Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

August 11, 2023

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-Q

______________________________________

(Mark One)

 

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

 

For the quarterly period ended June 30, 2023

or

 

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

For the transition period from to

Commission file number: 001-35776

______________________________________

Acasti Pharma Inc.

(Exact name of registrant as specified in its charter)

______________________________________

Québec, Canada

98-1359336

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

2572 boul. Daniel-Johnson, 2nd Floor

Laval, Québec, Canada H7T 2R3

(Address of principal executive offices, including zip code)

450-686-4555

(Registrants telephone number, including area code)

______________________________________

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, no par value per share

ACST

NASDAQ Stock Market

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

The number of outstanding common shares of the registrant, no par value per share, as of August 9, 2023, was 7,448,033.

 


 

ACASTI PHARMA INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended June 30, 2023

Table of Contents

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

4

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

36

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

36

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains information that may be 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 quarterly report as forward-looking information. Forward- looking information can be identified by the use of terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not statements about the present or historical facts.

Although the forward-looking statements in this quarterly report are based upon what we believe are reasonable assumptions, you should not place undue reliance on those forward-looking statements since actual results may vary materially from them.

 

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

We are heavily dependent on the success of our lead drug candidate, GTX-104.
Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. Failure can occur at any stage of clinical development.
We are subject to uncertainty relating to healthcare reform measures and reimbursement policies which, if not favorable to our drug candidates, could hinder or prevent our drug candidates’ commercial success.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our drug products, if approved, we may be unable to generate any revenue.
If we are unable to differentiate our drug products from branded reference drugs or existing generic therapies for similar treatments, or if the U.S. Food and Drug Administration (“FDA”) or other applicable regulatory authorities approve products that compete with any of our drug products, our ability to successfully commercialize our drug products would be adversely affected.

2


 

Our success depends in part upon our ability to protect our intellectual property for our drug candidates.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
We do not have internal manufacturing capabilities, and if we fail to develop and maintain supply relationships with various third-party manufacturers, we may be unable to develop or commercialize our drug candidates.
The design, development, manufacture, supply, and distribution of our drug candidates are highly regulated and technically complex.
If we fail to meet applicable listing requirements, the Nasdaq Stock Market may delist our common shares from trading, in which case the liquidity and market price of our common shares could decline.
The other risks and uncertainties identified in Item 1A. Risk Factors included in our Annual Report on Form 10-K for the year ended March 31, 2023.

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

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

Except as otherwise indicated, references in this quarterly report to “Acasti,” “the Corporation,” “we,” “us” and “our” refer to Acasti Pharma Inc. and its consolidated subsidiaries.


 

3


 

PART I. FINANCIAL INFORMATION

Item 1: Financial Information

Unaudited Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Balance Sheets

5

 

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

6

 

Condensed Consolidated Interim Statements of Shareholders’ Equity

7

Condensed Consolidated Interim Statements of Cash Flows

8

Notes to the Condensed Consolidated Interim Financial Statements

9

 

 

4


 

ACASTI PHARMA INC.

Condensed Consolidated Interim Balance Sheet

(Unaudited)

 

 

 

 

 

June 30, 2023

 

March 31,
2023

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

 

Notes

 

$

 

$

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

21,633

 

27,875

Short-term investments

 

5

 

15

 

15

Receivables

 

4

 

837

 

802

Prepaid expenses

 

 

 

1,127

 

598

Total current assets

 

 

 

23,612

 

29,290

 

 

 

 

 

 

 

Operating lease right of use asset

 

 

 

71

 

463

Equipment

 

 

 

84

 

104

Intangible assets

 

 

 

41,128

 

41,128

Goodwill

 

 

 

8,138

 

8,138

Total assets

 

 

 

73,033

 

79,123

 

 

 

 

 

 

 

Liabilities and Shareholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Trade and other payables

 

7

 

1,886

 

3,336

Operating lease liability

 

8

 

80

 

75

Total current liabilities

 

 

 

1,966

 

3,411

 

 

 

 

 

 

 

Operating lease liability

 

 

 

 

410

Deferred tax liability

 

 

 

7,057

 

7,347

Total liabilities

 

 

 

9,023

 

11,168

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Common shares, no par value per share; unlimited shares authorized as of June 30, 2023 and March 31, 2023; 7,435,533 shares issued and outstanding as of June 30, 2023 and March 31, 2023

 

9(a)

 

258,294

 

258,294

Additional paid-in capital

 

 

 

14,043

 

13,965

Accumulated other comprehensive loss

 

 

 

(6,038)

 

(6,038)

Accumulated deficit

 

 

 

(202,289)

 

(198,266)

Total shareholders' equity

 

 

 

64,010

 

67,955

 

 

 

 

 

 

 

Commitments and contingencies

 

14

 

 

 

 

Total liabilities and shareholders’ equity

 

 

 

73,033

 

79,123

 

See accompanying notes to unaudited interim financial statements.

5


 

ACASTI PHARMA INC.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

(Unaudited)

 

 

 

 

Three months ended

 

 

 

 

June 30, 2023

 

 

June 30,
2022

 

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

 

Notes

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development expenses, net of government assistance

 

6

 

 

(1,095

)

 

 

(2,590

)

General and administrative expenses

 

 

 

 

(1,763

)

 

 

(1,919

)

Sales and marketing

 

 

 

 

(111

)

 

 

(221

)

Restructuring cost

 

15

 

 

(1,485

)

 

 

 

Loss from operating activities

 

 

 

 

(4,454

)

 

 

(4,730

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange gain (loss)

 

 

 

 

8

 

 

 

(78

)

Change in fair value of warrant liabilities

 

 

 

 

 

 

 

10

 

Interest income and other expense

 

 

 

 

134

 

 

 

32

 

Total other income (loss), net

 

 

 

 

142

 

 

 

(36

)

Loss before income tax recovery

 

 

 

 

(4,312

)

 

 

(4,766

)

 

 

 

 

 

 

 

 

 

Income tax recovery

 

 

 

 

289

 

 

 

242

 

 

 

 

 

 

 

 

 

 

Net loss and total comprehensive loss

 

 

 

 

(4,023

)

 

 

(4,524

)

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share

 

11

 

 

(0.54

)

 

 

(0.61

)

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

7,435,533

 

 

 

7,388,065

 

See accompanying notes to unaudited interim financial statements

6


 

ACASTI PARMA INC.

Condensed Consolidated Interim Statements of Shareholders' Equity

(Unaudited)

 

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Notes

 

 

Number

 

 

Dollar

 

 

Additional
paid-in
capital

 

 

Accumulated
other
comprehensive
loss

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Balance, March 31, 2023

 

 

 

 

 

7,435,533

 

 

 

258,294

 

 

 

13,965

 

 

 

(6,038

)

 

 

(198,266

)

 

 

67,955

 

Net loss and total comprehensive loss for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,023

)

 

 

(4,023

)

Stock-based compensation

 

 

10

 

 

 

 

 

 

 

 

 

78

 

 

 

 

 

 

 

 

 

78

 

Balance at June 30, 2023

 

 

 

 

 

7,435,533

 

 

 

258,294

 

 

 

14,043

 

 

 

(6,038

)

 

 

(202,289

)

 

 

64,010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Notes

 

Number

 

 

Dollar

 

 

Additional
paid-in
capital

 

 

Accumulated
other
comprehensive
loss

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Balance, March 31, 2022

 

 

 

 

7,381,425

 

 

 

257,990

 

 

 

12,154

 

 

 

(6,037

)

 

 

(155,837

)

 

 

108,270

 

Net loss and total comprehensive loss for the period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,524

)

 

 

(4,524

)

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Stock-based compensation

 

10

 

 

 

 

 

 

 

 

464

 

 

 

 

 

 

 

 

 

464

 

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

 

 

 

 

34,335

 

 

 

195

 

 

 

 

 

 

 

 

 

 

 

 

195

 

Balance at June 30, 2022

 

 

 

 

7,415,760

 

 

 

258,185

 

 

 

12,618

 

 

 

(6,039

)

 

 

(160,361

)

 

 

104,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7


 

ACASTI PHARMA INC.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

 

 

 

Three months ended

 

 

 

 

June 30, 2023

 

 

June 30,
2022

 

(Expressed in thousands of U.S. dollars)

 

Notes

 

$

 

 

$

 

Cash flows used in operating activities:

 

 

 

 

 

 

 

 

Net loss for the period

 

 

 

 

(4,023

)

 

 

(4,524

)

Adjustments:

 

 

 

 

 

 

 

 

Depreciation of equipment

 

 

 

 

7

 

 

 

167

 

Stock-based compensation

 

10

 

 

78

 

 

 

464

 

Change in fair value of warrant liabilities

 

 

 

 

 

 

 

(10

)

Income tax recovery

 

 

 

 

(289

)

 

 

(242

)

Unrealized foreign exchange (gain) loss

 

 

 

 

 

 

 

(10

)

Write-off of equipment

 

 

 

 

13

 

 

 

 

Changes in operating assets and liabilities

 

12

 

 

(2,026

)

 

 

(1,271

)

Net cash used in operating activities

 

 

 

 

(6,240

)

 

 

(5,426

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of equipment

 

 

 

 

 

 

 

(7

)

Acquisition of short-term investments

 

 

 

 

 

 

 

(16

)

Maturity of short-term investment

 

 

 

 

 

 

 

13,281

 

Net cash from investing activities

 

 

 

 

 

 

 

13,258

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

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

 

(9a)

 

 

 

 

 

195

 

Net cash from financing activities

 

 

 

 

 

 

 

195

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

 

 

 

 

(2

)

 

 

11

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

 

 

(6,242

)

 

 

8,038

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

 

 

27,875

 

 

 

30,339

 

Cash and cash equivalents, end of period

 

 

 

 

21,633

 

 

 

38,377

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents are comprised of:

 

 

 

 

 

 

 

 

Cash

 

 

 

 

5,413

 

 

 

38,377

 

Cash equivalents

 

 

 

 

16,220

 

 

 

 

 

See accompanying notes to unaudited interim financial statements.

8


 

 

ACASTI PHARMA INC.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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

1. Nature of operation

Acasti Pharma Inc. (“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 2572 boul. Daniel-Johnson, 2nd Floor Laval, Québec, Canada H7T 2R3.

 

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

 

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

 

The Corporation has incurred operating losses and negative cash flows from operations in each year since its inception. The Corporation expects to incur significant expenses and continued operating losses for the foreseeable future.

 

In May 2023, the Corporation implemented a strategic realignment plan to enhance shareholder value that resulted in the Corporation engaging a new management team, streamlining its research and development activities to concentrate on its lead product, GTX 104, and greatly reducing its workforce. Moving forward, the Corporation plans to build a smaller, more focused organization in the United States. Further development of GTX-102 and GTX-101 will occur at such time as additional funding is obtained or strategic partnerships are entered into. This strategic realignment is expected to significantly reduce administrative and research and development expenses and enable the Corporation to extend its available cash resources to the second calendar quarter of 2025.

 

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

 

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

Reverse stock split

On June 29, 2023, the Board of Directors of the Corporation approved an amendment to the Corporation's Articles of Incorporation to implement a reverse stock split of the Corporation's Class A common shares, no par value per share, at a ratio of 1-for-6 (the “Reverse Stock Split”). On July 4, 2023, the Corporation filed Articles of Amendment to its Articles of Incorporation with the Registraire des entreprises du Québec, to implement the Reverse Stock Split. All references in these financial statements to number of common shares, warrants and

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options, price per share and weighted average number of shares outstanding have been adjusted to reflect the Reverse Stock Split, which became effective on July 10, 2023.

2. Summary of significant accounting policies:

Basis of presentation

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

 

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements as of and for the year ended March 31, 2023, and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Corporation’s consolidated financial position as of June 30, 2023, the consolidated results of its operations for the three months ended June 30, 2023 and 2022, its statements of shareholders’ equity for the three months ended June 30, 2023 and 2022 and its consolidated cash flows for the three months ended June 30, 2023 and 2022.

 

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

 

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

 

Use of estimates

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

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

Estimates and assumptions include the measurement of stock-based compensation, accruals for research and development contracts and contract organization agreements, and valuation of intangibles and goodwill. Estimates and assumptions are also involved in measuring the accrual of services rendered with respect to research and development expenditures at each reporting date, and determining which research and development expenses qualify for research and development tax credits and in what amounts. The Corporation recognizes the tax credits once it has reasonable assurance that they will be realized.

3. Recent accounting pronouncements

 

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

 

4. Receivables

 

 

 

 

June 30, 2023

 

March 31,
2023

 

 

Notes

 

$

 

$

Sales tax receivables

 

 

 

426

 

338

Government assistance

 

6

 

361

 

412

Interest receivable

 

 

 

50

 

52

Total receivables

 

 

 

837

 

802

 

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5. Short-term investments

 

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

 

June 30, 2023

 

 

March 31,
2023

 

 

$

 

 

$

 

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

 

 

15

 

 

 

15

 

Total short-term investments

 

 

15

 

 

 

15

 

 

 

6. Government assistance

 

June 30, 2023

 

 

March 31, 2023

 

 

$

 

 

$

 

Investment tax credit

 

 

361

 

 

 

412

 

 

Government assistance is comprised of research and development investment tax credits from the Québec provincial government, which relate to qualifiable research and development expenditures under the applicable tax laws. The amounts recorded as receivables are subject to a government tax audit and the final amounts received may differ from those recorded. For the three months ended June 30, 2023 and 2022, the Corporation recorded $(51) and $41, respectively, as an increase and a reduction of research and development expenses in the Statement of Loss and Comprehensive Loss.

 

Unrecognized Canadian federal tax credits may be used to reduce future Canadian federal income tax and expire as follows:

 

 

 

$

 

 2029

 

9

 

 2030

 

 

23

 

 2031

 

 

36

 

 2032

 

 

345

 

 2033

 

 

353

 

 2034

 

 

348

 

 2035

 

 

415

 

 2036

 

 

229

 

 2037

 

 

252

 

 2038

 

 

259

 

 2039

 

 

355

 

 2040

 

 

226

 

 2041

 

 

146

 

 2042

 

 

312

 

 2043

 

 

642

 

 

 

3,950

 

 

7. Trade and other payables

 

 

June 30, 2023

 

 

March 31, 2023

 

 

 

$

 

 

$

 

Trade payables

 

 

607

 

 

 

1,242

 

Accrued liabilities and other payables

 

 

994

 

 

 

946

 

Employee salaries and benefits payable

 

 

285

 

 

 

1,148

 

Total trade and other payables

 

 

1,886

 

 

 

3,336

 

 

8. Leases

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

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

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

 

Operating cash flows for operating lease

 

$

24

 

Weighted-average remaining lease term (in years)

 

 

0.75

 

Weighted-average discount rate

 

 

4.3

%

 

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

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

 

 

June 30, 2023

 

 

 

$

 

2024

 

 

81

 

2025 and thereafter

 

 

-

 

Total lease payments

 

 

81

 

Less: interest

 

 

(1

)

Total lease liability

 

 

80

 

 

9. Capital and other components of equity

 

a. Common Shares

Authorized capital stock

Unlimited number of shares

Class A shares (Common Shares), voting (one vote per share), participating and without par value. As of June 30, 2023, there were 7,435,533 Class A shares issued and outstanding.
Class B shares, voting (ten votes per share), non-participating, without par value and maximum annual non-cumulative dividend of 5% on the amount paid per share. Class B shares are convertible, at the holder’s discretion, into Class A shares (Common Shares), on a one-for-one basis, and Class B shares are redeemable at the holder’s discretion for CAD $4.80 per share, subject to certain conditions. As of June 30, 2023, there were no Class B shares issued and outstanding.
Class C shares, non-voting, non-participating, without par value and maximum annual non-cumulative dividend of 5% on the amount paid per share. Class C shares are convertible, at the holder’s discretion, into Class A shares (Common Shares), on a one-for-one basis, and Class C shares are redeemable at the holder’s discretion for CAD $1.20 per share, subject to certain conditions. As of June 30, 2023, there were no Class C shares issued and outstanding.
Class D and E shares, they are non-voting, non-participating, without par value and maximum monthly non-cumulative dividend between 0.5% and 2% on the amount paid per share. Class D and E shares are convertible, at the holder’s discretion, into 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. As of June 30, 2023, there were no Class D or E shares issued and outstanding.

 

At-the-Market (“ATM”) Program

 

On June 29, 2020, the Corporation entered into an amended and restated sales agreement (the “Sales Agreement”) with B. Riley FBR, Inc. ("B.Riley"), Oppenheimer & Co. Inc. and H.C. Wainwright & Co., LLC (collectively, the “Agents”) to amend the Corporation’s existing ATM program. Under the terms of the Sales Agreement, which had a three-year term, the Corporation could issue and sell from time-to-time common shares having aggregate gross proceeds of up to $75,000,000 through the Agents. Subject to the terms and conditions of the

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Sales Agreement, the Agents would use their commercially reasonable efforts to sell the common shares from time to time, based upon the Corporation’s instructions. The Corporation had no obligation to sell any of the common shares and could, at any time, suspend sales under the Sales Agreement. The Corporation and the Agents could terminate the Sales Agreement in accordance with its terms. Under the terms of the Sales Agreement, the Corporation provided the Agents with customary indemnification rights and the Agents were entitled to compensation at a commission rate equal to 3.0% of the gross proceeds from each sale of the common shares. The Sales Agreement expired pursuant to its terms on June 29, 2023 and the Corporation plans to revisit the renewal of a facility in the coming months.

 

On November 10, 2021, the Corporation filed a prospectus supplement relating to its at-the-market program, expiring July 7, 2023, with B. Riley, Oppenheimer& Co. Inc. and H.C. Wainwright & Co., LLC acting as agents. Under the terms of the ATM Sales Agreement and the prospectus supplement, the Corporation may issue and sell from time-to-time common shares having an aggregate offering price of up to $75,000,000 through the agents; however, our use of the shelf registration statement on Form S-3 will be limited for so long as we are subject to General Instruction I.B.6 of Form S-3, which limits the amounts that we may sell under the registration statement and in accordance with the ATM agreement. The common shares will be distributed at market prices prevailing at the time of the sale and, as a result, prices may vary between purchasers and during the period of distribution. The volume and timing of sales under the ATM program, if any, will be determined at the sole discretion of the Corporation’s board of directors and management.

During the three months ended June 30, 2023, no common shares were sold under the ATM program. During the three months ended June 30, 2022, 34,335 common shares were sold for total net proceeds of approximately $195 with commissions, legal expenses and costs related to the share sale amounting to $6. The common shares were sold at the prevailing market prices, which resulted in an average price of approximately $5.82 per share.

 

b. Warrants

 

During the three month period ended June 30, 2023, the remaining 137,370 warrants to acquire one common share at an exercise price of CAD $62.88 expired on May 9, 2023.

10. Stock-based compensation

 

At June 30, 2023, the Corporation had in place a stock option plan for directors, officers, employees, and consultants of the Corporation (“Stock Option Plan”).

 

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

 

The total number of options issued to any one consultant within any twelve-month period cannot exceed 2% of the Corporation’s total issued and outstanding common shares (on a non-diluted basis). The Corporation is not authorized to grant within any twelve-month period such number of options under the Stock Option Plan that could result in a number of common shares issuable pursuant to options granted to (a) related persons exceeding 2% of the Corporation’s issued and outstanding common shares (on a non-diluted basis) on the date an option is granted, or (b) any one eligible person in a twelve-month period exceeding 2% of the Corporation’s issued and outstanding common shares (on a non-diluted basis) on the date an option is granted.

 

The following table summarizes information about activities within the Stock Option Plan for the three month period ended June 30, 2023: