lead product, Macrilen® (macimorelin), is the first and only U.S. FDA and EMA approved oral test indicated for the diagnosis of patients with adult growth hormone deficiency (“AGHD”). Macimorelin is currently marketed under the tradename Ghryvelin™ in the European Economic Area and the United Kingdom through an exclusive licensing agreement with Pharmanovia. Aeterna is actively pursuing business development opportunities for the commercialization of macimorelin in North America, Asia and the rest of the world. Aeterna is also dedicated to the development of therapeutic assets and has taken steps to establish a pre-clinical pipeline to potentially address unmet medical needs across several indications with a focus on rare or orphan indications.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

The Transaction was accounted for as a reverse acquisition under the acquisition method of accounting for business combinations. Ceapro was considered to be the accounting acquirer, and Aeterna was considered the legal acquirer. The amounts recorded for certain assets and liabilities are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the acquisition date. The final determination of the fair values of certain assets and liabilities will be completed within the measurement period of up to one year from the acquisition date. Under the acquisition method of accounting, total consideration exchanged and allocation of the purchase price to the fair values of assets acquired and liabilities assumed in the Transaction were as follows:

Schedule of purchase price to the fair values of assets acquired and liabilities assumed

Preliminary Purchase Price Allocation

	Number		Amount
	#		$
Purchase price
Shares deemed issued to Aeterna shareholders⁽¹⁾		1,213,967		8,485
Warrants issued to Aeterna shareholders⁽²⁾		633,543		4,422
Replacement share-based payment awards:
Equity-settled options⁽³⁾		12,949		9
Cash-settled DSUs⁽³⁾		49,230		344
Warrants deemed issued⁽⁴⁾		114,405		2
		2,024,094		13,262

Recognized amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents				26,037
Trade and other receivables				142
Inventories				64
Income tax receivables				119
Prepaid expenses and deposits				971
Restricted cash equivalents				328
Property and equipment				235
Intangible assets⁽⁵⁾				3,352
Accounts payable and accrued liabilities				(4,357	)
Provisions				(424	)
Income tax payable				(109	)
Deferred revenues				(1,731	)
Lease liabilities				(201	)
Employee future benefits				(11,164	)

Total provisional identifiable net assets (liabilities)				13,262

	(1)	The fair value of the 1,213,967 common shares deemed issued to Aeterna shareholders of $6.99 per share was based on the listed share price of Ceapro as at June 3, 2024 (CA$0.225), after giving effect to the exchange of each outstanding Ceapro common share for 0.02360 of a Aeterna common share and the foreign currency exchange rate.
	(2)	The fair value of the 633,543 New Warrants (“New Warrants”) issued to Aeterna shareholders was based on the listed share price of Ceapro as at June 3, 2024 of $6.99 (CA$0.225) less the exercise price of $0.01, after giving effect to the exchange of each outstanding Ceapro Common Share for 0.02360 of a Aeterna Zentaris Common Share and the foreign currency exchange rate.
	(3)	In accordance with the terms of the Plan of Arrangement, Aeterna’s share-based payment awards held by employees of Aeterna continued with no modifications and are deemed to be replacement awards issued.

(4)

The fair value of the 114,405 warrants deemed issued to Aeterna warrant holders was estimated using a Black-Scholes option pricing model, considering the terms and conditions upon which the warrants were issued, using the following assumptions:

(5)

The identifiable intangible assets consist of patents expiring between 2027 and 2041 which will be amortized on their respective remaining patent life. To estimate the fair value of the intangible assets, management uses the royalty relief method to value patents using discounted cash flow models. Management developed assumptions related to revenue and EBITDA margin forecasts, attrition rates, royalty rates and discount rates.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

The fair value of the replacement awards is $356, after taking into account an estimated forfeiture rate of nil. The consideration for the business combination includes $9 for equity-settled options and $344 for cash-settled DSUs transferred to employees of Aeterna when the acquiree’s awards were substituted by the replacement awards, which relates to past service. The balance of $3 will be recognized as post-acquisition compensation cost.

The fair value at acquisition date was estimated using a Black-Scholes option pricing model, considering the terms and conditions upon which the options were granted, using the following assumptions:

Schedule of fair value at acquisition date was estimated using a Black-Scholes option

	Options
Expected dividend yield	$	0.0
Weighted average expected volatility		65	%
Weighted average risk-free rate		4.01	%
Weighted average expected life (years)		2.87
Share price	$	6.99
Weighted average exercise price	$	50.15
Weighted average fair value	$	0.90

The expected volatility of these options was determined using historical volatility rates and the expected life was determined using the weighted average life of past options issued.

The fair value of the replacement DSUs of $6.99 per DSU was based on the listed share price of Ceapro as at June 3, 2024 (CA$0.225), after giving effect to the exchange of each outstanding Ceapro common share for 0.02360 of a Aeterna common share and the foreign currency exchange rate.

(4)

Schedule of fair value at acquisition date was estimated using a Black-Scholes option

	Warrants
Expected dividend yield	$	0.00
Weighted average expected volatility		65	%
Weighted average risk-free rate		4.47	%
Weighted average expected life (years)		1.19
Share price	$	6.99
Weighted average exercise price	$	87.04
Weighted average fair value	$	0.02

(5)

For the period subsequent to the Transaction, Aeterna contributed revenue of $167 and net loss of $3,632 to the Company’s results. If the acquisition had occurred on January 1, 2024, management estimates that revenue would have been $6,271 and consolidated net loss for the year would have been $16,689. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition had occurred on January 1, 2024.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

The Company incurred acquisition-related costs of $4,081 on legal fees and due diligence costs. These costs have been included in Selling, general and administrative expenses as incurred.

4. Revenue

The Company derives revenue from the transfer of goods at a point in time in the following categories:

Summary of revenue from transfer of goods and services

	2024		2023		2024		2023
	Three months ended				Nine months ended
	September 30,				September 30,
	2024		2023		2024		2023
		$		$		$		$
Active ingredients		1,707		1,952		6,098		5,929
Pharmaceutical		164		-		167		-
Total		1,871		1,952		6,265		5,929

Deferred revenue

The deferred revenue balance primarily relates to the advance consideration received in the form of non-refundable non-creditable upfront payment and milestone payments relating to list price approvals of Ghryvelin™ in the United Kingdom, Spain and Germany as per an exclusive licensing agreement for the commercialization of macimorelin (the “Licensed Product”) in the European Economic Area and the United Kingdom and an exclusive supply agreement for a period of ten years, subject to renewal, to supply such Licensed Product.

Revenue for this contract will be recognized based on units of Licensed Product supplied. The total units that the Company expects to supply pursuant to the Pharmanovia Agreement is an estimate, based on current projections and anticipated market demand, and therefore will be a significant judgment that will be relied upon when using the outputs method to recognize revenue. The Company expects to recognize the balance of the deferred revenue over the remaining period of eight years, subject to extension based on the outcome of the ongoing clinical development related to the Pediatric Indication and related patent application initiatives. For the three months and nine months ended September 30, 2024, the Company recognized $39 and $39 respectively as revenue from the deferred revenue balance originating from the acquisition of Aeterna Zentaris Inc. (note 3).

Liabilities related to contracts with customers

The following table provides a summary of deferred revenue balances:

Summary of deferred revenue

	Current		Non-current		Total
	September 30, 2024
	Current		Non-current		Total
	$		$		$
Pharmanovia		38		1,798		1,836
NK Meditech		8		126		134
Contract liabilities		46		1,924		1,970

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

5. Inventories

The Company had the following inventories at the end of each reporting period:

Schedule of inventories

	September 30,		December 31,
	2024		2023
	$		$
Raw materials		898		889
Work in progress		2,096		2,576
Finished goods		312		544
Inventories		3,306		4,009

Inventories expensed to cost of goods sold during the three-month period ended September 30, 2024, are $887 (September 30, 2023 - $1,147) and the nine-month period ended September 30, 2024, are $3,354 (September 30, 2023 - $3,139).

6. Prepaid expenses and other assets

The Company had the following prepaid expenses at the end of each reporting period:

Summary of prepaid expenses and other current assets

	September 30,		December 31,
	2024		2023
	$		$
Prepaid insurance		1,945		81
Prepaid research and development		569		97
Other		388		112
Total		2,902		290

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

7.	Property and equipment

Components of the Company’s property and equipment are summarized below.

Schedule of property and equipment

	Equipment Not Available for Use			Equipment			Office and Computer Equipment			Buildings			Leasehold Improvements			Total
	Cost
	Equipment Not Available for Use			Equipment			Office and Computer Equipment			Buildings			Leasehold Improvements			Total
	$			$			$			$			$			$
At January 1, 2023		1,462			9,223			681			2,730			6,442			20,538
Additions		683			68			20			-			86			857
Acquisition of Aeterna (note 3)
Amortization
Disposals		-			(438	)		-			-			-			(438	)
Impact of foreign exchange rate changes		54			206			16			64			152			492
At December 31, 2023		2,199			9,059			717			2,794			6,680			21,449
Property plant and equipment		2,199			9,059			717			2,794			6,680			21,449
Acquisition of Aeterna (note 3)		-			124			23			88			-			235
Additions		1,155			69			12			3			12			1,251
Disposals		-			-			(6	)		-			-			(6	)
Impact of foreign exchange rate changes		(21	)		(159	)		(16	)		(28	)		(127	)		(351	)
At September 30, 2024		3,333			9,093			730			2,857			6,565			22,578
Property plant and equipment		3,333			9,093			730			2,857			6,565			22,578

	Accumulated Depreciation
	Equipment Not Available for Use		Equipment			Office and Computer Equipment			Buildings		Leasehold Improvements			Total
	$		$			$			$		$			$
At January 1, 2023		-		4,842			565			997		2,180			8,584
Amortization		-		630			34			287		490			1,441
Disposals		-		(438	)		-			-		-			(438	)
Impact of foreign exchange rate changes		-		114			14			29		60			217
At December 31, 2023		-		5,148			613			1,313		2,730			9,804
Property plant and equipment		-		5,148			613			1,313		2,730			9,804
Amortization		-		473			25			250		373			1,121
Disposals		-		-			(6	)		-		-			(6	)
Impact of foreign exchange rate changes		-		(84	)		(15	)		-		(49	)		(148	)
At September 30, 2024		-		5,537			617			1,563		3,054			10,771
Property plant and equipment		-		5,537			617			1,563		3,054			10,771

	Carrying amount

	Equipment Not Available for Use		Equipment		Office and Computer Equipment		Buildings		Leasehold Improvements		Total
	$		$		$		$		$		$
At December 31, 2023		2,199		3,911		104		1,481		3,950		11,645
Property plant and equipment, Beginning		2,199		3,911		104		1,481		3,950		11,645
At September 30, 2024		3,333		3,556		113		1,294		3,511		11,807
Property plant and equipment, Ending		3,333		3,556		113		1,294		3,511		11,807

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

Depreciation expense is allocated to the following expense categories:

Schedule of depreciation expenses

	Cost of goods sold		Selling, general and administrative		Research and development		Total
	$		$		$		$
Nine Months Ended September 30, 2023		868		216		-		1,084
Nine Months Ended September 30, 2024		796		282		43		1,121

Included right-of-use in the net carrying amount of property and equipment at September 30, 2024, are assets relating to buildings, in the amount of $1,294 (December 31, 2023 - $1,481).

Included in the carrying amount of leasehold improvements is $785 (December 31, 2023 - $800) and included in the carrying amount of equipment not available for use is $3,333 (December 31, 2023 - $2,199) which represent the accumulated expenditures incurred on the purchase of an ethanol recovery system, equipment purchased for technology scale-up, other equipment, and the engineering design for the related construction and installation of the ethanol recovery system. Construction and installation activities related to technology scale-up have progressed since year-end. However, as the activities had not yet been finalized, depreciation on these balances has not commenced.

The Company has entered into a purchase commitment with a European specialized engineering firm for the supply of engineering, services and equipment related to the construction of a PGX-100 pilot plant for $1,134 (€1,015). Payments made toward the purchase are included in the carrying amount of equipment not available for use. As of September 30, 2024, the remaining purchase commitment is $491 (€438) and is expected to be completed in 2024.

8.	Intangible assets

Changes in the carrying value of the Company’s identifiable intangible assets are summarized below.

Schedule of Intangible Assets

	Cost			Accumulated amortization			Carrying value
	As at September 30, 2024
	Cost			Accumulated amortization			Carrying value
	$						$
At January 1, 2024		34			(27	)		7
Acquisition of Aeterna (note 3)		3,352			-			3,352
Amortization		-			(94	)		(94	)
Impairment of intangible assets		(1,459	)		-			(1,459	)
Impact of foreign exchange rate changes		1			-			1
At September 30, 2024		1,928			(121	)		1,807

	As at December 31, 2023
		Cost	Accumulated amortization		Carrying value
		$			$
At January 1, 2023		33	(24	)	9
Acquisition of Aeterna (note 3)		-	-		-
Amortization		-	(2	)	(2	)
Impact of foreign exchange rate changes		1	(1	)	-
At December 31, 2023		34	(27	)	7

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

During the three-month period ended September 30, 2024, the Company concluded an indicator of impairment existed related to its macimorelin patent intangible assets due to the primary efficacy endpoint for the pediatric clinical trial not being met according to the definitions in the study protocol and thus requiring further analysis of the study results. These results require further clarification and some reanalysis with the aim to consider the trial outcome and the strategy moving forward.

As a result, the Company performed an impairment test. The recoverable value of the macimorelin patent intangible assets was based on a fair value less costs of disposal determined using the royalty relief method using discounted cash flow models. Management developed assumptions related to revenue, royalty rates, discount rates and probability of possible scenarios. The royalty rate and the range of discount rates used of 21.7% to 25.8% are key assumptions classified as Level 3 in the fair value hierarchy, as they are not based on observable market data. The Company compared the carrying amount of the intangible asset to the fair value, and the recoverable amount of $1,807 was determined to be lower than the carrying value and a $1,459 impairment loss was recorded in the three months ended September 30, 2024. The recoverable value is sensitive to a change in the probability of possible scenarios and an increase or decrease in those assumptions by 10% would result in a change in the impairment recorded by $375. As at September 30, 2024, there remains significant uncertainty with regards to the trial outcome and the strategy moving forward.

9.	Accounts payable

The Company had the following accounts payable and accrued expenses at the end of each reporting period:

Summary of detailed information about accounts payable and accrued expenses

	September 30,		December 31,
	2024		2023
	$		$
Trade accounts payable		2,396		281
Accrued research and development costs		1,046		-
Accrued employee benefits		432		130
Payroll tax and other statutory liabilities		60		-
Other accrued liabilities		883		601
Accounts Payables and accrued liabilities		4,817		1,012

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

10.

Employee future benefits

The change in the Company’s employee future benefit obligations is summarized as follows:

Summary of net employee future benefit liability asset

	$			$		$
	Nine months ended September 30, 2024
	Pension			Other
	benefit plans			benefit plans		Total
	$			$		$
Change in plan liabilities
Balances – Beginning of the period		-			-		-
Acquisition of Aeterna (note 3)		22,036			100		22,136
Current service cost		42			4		46
Interest cost		271			1		272
Actuarial loss from changes in financial assumptions		936			1		937
Benefits paid		(251	)		-		(251	)
Impact of foreign exchange rate changes		696			1		697
Balances – End of the period		23,730			107		23,837

Change in plan assets
Balances – Beginning of the period		-			-		-
Acquisition of Aeterna Zentaris Inc. (note 3)		10,972			-		10,972
Interest income from plan assets		136			-		136
Employer contributions		13			-		13
Employee contributions		4			-		4
Benefits paid		(87	)		-		(87	)
Impact of foreign exchange rate changes		346			-		346
Balances – End of the period		11,384			-		11,384

Net liability of the unfunded plans		11,584			107		11,691
Net liability of the funded plans		762			-		762
Net amount recognized as Employee future benefits		12,346			107		12,453

Amounts recognized:
In net loss		173			6		179
Actuarial loss on defined benefit plans in other comprehensive loss		(936	)		-		(936	)

The calculation of the employee future benefit obligation is sensitive to the discount rate assumption and other assumptions such as the rate of the pension benefit increase. Discount rates were 3.40% as of September 30, 2024, and 3.70% as of June 3, 2024, causing the variances in the actuarial loss on defined benefit plan during the nine months ended September 30, 2024.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

11.

Warrants

Warrant activity for the nine months ended September 30, 2024, was as follows:

Summary of warrants activity reclassified equity

	Warrants			Weighted average exercise price		Amount
	#			$		$
Balance – December 31, 2023		-			-		-
Warrants either issued or assumed as part of the acquisition of Aeterna (note 3)		747,948			13.32		4,424
Exercised		(60,167	)		0.01		(386	)
Expired		(13,249	)		165.00		-
Change in fair value of warrants		-			-		(1,895	)
Balance – September 30, 2024		674,532			11.53		2,143

The method and inputs used in estimating the fair value of warrants on the acquisition date are described in Note 3. The fair values of warrants as at September 30, 2024 are estimated using the Black-Scholes option pricing model. The weighted average assumptions used in the Black-Scholes valuation model for the period presented were as follows:

Summary of fair values of warrants assumptions

	September 30, 2024
Expected dividend yield	$	0.00
Expected volatility		65.00	%
Risk-free annual interest rate		4.47	%
Expected life (years)		2.67
Weighted average share price	$	3.75
Weighted average exercise price	$	11.53

At September 30, 2024, the following warrants were outstanding:

Schedule of warrants outstanding

Issuance date	Number		Weighted average remaining contractual life		Weighted average exercise price
	#		years		$
February 2020		11,129		1.35		129.12
July 2020		56,210		0.89		45.00
August 2020		17,310		0.89		47.00
February 2021		16,507		1.39		181.25
June 2024		573,376		0.76		0.01
Balance – September 30, 2024		674,532		2.67		11.53

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

12.

Deferred share units

The Company grants deferred share units (“DSUs”) to members of its Board of Directors and DSUs cannot be redeemed until the holder is no longer a director of the Company. Under the terms of the Long-Term Incentive Plan (“LTIP”), DSUs vest immediately and can either be settled via equity issuance or a cash payment, which is determined by the Board of Directors on the date of issuance for each grant. Each DSU settled by the issuance of one common share of the Company, net of applicable withholding taxes, is classified as equity-settled, while the DSUs settled by cash payment are classified as cash-settled.

Cash-settled deferred share units

The compensation expense for the nine months ended September 30, 2024, was a gain of $131 (2023 - nil) and is presented in selling, general and administrative expenses. Cash-settled DSU activity for the nine months ended September 30, 2024, was as follows:

Summary of number and weighted average exercise prices of cash settled deferred shares units

	Units			Amount
	#			$
Balance – January 1, 2024		-			-
Granted – Replacement awards (note 3)		49,230			344
Exercised		(12,250	)		(74	)
Change in fair value of cash-settled DSUs		-			(131	)
Balance – September 30, 2024		36,980			139

The method and inputs used in estimating the fair value of DSUs on the acquisition date are described in Note 3. The fair value of the liability, classified as DSU liability, is subsequently remeasured at each reporting date and at settlement date, with changes in fair value recognized in profit or loss.

Equity-settled deferred share units

The compensation expense for the nine months ended September 30, 2024, was $411 (2023 - $nil) and is presented in selling, general and administrative expenses. Equity-settled DSU activity for the nine months ended September 30, 2024, was as follows:

Summary of number and weighted average exercise prices of equity settled deferred shares units

	2024		Amount
	#		$
Balance – January 1, 2024		-		-
Granted		65,000		411
Balance – September 30, 2024		65,000		411

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

13.

Shareholders’ equity

Share capital

The Company has authorized an unlimited number of common shares (being voting and participating shares) with no par value, as well as an unlimited number of preferred, first and second ranking shares, issuable in series, with rights and privileges specific to each class, with no par value.

Summary of share capital

	Common shares		Amount
	#		$
Balance – December 31, 2023		1,847,593		13,517
Deemed issuance of shares to Aeterna shareholders (note 3)		1,213,967		8,485
Granted		60,167		386
Balance – September 30, 2024		3,121,727		22,388

As discussed in Note 1, Business Overview, on June 3, 2024, each outstanding Ceapro common share was exchanged for 0.02360 of an Aeterna common share. Accordingly, all common shares, stock options and per share amounts in these interim condensed consolidated financial statements have been retroactively adjusted for all periods presented to give effect to the share exchange.

Share-based compensation

The Company grants stock options to eligible employees, directors, officers, and consultants under stock option plans. In accordance with the terms of the Plan of Arrangement, the 12,949 share-based payment awards held by employees of Aeterna prior to the transaction date of June 3, 2024 are deemed to be replacement awards issued with no modifications. Furthermore, in the nine months ended September 30, 2024, the Company granted nil (2023 – 21,004) new stock options. The stock options have a term of seven years and will vest over a period of three years. The fair value at grant date is estimated using a Black-Scholes option pricing model, considering the terms and conditions upon which the options were granted, using the following assumptions:

Summary of assumptions to determine share-based compensation options granted

	September 30, 2023
Expected dividend yield	$	0.00
Expected volatility		65.00	%
Risk-free annual interest rate		3.23	%
Expected life (years)		5.0
Share price	$	19.06
Exercise price	$	19.06
Grant date fair value	$	11.00

The expected volatility of these stock options was determined using historical volatility rates and the expected life was determined using the weighted average life of past options issued.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

The compensation expense for the three months ended September 30, 2024, was $29 (2023 – $43) and for the nine months ended September 30, 2024, was $43 (2023 – $142) recognized over the vesting period. Option activity for the nine months ended September 30, 2024, and 2023, was as follows:

Summary of number and weighted average exercise prices of deferred shares units

	Stock options			Weighted average exercise price
	#			$
Balance – January 1, 2024		74,371			20.74
Granted - Replacement options (note 3)		12,949			50.65
Exercised		(1,416	)		2.93
Cancelled / Forfeited		(7,258	)		34.90
Balance – September 30, 2024		80,062			12.50

	Stock options		Weighted average exercise price
	#		$
Balance – January 1, 2023	64,735		20.53
Granted	21,712		19.06
Exercised	(1,416	)	2.93
Cancelled / Forfeited	(5,939	)	19.06
Balance – September 30, 2023	79,091		20.53

Concurrent with the Transaction described in Note 1, Business Overview, on June 3, 2024, each outstanding stock option was reissued to reflect the exchange rate of the Company’s common shares and to convert the exercise price into U.S. dollar. Accordingly, all quantities and prices in these interim condensed consolidated financial statements have been retroactively adjusted for all periods presented to give effect to the share exchange and related adjustments.

14.

Fair value of financial instruments

The following presents financial assets and liabilities measured at fair value in the statement of financial position in accordance with the fair value hierarchy.

In establishing fair value, the Company uses a fair value hierarchy based on levels as defined below:

	●	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities at the reporting date;
	●	Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and
	●	Level 3: inputs that are based on little or no observable market data, therefore requiring entities to develop their own assumptions.

The Company has determined that, excluding the derivative, the carrying amounts of its current financial assets and financial liabilities approximate their fair value given the short-term nature of these instruments.

As at September 30, 2024 and December 31, 2023, the New Warrants and DSUs are the only financial instruments measured at fair value in the condensed interim consolidated statement of financial position. The New Warrants having an exercise price of $0.01 and DSUs of $nil are classified in level 2 and their fair value has been estimated by reference to the quoted price of the underlying shares at the reporting date. The fair value of warrants deemed issued to Aeterna warrant holders is measured at fair value are classified in level 3.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

15.

Supplemental disclosure of cash flow information

Summary of changes in operating assets and liabilities

	2024			2023			2024			2023
	Three months ended						Nine months ended
	September 30,						September 30,
	2024			2023			2024			2023
		$			$			$			$
Changes in operating assets and liabilities:
Trade and other receivables		(978	)		429			(1,662	)		1,356
Inventory		(206	)		(169	)		688			(1,203	)
Prepaid expenses and other current assets		266			(82	)		(1,627	)		(56	)
Payables and accrued liabilities		(3,566	)		558			(983	)		(408	)
Deferred revenues		217			-			217			-
Provision for restructuring and other costs		273			-			274			-
Employee future benefits		(131	)		-			(175	)		-
Increase (decrease) in operating assets and liabilities		(4,125	)		736			(3,268	)		(311	)

Additions of property and equipment of $0.5 million for the nine-months ended September 30, 2024 (2023 - nil) were acquired on deferred payment terms, the settlement of which are still outstanding at period end.

16.

Net loss per share

The following table sets forth pertinent data relating to the computation of basic and diluted net loss per share attributable to common shareholders.

Summary of pertinent data relating to computation of basic and diluted net loss per share

	2024			2023			2024			2023
	Three months ended						Nine months ended
	September 30,						September 30,
	2024			2023			2024			2023
	$			$			$			$
Net loss		(5,755	)		(776	)		(8,578	)		(1,921	)
Basic and diluted weighted-average shares outstanding		3,106,503			1,847,678			2,394,927			1,847,068

Basic and diluted loss per share		(1.85	)		(0.42	)		(3.58	)		(1.04	)

Items excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:
Stock options and DSUs		182,042			79,091			182,042			79,091
Warrants		674,532			-			674,532			-

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

17.

Segment information

As of September 30, 2024 and a result of the transaction, the Company has two reportable and operating segments: Active ingredient and Biopharmaceutical. The Company’s chief operating decision maker assesses the performance of the reportable segments based on revenues and operating loss before selling, general & administrative expenses, other income and tax by segment. Selling, general and administrative expenses are expenses and salaries related to centralized functions, such as corporate finance, legal, human resources and technology teams, which are not allocated to segments. Accounting policies applied for the Active ingredient and the Biopharmaceutical segments are identical to those used for the purposes of the consolidated financial statements as described in Note 2.

Active ingredient

The Active ingredient segment involves the development of proprietary extraction technologies and the application of these technologies to the production and development and commercialization of active ingredients derived from oats and other renewable plant resources for healthcare and cosmetic industries. Active ingredients produced include oat beta glucan, oat oil and avenanthramides. These and similar manufactured products are sold primarily through distribution networks.

Biopharmaceutical

The Biopharmaceutical segment includes the results of Aeterna Zentaris from its acquisition on June 3, 2024 (Note 3). The segment involves the commercializing and developing pharmaceutical therapeutics and diagnostic tests, including the Company’s lead product, Macrilen^®(macimorelin). The segment also includes costs associated with the development of our pre-clinical pipeline to potentially address unmet medical needs across several indications with a focus on rare or orphan indications.

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

The table below summarizes the relevant financial information by operating segment:

Summary relevant financial information by operating segment

	Active ingredient			Biopharmaceutical			Total
	Three months ended September 30, 2024
	Active ingredient			Biopharmaceutical			Total
	$			$			$
Revenue		1,707			164			1,871
Cost of sales		(839	)		(75	)		(914	)
Gross margin		868			89			957
Research and development		(599	)		(2,200	)		(2,799	)
Impairment of intangible assets		-			(1,459	)		(1,459	)
Loss from operations before SG&A and other income (expenses)		269			(3,570	)		(3,301	)
Selling, general & administrative								(2,992	)
Loss from operations								(6,293	)
Net other income								426
Loss before income taxes								(5,867	)

	Active ingredient			Biopharmaceutical		Total
	Three months ended September 30, 2023
	Active ingredient			Biopharmaceutical		Total
	$			$		$
Revenue		1,952			-		1,952
Cost of sales		(1,147	)		-		(1,147	)
Gross margin		805			-		805
Research and development		(436	)		-		(436	)
Income from operations before SG&A and other income (expenses)		369			-		369
Selling, general & administrative							1,480
Loss from operations							(1,111	)
Net other income							(123	)
Loss before income taxes							(988	)

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

	Active ingredient			Biopharmaceutical			Total
	Nine months ended September 30, 2024
	Active ingredient			Biopharmaceutical			Total
	$			$			$
Revenue		6,098			167			6,265
Cost of sales		(3,506	)		(79	)		(3,585	)
Gross margin		2,592			88			2,680
Research and development		(2,443	)		(2,948	)		(5,391	)
Impairment of intangible assets		-			(1,459	)		(1,459	)
Loss from operations before SG&A and other income (expenses)		149			(4,319	)		(4,170	)
Selling, general & administrative								(7,702	)
Loss from operations								(11,872	)
Net other income								2,296
Loss before income taxes								(9,576	)

	Active ingredient			Biopharmaceutical		Total
	Nine months ended September 30, 2023
	Active ingredient			Biopharmaceutical		Total
	$			$		$
Revenue		5,929			-		5,929
Cost of sales		(3,139	)		-		(3,139	)
Gross margin		2,790			-		2,790
Research and development		1,551			-		(1,551	)
Income from operations before SG&A and other income (expenses)		1,239			-		1,239
Income (Loss) from operations before SG&A and other income (expenses)		1,239			-		1,239
Selling, general & administrative							(3,832	)
Loss from operations							(2,593	)
Net other income							147
Loss before income taxes							(2,446	)

Major Customer

During the three months ended September 30, 2024, the Company had export sales to one major distributor of the Company’s products representing 72% of total revenue (2023 - 93% of total revenue). During the nine months ended September 30, 2024, the Company had export sales to one major distributor of the Company’s products representing 85% of total revenue (2023 - 90% of total revenue). As at September 30, 2024, one customer represented 69% of total trade and other receivables (September 30, 2023 – one major customer amounted to 80%).

COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

18. Commitments

Significant expenditure under contracted supply agreements for at the end of the reporting period but not recognized as liabilities is as follows:

Schedule of expected future minimum lease payments

	TOTAL
	$
Less than 1 year		2,715
1 - 3 years		56
4 - 5 years		-
More than 5 years		-
Minimum lease payments, net		2,771

The Company executed various agreements including in-licensing and similar arrangements with development partners. Such agreements may require the Company to make payments on achievement of stages of development, launch or revenue milestones, although the Company generally has the right to terminate these agreements at no penalty. The Company may have to pay up to $30,016 upon achieving certain sales volumes, regulatory or other milestones related to specific products.

In addition, the Company previously entered into license agreements with Agriculture Canada (AG) for a technology to increase the concentration of avenanthramides in selected oat and with University of Alberta for a Pressurized Gaz expanded Technology (PGX) for the processing of various polymers. Royalties percentage rate would be 2% strictly for sales made from avenanthramides produced from the AG technology while royalty percentage rates would range between1.0% to 3.5% for sales made from products manufactured using the PGX Technology, the rate being according to the classification of the resulting product (cosmeceutical, nutraceutical, pharmaceutical).

The Company has entered into a purchase commitment with a European specialized engineering firm for the supply of engineering, services and equipment related to the construction of a PGX-100 pilot plant (note 7). As of September 30, 2024 the remaining purchase commitment is $491 (€438) and is expected to be completed in 2024.

COSCIENS Biopharma (CSCI) 6-KManagement’s Discussion and Analysis of Financial Condition and Results of Operations