Item 1: Financial Information
Unaudited Interim Condensed Consolidated Financial
Statements
Acasti pharma INC.
Interim Condensed Consolidated Balance Sheet
(Unaudited)
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June 30,
2020
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March 31,
2020
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(thousands of US dollars)
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Notes
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|
$
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|
|
$
|
|
Assets
|
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|
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Current assets:
|
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|
|
|
|
|
|
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Cash and cash equivalents
|
|
|
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|
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|
12,122
|
|
|
|
14,240
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|
Receivables
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|
495
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|
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|
546
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|
Current- other assets
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4
|
|
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|
499
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|
195
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|
Deferred financing costs
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|
130
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|
121
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|
Prepaid expenses
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|
718
|
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|
|
977
|
|
Total current assets
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|
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|
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|
13,964
|
|
|
|
16,079
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|
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|
|
|
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|
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|
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Other assets
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4
|
|
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|
192
|
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|
473
|
|
Equipment
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|
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1,926
|
|
|
|
1,910
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|
Right of Use Asset
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|
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|
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|
|
135
|
|
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|
147
|
|
Intangible assets
|
|
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3,925
|
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|
|
4,244
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Total assets
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20,142
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22,853
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Liabilities and Equity
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Current liabilities:
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Trade and other payables
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5,900
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7,319
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Lease Liability
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|
79
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|
76
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Total current liabilities
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5,979
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7,395
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Derivative warrant liabilities
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5, 6(c)
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3,071
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2,393
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Lease liability
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56
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|
71
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Total liabilities
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9,106
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9,859
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Equity:
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Common shares
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139,189
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137,424
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Additional paid-in capital
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10,432
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9,797
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Accumulated other comprehensive loss
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(7,579
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)
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(7,887
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)
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Accumulated deficit
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(131,006
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)
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(126,340
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)
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Total shareholder’s equity
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11,036
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12,994
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Commitments and contingencies
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11
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Total liabilities and shareholders’ equity
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20,142
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22,853
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See accompanying notes to unaudited interim condensed
financial statements.
Acasti pharma INC.
Interim Condensed Consolidated Statements of Loss and
Comprehensive Loss
(Unaudited)
Three-month periods ended June 30, 2020 and June 30, 2019
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June 30,
2020
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June 30,
2019
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(note 12)
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(thousands of US dollars, except per share data)
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Notes
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$
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$
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|
|
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Research and development expenses, net of government assistance
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7
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(1,756
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)
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(6,190
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)
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General and administrative expenses
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(1,649
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)
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(1,116
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)
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Sales and marketing expenses
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(716
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)
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(700
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)
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Loss from operating activities
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(4,121
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)
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(8,006
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)
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Financial Expenses
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8
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|
(545
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)
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|
(840
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)
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Net loss and total comprehensive loss
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(4,666
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)
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(8,846
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)
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Basic and diluted loss per share
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(0.05
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)
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(0.11
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)
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Weighted average number of shares outstanding
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90,691,726
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78,638,075
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See accompanying notes to unaudited interim condensed
consolidated financial statements.
Acasti pharma INC.
Interim Condensed Consolidated Statements of Changes in
Shareholder’s Equity
(Unaudited)
Three-month periods ended June 30, 2020 and June 30, 2019
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Common Shares
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(thousands
of US dollars except for share data)
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Notes
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Number
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Dollar
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Additional Paid-in Capital
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Accumulated other comprehensive loss
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Deficit
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Total
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$
|
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$
|
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|
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$
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|
$
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|
|
$
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|
Balance, March 31, 2020
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90,209,449
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137,424
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9,797
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|
(7,887
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)
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|
(126,340
|
)
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|
12,994
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|
Net loss and total comprehensive
loss for the period
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|
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(4,666
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)
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(4,666
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)
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Cumulative translation adjustment
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-
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-
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-
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|
308
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-
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|
308
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Net proceeds from shares issued under
the at-the-market (ATM) program
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|
6(a)
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2,278,936
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|
1,765
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-
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-
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-
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1,765
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|
Stock based compensation
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9
|
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-
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|
-
|
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|
635
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|
-
|
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|
-
|
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|
635
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|
Balance at June 30, 2020
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|
|
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92,488,385
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|
139,189
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10,432
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|
(7,579
|
)
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|
(131,006
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)
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|
11,036
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Common Shares
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(thousands of US dollars except for share data) (note 12)
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Notes
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Number
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Dollar
|
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Additional Paid-in Capital
|
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|
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Accumulated other comprehensive loss
|
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|
|
Deficit
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Total
|
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|
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$
|
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|
|
$
|
|
|
|
$
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|
|
|
$
|
|
|
|
$
|
|
Balance, March 31, 2019
|
|
|
|
|
|
|
78,132,734
|
|
|
|
110,857
|
|
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|
8,150
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|
|
|
(7,135
|
)
|
|
|
(100,827
|
)
|
|
|
11,045
|
|
Net loss and total comprehensive
loss for the period
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(8,846
|
)
|
|
|
(8,846
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)
|
Cumulative translation adjustment
|
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|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
51
|
|
|
|
-
|
|
|
|
51
|
|
Shares issued as settlement
|
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|
6(c)
|
|
|
|
900,000
|
|
|
|
739
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
739
|
|
Warrants exercised
|
|
|
|
|
|
|
20,000
|
|
|
|
34
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34
|
|
Stock based compensation
|
|
|
9
|
|
|
|
3,000
|
|
|
|
2
|
|
|
|
250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
252
|
|
Balance at June 30, 2019
|
|
|
|
|
|
|
79,055,734
|
|
|
|
111,632
|
|
|
|
8,400
|
|
|
|
(7,084
|
)
|
|
|
(109,673
|
)
|
|
|
3,275
|
|
See accompanying notes to unaudited interim condensed
consolidated financial statements.
Acasti pharma INC.
Interim Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three-month periods ended June 30, 2020 and June 30, 2019
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|
|
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|
June 30,
2020
|
|
|
|
June 30,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
(note 12)
|
|
(thousands of US dollars)
|
|
|
Notes
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
|
|
|
|
(4,666
|
)
|
|
|
(8,846
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
|
|
|
462
|
|
|
|
481
|
|
Depreciation of equipment
|
|
|
|
|
|
|
86
|
|
|
|
89
|
|
Stock-based compensation
|
|
|
9
|
|
|
|
632
|
|
|
|
250
|
|
Fair value of warrant liabilities
|
|
|
|
|
|
|
509
|
|
|
|
932
|
|
Interest accretion on convertible debenture
|
|
|
|
|
|
|
-
|
|
|
|
37
|
|
Unrealized foreign exchange gain
|
|
|
|
|
|
|
(134
|
)
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
(3,111
|
)
|
|
|
(7,117
|
)
|
Changes in non-cash working capital items
|
|
|
10
|
|
|
|
(1,198
|
)
|
|
|
293
|
|
Net cash used in operating activities
|
|
|
|
|
|
|
(4,309
|
)
|
|
|
(6,824
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of equipment
|
|
|
|
|
|
|
(36
|
)
|
|
|
(19
|
)
|
Acquisition of short-term investment
|
|
|
|
|
|
|
-
|
|
|
|
(2,019
|
)
|
Maturity of short-term investments
|
|
|
|
|
|
|
-
|
|
|
|
7,556
|
|
Net cash from (used in) investing activities
|
|
|
|
|
|
|
(36
|
)
|
|
|
5,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from in financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from issuance of common shares under the at-the-market (ATM) program
|
|
|
6(a)
|
|
|
|
1,775
|
|
|
|
-
|
|
Proceeds from warrants exercised
|
|
|
|
|
|
|
-
|
|
|
|
34
|
|
Net cash from financing activities
|
|
|
|
|
|
|
1,775
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation effect on cash and cash equivalents related to reporting currency
|
|
|
|
|
|
|
572
|
|
|
|
256
|
|
Effect on exchange rate fluctuations on cash and cash equivalents
|
|
|
|
|
|
|
(120
|
)
|
|
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
|
|
|
|
(2,118
|
)
|
|
|
(894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, beginning of period
|
|
|
|
|
|
|
14,240
|
|
|
|
16,871
|
|
Cash and Cash Equivalents, end of period
|
|
|
|
|
|
|
12,122
|
|
|
|
15,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents is comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
5,270
|
|
|
|
1,113
|
|
Cash equivalents
|
|
|
|
|
|
|
6,852
|
|
|
|
14,864
|
|
See accompanying notes to unaudited interim condensed
consolidated financial statements.
Acasti pharma INC.
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
Three-month periods ended June 30, 2020 and June 30, 2019
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 3009, boul. de la Concorde Est, Suite 102, Laval, Québec, H7E
2B5
The Corporation is subject to a number of risks associated
with its ongoing priorities, including the conduct of its clinical program and its results, the establishment of strategic alliances
and the development of new pharmaceutical products and their marketing. The Corporation’s current product in development
requires approval from the U.S Food and Drug Administration and equivalent regulatory organizations in other countries before their
sale can be authorized.
The Corporation has incurred significant operating
losses and negative cash flows from operations since inception. To date, the Corporation has financed its operations through the
public offering and private placement of Common Shares, units consisting of Common Shares and warrants and convertible debt, the
proceeds from research grants and research tax credits, and the exercises of warrants, rights and options. To achieve the objectives
of its business plan, Acasti plans to raise the necessary funds through additional securities offerings and the establishment of
strategic alliances as well as additional research grants and research tax credits. The ability of the Corporation to complete
the needed financing and ultimately achieve profitable operations is dependent on a number of factors outside of the Corporation’s
control.
2.
|
Summary of significant accounting policies
|
Adoption of U.S. GAAP
These interim condensed consolidated financial statements
of the Corporation have been prepared in accordance with generally accepted accounting principles in the United States of America
(U.S. GAAP). Comparative figures , for the three month period ended June 30, 2019, which were previously presented in accordance
with International Financial Reporting Standards (”IFRS”) as issued by the International Accounting Standards Board,
have been adjusted as required to be compliant with the Corporation’s accounting policies under U.S. GAAP
Basis of presentation
These unaudited Interim Consolidated Financial Statements
have been prepared using accounting policies consistent with those used in preparing the Corporation’s March 31, 2020 Annual
Consolidated Financial Statements, except as disclosed in Note 3 – Recent accounting pronouncements and policies, and should
be read in conjunction with such statements and Notes thereto.
Going concern uncertainty:
The following summarizes the principal conditions
or events relevant to the Corporation’s going concern assessment, which primarily considers the period of one year from the
issuance date of these financial statements. The Corporation has incurred operating losses and negative cash flows from operations
since its inception. The Corporation’s current assets of $14.0 million as at June 30, 2020 include cash and cash equivalents
totaling $12.1 million. The Corporation’s current liabilities total $6.0 million at June 30, 2020 and are comprised primarily
of amounts due to or accrued for creditors. Assuming positive Phase 3 results, Management projects that additional funds will be
needed in the future for us to file an NDA to obtain FDA approval for CaPre in the United States, to further scale up our manufacturing
capabilities, and to complete market development and other pre-commercialization activities. The Corporation’s plans include
raising additional capital through additional securities offerings, as well as non-dilutive sources of capital such as grants or
loans and license and milestone payments from strategic alliances, however there can be no assurance as to when or whether Acasti
will complete any financings or strategic alliances. In particular, raising additional equity capital is subject to market
conditions not within the Corporation’s control. If the Corporation does not raise additional funds or find one or more strategic
partners, it may not be able to realize its assets and discharge its liabilities in the normal course of business. The Corporation
currently has no arranged sources of financing other than its “At-The-Market” sales agreement, which provides for only
conditional selling of the Corporation’s shares.
As a result, there is a substantial doubt about the
Corporation’s ability to continue as a going concern.
Acasti pharma INC.
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
Three-month periods ended June 30, 2020 and June 30, 2019
|
2.
|
Summary of significant accounting policies (continued):
|
Going concern uncertainty (continued):
The condensed consolidated financial statements have been
prepared on a going concern basis, which assumes the Corporation will continue its operations in the foreseeable future and will
be able to realize its assets and discharge its liabilities and commitments in the ordinary course of business. These consolidated
financial statements do not include any adjustments to the carrying values and classification of assets and liabilities and reported
expenses that might result from the outcome of this uncertainty and that may be necessary if the going concern basis was not appropriate
for these consolidated financial statements. If the Corporation was unable to continue as a going concern, material impairment
of the carrying values of the Corporation’s assets, including the intangible asset, could be required.
Use of estimates
The preparation of the 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 derivative
warrant liabilities (note 5) and stock-based compensation (note 9). Estimates and assumptions are also involved in measuring the
accrual of services rendered with respect to research and developments expenditures at each reporting date, as well as in determining
which research and development expenses qualify for investment tax credits and in what amounts. The Corporation recognizes the
tax credits once it has reasonable assurance that they will be realized. Recorded tax credits are subject to review and approval
by tax authorities and, therefore, could be different from the amounts recorded.
Acasti pharma INC.
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
Three-month periods ended June 30, 2020 and June 30, 2019
|
3.
|
Recent Accounting Pronouncements
|
In June 2016, the FASB issued ASU 2016-13-Financial Instruments-Credit
Losses (Topic 326), which amends guidance on reporting credit losses for assets held at amortized cost basis and available for
sale debt securities. For assets held at amortized cost, the new guidance eliminates the probable initial recognition threshold
in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for
credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net
amount expected to be collected. ASU 2016-13 will affect loans, debt securities, trade receivables, net investments in leases,
off balance sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right
to receive cash. ASU 2016-13 is effective for annual periods, and interim periods within those annual periods, beginning after
December 15, 2022. Management has not yet evaluated the impact of this ASU on the consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15 Intangibles-Goodwill
and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement
That is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs in such cloud computing arrangements
with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This ASU is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and early adoption is permitted.
Entities can choose to adopt the new guidance prospectively or retrospectively. Management has adopted the accounting standard
update. However, the adoption of this update did not have any impact on the reported amounts as at June 30, 2020.
As at June 30, 2020, the Corporation owned a reserve of
krill oil for a total value of $691 of which, $499 is expected to be used during the next twelve months in the R&D production
processes and for NKPL66 manufacturing, and therefore it is presented as current other asset in the Balance Sheet.
Acasti pharma INC.
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
Three-month periods ended June 30, 2020 and June 30, 2019
5.
|
Derivative warrant liabilities:
|
The warrants issued as part of the public offering of
units composed of class A shares (Common Shares) and Common Shares purchase warrants on both May 9, 2018 and May 14, 2018 (see
note 6) are derivative liabilities (“Derivative warrant liabilities”) given the warrant indenture contains certain
contingent provisions that allow for cash settlement.
The warrants issued as part of a public offering of units
composed of class A shares (Common Shares) and Common Shares purchase warrants on December 27, 2017 are
derivative liabilities (“Derivative warrant liabilities”) given the currency of the exercise price is different from
the Corporation’s functional currency.
The derivative warrant liabilities are measured at fair
value at every reporting period and the reconciliation of changes in fair value for the three-month periods ended June 30, 2020
and 2019 is presented in the following table:
|
|
|
Warrant liabilities issued
May 2018
|
|
|
|
Warrant liabilities issued
December 27, 2017
|
|
|
|
|
June 30,
2020
|
|
|
|
June 30,
2019
|
|
|
|
June
30,
2019
|
|
|
|
June 30,
2019
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Balance – beginning of period
|
|
|
1,146
|
|
|
|
6,177
|
|
|
|
1,247
|
|
|
|
6,005
|
|
Change in fair value
|
|
|
378
|
|
|
|
514
|
|
|
|
131
|
|
|
|
418
|
|
Translation effect
|
|
|
80
|
|
|
|
115
|
|
|
|
89
|
|
|
|
123
|
|
Balance – end of period
|
|
|
1,604
|
|
|
|
6,806
|
|
|
|
1,467
|
|
|
|
6,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD $0.66
|
|
Fair value per warrant
|
|
|
USD $0.23
|
|
|
|
USD $0.67
|
|
|
|
USD $0.21
|
|
|
|
|
|
The fair value of the derivative warrant liabilities was
estimated using the Black-Scholes option pricing model and based on the following assumptions:
|
|
Warrant liabilities issued
May 2018
|
|
Warrant liabilities issued
December 27, 2017
|
|
|
|
June 30,
2020
|
|
|
|
March 31,
2020
|
|
|
|
June 30,
2020
|
|
|
|
March 31,
2020
|
|
Exercise price
|
|
|
CAD $1.31
|
|
|
|
CAD $1.31
|
|
|
|
USD $1.26
|
|
|
|
USD $1.26
|
|
Share price
|
|
|
CAD $0.64
|
|
|
|
CAD $0.53
|
|
|
|
USD $0.47
|
|
|
|
USD $0.38
|
|
Risk-free interest
|
|
|
0.44
|
%
|
|
|
0.66
|
%
|
|
|
0.29
|
%
|
|
|
0.37
|
%
|
Estimated life (years)
|
|
|
2.86
|
|
|
|
3.11
|
|
|
|
2.47
|
|
|
|
2.74
|
|
Expected volatility
|
|
|
116.41
|
%
|
|
|
107.59
|
%
|
|
|
120.55
|
%
|
|
|
125.03
|
%
|
Acasti pharma INC.
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
Three-month periods ended June 30, 2020 and June 30, 2019
|
6.
|
Capital and other components of equity:
|
|
(a)
|
“At-the-market” sales agreement:
|
On February 14, 2019, the Corporation entered into an
“at-the-market” (ATM) sales agreement with B. Riley FBR, Inc. (“B. Riley”) pursuant to which the Common
Shares may be sold from time to time for aggregate gross proceeds of up to $30 million, with sales only being made on the NASDAQ
Stock Market. The Common Shares would be issued 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 ATM has a 3-year term and requires the Corporation to pay between
3% and 4% commission to B. Riley based on volume of sales made.
During the three-month period ended June 30, 2020, a total
of 2.3 million common shares were sold for total net proceeds of approximately $1.8 million under the ATM program. The shares were
sold at the prevailing market prices, which resulted in an average price of approximately $0.81 per share. Accordingly, proportional
costs of $10 related to the common shares sold, have been reclassified from deferred financings costs to equity.
On June 29, 2020, the Corporation entered into an amended
and restated sales agreement (the Sales Agreement) with B. Riley, Oppenheimer & Co. Inc. and H.C. Wainwright & Co., LLC
(collectively, the “Agents”) to amend the existing ATM program. Under the terms of the Sales Agreement, the Corporation
may issue and sell from time to time its common shares (the Shares) having an aggregate offering price of up to US$75,000,000 through
the Agents.
Subject to the terms and conditions of the Sales
Agreement, the Agents will use their commercially reasonable efforts to sell the Shares from time to time, based upon the Corporation’s
instructions. The Corporation has no obligation to sell any of the Shares and may at any time suspend sales under the Sales Agreement.
The Corporation and the Agents may terminate the Sales Agreement in accordance with its terms. Under the terms of the Sales Agreement,
the Corporation has provided the Agents with customary indemnification rights and the Agents will be entitled to compensation,
at a commission rate equal to 3.0% of the gross proceeds from each sale of the Shares.
Costs incurred to register the Sales Agreement amounted
to $130 and were recorded as deferred financing costs in the Consolidated Balance Sheet. Accordingly, the remaining balance of
the costs incurred during February 2019 for an amount of $115 were written off to financing expenses.
|
(b)
|
Shares issued as settlement:
|
On May 10, 2019, the Corporation announced the settlement
regarding legal claims made by its former chief executive (“CEO”) officer with respect to the termination of his employment.
Pursuant to the settlement agreement, the Corporation agreed to issue 900,000 common shares at $0.82 (CAD $1.10) per share to the
former CEO. In addition, the Corporation agreed to reimburse the former CEO for legal fees of $48 (CAD $64.) Furthermore,
pursuant to the settlement agreement, the Corporation received a full and final release from the former CEO on all procedures in
connection with the termination of his employment. This settlement was accrued as a short-term liability as at March 31, 2019 and
the expense of $786 (CAD $1,054) was included as part of General and administrative expenses. During May 2019, the shares were
issued and the liability of $739 (CAD $990) reclassified as Equity.
Acasti pharma INC.
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
Three-month periods ended June 30, 2020 and June 30, 2019
|
6.
|
Capital and other components of equity (continued):
|
The warrants of the Corporation are composed of the
following as at June 30, 2020 and March 31, 2020:
|
|
|
June 30, 2020
|
|
|
|
March 31, 2020
|
|
|
|
|
Number outstanding
|
|
|
|
Amount
|
|
|
|
Number outstanding
|
|
|
|
Amount
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
Liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2018 over-allotment
|
|
|
6,593,750
|
|
|
|
1,604
|
|
|
|
6,593,750
|
|
|
|
1,146
|
|
Warrants 2018 (i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series December 2017 US Public offering
|
|
|
7,072,962
|
|
|
|
1,467
|
|
|
|
7,072,962
|
|
|
|
1,247
|
|
Warrants 2017 (ii)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,666,712
|
|
|
|
3,071
|
|
|
|
13,666,712
|
|
|
|
2,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public offering warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public offering Broker warrants May 2018(iii)
|
|
|
222,976
|
|
|
|
89
|
|
|
|
222,976
|
|
|
|
89
|
|
Series December 2017 US Broker warrants (iv)
|
|
|
259,121
|
|
|
|
161
|
|
|
|
259,121
|
|
|
|
161
|
|
Public offering warrants February 2017 (v)
|
|
|
1,723,934
|
|
|
|
631
|
|
|
|
1,723,934
|
|
|
|
631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,206,031
|
|
|
|
881
|
|
|
|
2,206,031
|
|
|
|
881
|
|
|
(i)
|
Warrant to acquire one Common Share of the Corporation at an exercise price of CAD $1.31, expiring
on May 9, 2023.
|
|
(ii)
|
Warrant to acquire one Common Share of the Corporation at an exercise price of $1.26, expiring
on December 27, 2022.
|
|
(iii)
|
Warrant to acquire one Common Share of the Corporation at an exercise price of CAD $1.05, expiring
on May 9, 2023.
|
|
(iv)
|
Warrant to acquire one Common Share of the Corporation at an exercise price of $1.2625, expiring
on December 19, 2022.
|
|
(v)
|
Warrant to acquire one Common Share of the Corporation at an exercise price of CAD $2.15, expiring
on February 21, 2022.
|
Acasti pharma INC.
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
Three-month periods ended June 30, 2020 and June 30, 2019
7.
|
Government assistance:
|
Government assistance is comprised of a government
grant from the Canadian federal government and research and development investment tax credits receivable from the Quebec 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-month
periods ended June 30, 2020 and 2019, the Corporation recorded $50 and $75, respectively, as a reduction of research and development
expenses in the Consolidated Statements of Loss and Comprehensive Loss.
In September 2019, the Corporation was awarded up
to CAD $750,000 in non-dilutive and non-repayable funding from the National Research Council of Canada Industrial Research Assistance
Program (NRC IRAP) to apply towards eligible research and development disbursements of the Corporation’s unique commercial
production platform for CaPre. During the three-month period ended June 30, 2020 the Corporation claimed $26 in connection with
this program, which has been recorded as a reduction of research and development expenses in the Consolidated Statements of Loss
and Comprehensive Loss.
|
|
|
Three-month periods ended
|
|
|
|
|
June 30,
2020
|
|
|
|
June 30,
2019
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
25
|
|
|
|
103
|
|
Foreign exchange gain
|
|
|
60
|
|
|
|
56
|
|
Financing fees
|
|
|
(121
|
)
|
|
|
-
|
|
Interest payable on convertible debenture
|
|
|
-
|
|
|
|
(30
|
)
|
Accretion of interest on convertible debenture
|
|
|
-
|
|
|
|
(37
|
)
|
Change in fair value of warrant liabilities
|
|
|
(509
|
)
|
|
|
(932
|
)
|
|
|
|
|
|
|
|
|
|
Financial (expenses) income
|
|
|
(545
|
)
|
|
|
(840
|
)
|
|
9.
|
Stock based compensation:
|
At June 30, 2020 the Corporation has in place a
stock option plan for directors, officers, employees and consultants of the Corporation (“Stock Option Plan”). The
terms and conditions for acquiring and exercising options are set by the Corporation’s Board of Directors in accordance with
and subject to the terms and conditions of the stock option plan.
The total number of shares issued to any one consultant
within any twelve-month period cannot exceed 2% of the Corporation’s total issued and outstanding 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.
Acasti pharma INC.
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
Three-month periods ended June 30, 2020 and June 30, 2019
|
9.
|
Stock based compensation: (continued):
|
The following table summarizes information about
activities within the stock option plan for the three-month periods ended:
|
|
|
June 30, 2020
|
|
|
|
June 30, 2019
|
|
|
|
|
Weighted average exercise price
|
|
|
|
Number of options
|
|
|
|
Weighted average exercise price
|
|
|
|
Number of options
|
|
|
|
|
CAD $
|
|
|
|
|
|
|
|
CAD $
|
|
|
|
|
|
Outstanding at beginning of period
|
|
|
1.00
|
|
|
|
9,936,486
|
|
|
|
1.25
|
|
|
|
4,046,677
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
1.31
|
|
|
|
791,617
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
0.77
|
|
|
|
(3,000
|
)
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
0.77
|
|
|
|
(1,000
|
)
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at end of period
|
|
|
1.00
|
|
|
|
9,936,486
|
|
|
|
1.26
|
|
|
|
4,834,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of period
|
|
|
1.28
|
|
|
|
4,132,146
|
|
|
|
1.53
|
|
|
|
2,193,033
|
|
No stock options were granted during the three-month period
ended June 30, 2020.
Compensation expense recognized under the stock option
plan for the three-month periods ended June 30, 2020 and 2019 was as follows:
|
|
|
Three-month periods ended
|
|
|
|
|
June 30,
2020
|
|
|
|
June 30,
2019
|
|
|
|
|
$
|
|
|
|
$
|
|
Research and development expenses
|
|
|
141
|
|
|
|
79
|
|
General and administrative expenses
|
|
|
348
|
|
|
|
148
|
|
Sales and marketing expenses
|
|
|
143
|
|
|
|
23
|
|
|
|
|
632
|
|
|
|
250
|
|
Stock-based compensation payment transactions
and broker warrants:
The fair value of stock-based compensation transactions
is measured using the Black-Scholes option pricing model. Measurement inputs include share price on measurement date, exercise
price of the instrument, expected volatility (based on weighted average historic volatility for a duration equal to the weighted
average life of the instruments, life based on the average of the vesting and contractual periods for employee awards as minimal
prior exercises of options in which to establish historical exercise experience; contractual life for broker warrants), and the
risk-free interest rate (based on government bonds). Service and performance conditions attached to the transactions, if any, are
not taken into account in determining fair value. The expected life of the stock options is not necessarily indicative of exercise
patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to
the life of the options is indicative of future trends, which may also not necessarily be the actual outcome.
Acasti pharma INC.
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
Three-month periods ended June 30, 2020 and June 30, 2019
|
10.
|
Supplemental cash flow disclosure:
|
|
(a)
|
Changes in non-cash operating items:
|
|
|
|
Three-month periods ended
|
|
|
|
|
June 30,
2020
|
|
|
|
June 30,
2019
|
|
|
|
|
$
|
|
|
|
$
|
|
Receivables
|
|
|
71
|
|
|
|
(200
|
)
|
Prepaid expenses
|
|
|
294
|
|
|
|
371
|
|
Deferred financing costs
|
|
|
(19
|
)
|
|
|
-
|
|
Trade and other payables
|
|
|
(1,544
|
)
|
|
|
122
|
|
|
|
|
(1,198
|
)
|
|
|
293
|
|
|
(b)
|
Non-cash transactions:
|
|
|
|
Three-month periods ended
|
|
|
|
|
June 30,
2020
|
|
|
|
June 30,
2019
|
|
|
|
|
$
|
|
|
|
$
|
|
Shares issued as settlement
|
|
|
-
|
|
|
|
739
|
|
Interest payable included in trade and other payables
|
|
|
-
|
|
|
|
30
|
|
Unpaid fixed assets
|
|
|
-
|
|
|
|
17
|
|
11.
|
Commitments and contingencies:
|
Research and development
contracts and contract research organizations agreements:
The Company utilizes contract manufacturing organizations
related to the development and production of clinical material and clinical research organizations to perform services related
to the Company’s clinical trials. Pursuant to these agreements with manufacturing and contract research organizations, the
Company has the right to terminate the agreements either without penalties or under certain penalty conditions. There are no penalties
to be incurred in any open contracts.
RKO Supply agreement
On October 25, 2019, the Corporation signed a supply agreement
with Aker Biomarine Antartic AS (‘’Aker’’), to purchase raw krill oil product for a committed volume of
commercial starting material for CaPre for a total value of $3.1M million (take or pay). The delivery of the products has been
established following a calendar year basis and it must be completed in the 4th calendar quarter of 2021. As at June
30, 2020, the remaining balance of the commitment with Aker amounts to $2.8 million.
Certain comparative figures in the three-month period
ended June 30, 2019, have been adjusted, in order to conform to US GAAP. Adjustments included certain reclassifications within
equity for certain warrants, the recognition of deferred tax on legacy transfers of license from Neptune that were subject to an
initial recognition exemption under IFRS and different classifications within the statement of cash flows for treatment of interest
expense and income.
ATM Program
Subsequent to June 30, 2020, the Corporation sold a total
of 4,404,152 Common Shares through the ATM program, for net proceeds of approximately $3.4 million (net of commissions paid for
approximately $0.1 million). The shares were sold at the prevailing market prices which resulted in an average price of approximately
$0.80 per share.
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operation
|
This management’s discussion and analysis, or MD&A, is
presented in order to provide the reader with an overview of the financial results and changes to our balance sheet as at June
30, 2020 and for the three months period then ended. This MD&A explains the material variations in our results of operations,
balance sheet and cash flows for the three-month periods ended June 30, 2020 and 2019.
Market data, and certain industry data and forecasts included in
this MD&A, were obtained from internal corporation surveys and market research and those conducted by third parties hired by
us, publicly available information, reports of governmental agencies and industry publications, and independent third party surveys.
We have relied upon industry publications as our primary sources for third-party industry data and forecasts. Industry surveys,
publications and forecasts generally state that the information they contain has been obtained from sources believed to be reliable,
but that the accuracy and completeness of that information is not guaranteed. We have not independently verified any of the data
from third-party sources or the underlying economic assumptions they have made. Similarly, internal surveys, industry forecasts
and market research, which we believe to be reliable based upon our management’s or contracted third parties’ knowledge
of our industry, have not been independently verified. Our estimates involve risks and uncertainties, including assumptions that
may prove not to be accurate, and these estimates and certain industry data are subject to change based on various factors, including
those discussed in our most recently filed annual report on Form 10-K.
This MD&A, approved by the Board of Directors on August 13, 2020,
should be read in conjunction with our unaudited condensed interim consolidated financial statements for the three-month periods
ended June 30, 2020 and 2019 included in this quarterly report. Our interim financial statements were prepared in accordance with
generally accepted accounting principles issued by the Financial Accounting Standards Board in the United States, or GAAP. Up to
and including the third quarter ended December 31, 2019, we prepared our consolidated financial statements in accordance with International
Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board. The comparative information
in our financial statements for the three months ended June 30, 2019, has been adjusted, as necessary, to be compliant with our
accounting policies under GAAP. Our financial results are now published in United States dollars. Effective March 31, 2020, the
reporting currency used in the consolidated financial statements has changed from Canadian dollars to U.S. dollars. This change
in reporting currency has been applied in the interim financial statements retrospectively such that all amounts expressed in our
consolidated financial statements and the accompanying notes thereto are in U.S. dollars.
All amounts appearing in this MD&A for the period by period
discussions are in thousands of U.S. dollars, except share and per share amounts or unless otherwise indicated.
Business Overview
We are a biopharmaceutical innovator focused on the research, development
and commercialization of prescription drugs using OM3 fatty acids delivered both as free fatty acids and bound-to-phospholipid
esters, derived from krill oil. OM3 fatty acids have extensive clinical evidence of safety and efficacy in lowering TGs in patients
with hypertriglyceridemia, or HTG. Our lead product candidate is CaPre, an OM3 phospholipid therapeutic, which we are developing
initially for the treatment of sHTG, a condition characterized by very high or severe levels of TGs in the bloodstream (≥ 500
mg/dL). In accordance with a study published in 2009 in the Archives of Internal Medicine by Ford et al., it is estimated that
three to four million people in the United States have sHTG. In primary qualitative market research studies commissioned by Acasti
in August 2016 and November 2017 by DP Analytics, a division of Destum Partners, and in April 2019 by another well-respected third
party provider, key opinion leaders, high volume prescribers and pharmacy benefit managers who were interviewed indicated a significant
unmet medical need exists for an effective, safe and well-absorbing OM3 therapeutic that can also demonstrate a positive impact
on the major blood lipids associated with cardiovascular disease risk. We believe that CaPre may address this unmet medical need
if our TRILOGY Phase 3 clinical program is successful in reproducing what we observed in our Phase 2 clinical data.
We also believe the potential exists to expand CaPre’s initial
indication to the roughly 44.4 million patients in the United States with elevated TGs in the mild to moderate range (e.g., blood
levels between 200 - 499 mg/dL), although at least one additional clinical trial would likely be required to support FDA approval
of a supplemental NDA to expand CaPre’s indication to this segment. Data from our Phase 2 studies indicated that CaPre may
have a positive effect in diabetes and other inflammatory and cardiometabolic diseases; consequently, we may also seek to identify
new potential indications for CaPre that may be appropriate for future studies and pipeline expansion. In addition, we may also
seek to in-license other cardiometabolic or other synergistic primary care-focused drug candidates for drug development and commercialization.
In four clinical trials conducted to date, we saw the following
consistent results with CaPre, and we are seeking to demonstrate similar safety and efficacy in our TRILOGY Phase 3 program:
|
•
|
significant reduction of TGs and non-high density lipoprotein cholesterol (non-HDL-C) levels in
the blood of patients with mild to sHTG;
|
|
•
|
no deleterious effect on low-density lipoprotein cholesterol (LDL-C), or “bad” cholesterol,
with the potential to reduce LDL-C;
|
|
•
|
potential to increase high-density lipoprotein cholesterol (HDL-C), or “good” cholesterol;
|
|
•
|
potential to benefit diabetes patients by decreasing hemoglobin A1c (HbA1c), a marker of glucose
control;
|
|
•
|
good bioavailability (absorption by the body), even under fasting conditions;
|
|
•
|
no significant food effect when taken with either low-fat or high-fat meals; and
|
|
•
|
an overall safety profile similar to that demonstrated by currently marketed OM3s.
|
We believe that if we are able to reproduce these results in our
TRILOGY Phase 3 program, that this could potentially set CaPre apart from current FDA-approved fish oil-derived OM3 treatment options,
and it could give us a significant clinical and marketing advantage.
TRILOGY 1 Topline Results
Our first Phase 3 clinical trial, designated as TRILOGY 1, was conducted
exclusively in the United States and was fully randomized with a final total of 242 patients. On January 13, 2020, we released
topline results for TRILOGY 1, which, despite meaningful TG-lowering in the CaPre arm of the study, did not reach statistical significance
due to an unusually large placebo effect. The observed reductions in TG levels in the TRILOGY 1 placebo group were far greater
than that seen in any previous TG-lowering trial with a prescription OM3. As previously disclosed, we, along with the academic
principal investigator of the trial, Dariush Mozaffarian, M.D., Dr.P.H., and external clinical and statistical experts, conducted
rigorous post-hoc analysis of TRILOGY 1 data. This analysis revealed a rapid, significant and sustained reduction in TG levels
between screening (during qualification) and the time of patient randomization (prior to patients starting on either drug or placebo),
which we refer to as “Pre-randomization Triglyceride Normalization.” This artefactual phenomenon affected both treatment
groups, but was much greater in the placebo group, resulting in the large placebo effect and significant underestimation of the
post-randomization treatment effect of the active drug, CaPre. The post-hoc analyses of the primary endpoint using a revised, single
point baseline value from Week 0 (Visit 4) corrected for a significant amount of the pre-randomization TG reduction in subjects
that were most affected by the normalization phenomenon, and a meaningful efficacy trend for CaPre was observed.
Recent Developments
As we have previously disclosed, we filed a Type C meeting request
at the end of March 2020 with the FDA. We subsequently submitted our briefing package on April 29, 2020 to the FDA. The briefing
package intended to provide the FDA with a review of the relevant TRILOGY 1 clinical data and audit findings, with the objective
of gaining alignment on the interpretation of the TRILOGY 1 results and implications for TRILOGY 2. We also sought the FDA’s
input on our proposed revisions to the pre-specified TRILOGY 2 Statistical Analysis Plan, or SAP, and their input on a plan for
pooling the data from TRILOGY 1 and TRILOGY 2 to support an NDA filing.
On June 19, 2020, we announced that the FDA had provided us with
a written response to our meeting request and briefing package. The FDA confirmed that it will require pivotal efficacy analyses
to be performed on the full Intent to Treat population as contemplated in the original SAP, and they supported the conduct of post-hoc
analyses in TRILOGY 1 for exploratory purposes. Consistent with our prior disclosures and depending on the outcome of TRILOGY 2,
an additional clinical study may still be needed prior to an NDA submission.
Based on the written feedback received from the FDA, and working
with the academic principal investigator of our TRILOGY Phase 3 clinical program, Dariush Mozaffarian, M.D., Dr.P.H., and other
key advisors, we finalized the SAP for TRILOGY 2 and submitted it to the FDA as planned on July 31, 2020. We continue to remain
blinded to the TRILOGY 2 clinical data and we continue to expect to report topline data from TRILOGY 2 on or about August 31, 2020.
We expect to provide an update on the timing to report the key secondary and exploratory endpoints from both TRILOGY 1 and TRILOGY
2 trials and pooled results from both studies sometime after TRILOGY 2 results are reported.
On April 30, 2020, we also announced that we had received notice
of issuance of a composition of matter patent awarded by the Intellectual Property Office in Hong Kong. This new patent expands
our intellectual property portfolio by granting claims for any composition containing eicosapentaenoic acid and docosahexaenoic
acid, where at least 50% of the composition consists of phospholipids.
COVID-19 Update
To date, the ongoing COVID-19 pandemic has not caused significant
disruptions to our business operations and research and development activities. In January 2020, before the COVID-19 pandemic
started to have a widespread impact in North America, the last patient completed their final visit to our TRILOGY 2 Phase 3 trial.
However, in light of our plan to raise additional capital (dilutive or non-dilutive) to fully execute our business plan, a continuation
of the COVID-19 pandemic and any resulting volatility generally in the capital markets could adversely impact our ability to access
capital on terms acceptable to us or at all. In addition, a continuation of the COVID-19 pandemic in North America could negatively
affect our ability to conduct any additional clinical work, if it is required.
The extent to which the COVID-19 pandemic impacts our business and
prospects will depend on future developments, which are highly uncertain and cannot be predicted, including new information which
may emerge concerning the severity of the COVID-19 pandemic and the actions to contain the COVID-19 pandemic or treat its impact,
among others.
Caution Regarding Non-GAAP Financial Measures
We use multiple financial measures for the review of our operating
performance. These measures are generally GAAP financial measures, but one adjusted financial measure, non-GAAP operating loss,
is also used to assess our operating performance. This non-GAAP financial measure is directly derived from our financial statements
and is presented in a consistent manner. We use this measure, in addition to the GAAP financial measures, for the purposes of evaluating
our historical and prospective financial performance, as well as our performance relative to competitors and to plan and forecast
future periods as well as to make operational and strategic decisions. We believe that providing this non-GAAP information to investors,
in addition to GAAP measures, allows them to see our results through the eyes of management, and to better understand our historical
and future financial performance.
Earnings and other measures adjusted to a basis other than GAAP
do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they
should not be considered in isolation. We use non-GAAP operating loss to measure our performance from one period to the next without
the variation caused by certain adjustments that could potentially distort the analysis of trends in our operating performance,
and because we believe it provides meaningful information on our financial condition and operating results. Our method for calculating
non-GAAP operating loss may differ from that used by other companies.
We calculate our non-GAAP operating loss by adding to net loss our
finance expenses (which includes change in fair value of derivative warrant liabilities, foreign exchange gain (loss), interest
expense and accretion on convertible debentures, and transaction costs related to derivative warrant liabilities, net of interest
income) depreciation and amortization, impairment loss, litigation settlement that was settled via the issuance of common shares,
and stock-based compensation, and by subtracting deferred tax recovery. Items that do not impact our core operating performance
are excluded from the calculation as they may vary significantly from one period to another. We also exclude the effects of certain
non-monetary transactions recorded, such as stock-based compensation and litigation settlement that was settled via the issuance
common shares, from our non-GAAP operating loss calculation. Excluding these items does not imply they are necessarily non-recurring.
A reconciliation of net loss to non-GAAP operating loss is presented
later in this MD&A.
Basis of Presentation of the Financial Statements
Our consolidated financial statements, which include the accounts
of our wholly owned subsidiary, Acasti Innovations AG, have been prepared in accordance with GAAP, and the rules and regulations
of the U.S. Securities and Exchange Commission, or the SEC, related to interim reports filed on Form 10-Q. All intercompany transactions
and balances are eliminated on consolidation.
Going Concern Uncertainty
The following summarizes the principal conditions or events relevant
to our going concern assessment, which primarily considers the period of one year from the issuance date of our consolidated financial
statements. We have incurred operating losses and negative cash flows from operations since our inception. Our current assets of
$14.0 million as at June 30, 2020 include cash and cash equivalents totaling $12.1 million. Our current liabilities total $6.0
million at June 30, 2020 and are comprised primarily of amounts due to or accrued for creditors. Management projects that assuming
positive results from our TRILOGY Phase 3 program, additional funds will be needed in the future for us to file an NDA, to obtain
FDA approval for CaPre in the United States, to further scale-up our manufacturing capabilities, and to complete market development
and other pre-commercialization activities. Our plans include raising additional capital through additional securities offerings,
as well as non-dilutive sources of capital such as grants or loans and strategic alliances, but there can be no assurance as to
when or whether we will complete any financings or strategic alliances. In particular, raising additional equity capital is subject
to market conditions not within our control. If we do not raise additional funds or find one or more strategic partners, we may
not be able to realize our assets and discharge our liabilities in the normal course of business. We have no arranged sources of
financing currently other than our “At-the-Market” sales agreement which provides for only conditional selling of our
common shares.
As a result, there is a substantial doubt about our ability to continue
as a going concern. Our consolidated financial statements have been prepared on a going concern basis, which assumes we will continue
our operations in the foreseeable future and will be able to realize our assets and discharge our liabilities and commitments in
the ordinary course of business. These consolidated financial statements do not include any adjustments to the carrying values
and classification of assets and liabilities and reported expenses that might result from the outcome of this uncertainty and that
may be necessary if the going concern basis was not appropriate for these consolidated financial statements. If we were unable
to continue as a going concern, material impairment of the carrying values of our assets, including the intangible asset, could
be required.
Comparative Financial Information for the Three-Month Periods
Ended June 30, 2020 and 2019
|
|
|
Three-month periods ended
|
|
|
|
|
June 30,
2020
|
|
|
|
June 30,
2019
|
|
|
|
|
$
|
|
|
|
$
|
|
Net loss
|
|
|
(4,666
|
)
|
|
|
(8,846
|
)
|
Basic and diluted gain (loss) per share
|
|
|
(0.05
|
)
|
|
|
(0.11
|
)
|
Non-GAAP operating (loss)1
|
|
|
(2,941
|
)
|
|
|
(7,186
|
)
|
Total assets
|
|
|
20,142
|
|
|
|
29,985
|
|
Working capital2
|
|
|
7,985
|
|
|
|
9,529
|
|
Total non-current financial liabilities
|
|
|
3,127
|
|
|
|
14,777
|
|
Total shareholders’ equity
|
|
|
11,036
|
|
|
|
3,275
|
|
Reconciliation of Net Loss to Non-GAAP Operating Loss
|
|
|
Three-month periods ended
|
|
|
|
|
June 30,
2020
|
|
|
|
June 30,
2019
|
|
|
|
|
$
|
|
|
|
$
|
|
Net income (loss)
|
|
|
(4,666
|
)
|
|
|
(8,846
|
)
|
Add (deduct):
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
632
|
|
|
|
250
|
|
Depreciation and amortization
|
|
|
548
|
|
|
|
570
|
|
Financial expenses
|
|
|
545
|
|
|
|
840
|
|
Non-GAAP operating gain (loss)
|
|
|
(2,941
|
)
|
|
|
(7,186
|
)
|
Results of Operations for the Three-Month Periods Ended June
30, 2020 and 2019
The net loss of $4,666 or $0.05 per share for the three months ended
June 30, 2020 decreased by $4,180 from the net loss $8,846 or $0.11 per share for the three months ended June 30, 2019.
The reduction in net loss, resulted primarily from the decrease
in research and development expenses of $4,434 as the TRILOGY Phase 3 clinical program for CaPre moved closer to completion. In
addition, net financial expenses decreased to $545 for the three months ended June 30, 2020, as compared to net financial expenses
of $840 for the three months ended March 31, 2019, due mostly to a lower change in fair value of the derivative warrant liability
in the first fiscal quarter in 2020 as compared to the comparative fiscal quarter in 2019 caused by a proportionately higher increase
in the quarter over quarter closing share price partly offset by a reduction in the number of warrants outstanding due to exercises
during the prior year. Sales and marketing expenses also decreased as a as a result of a planned delay in pre-launch marketing
activities until the results of the TRILOGY 2 Phase 3 clinical trial are obtained.
In contrast, general and administrative expenses increased due to
higher consulting, accounting and legal fees incurred in connection with the conversion of the financial statements from IFRS to
GAAP.
Stock-based compensation expense increased to $632 for the three-month
period ended June 30, 2020, as compared to $250 for the three-month period ended June 30, 2019. The increased expense of $382 is
the result of 6.1 million stock options granted to existing and new employees and directors during the fiscal year ended March
31, 2020, partially offset by stock options exercised, forfeited and expired. Moreover, the weighted average fair value of the
options granted to employees and directors during the fiscal year ended March 31, 2020 was CAD$0.85 compared to CAD$0.51 for the
fiscal year ended March 31, 2019 grants.
_____________________
1 The Non-GAAP operating loss is not a standard
measure endorsed by GAAP requirements. A reconciliation to our net loss is presented in this MD&A.
2 Working capital is calculated by subtracting
current liabilities from current assets. Because there is no standard method endorsed by GAAP requirements, the results may not
be comparable to similar measurements presented by other public companies.
The depreciation and amortization expense remained relatively constant.
Two separate derivative warrant liabilities are included in the
statement of financial position as at June 30, 2020, and June 30, 2019. These derivative warrant liabilities stem from the financing
transactions that took place in May 2018 and December 2017. The derivative warrant liabilities are re-measured to fair value at
each reporting date using the Black-Scholes option pricing model. The valuations are mainly driven by the fluctuation in our share
price resulting in an increased or decreased loss or gain related to the change in fair value of the warrant liabilities and increasing
or decreasing the corresponding liability in the balance sheet.
Breakdown of Major Components of the Statement of Loss and
Comprehensive Loss
Research and development expenses
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
June 30,
2020
|
|
|
|
June 30,
2019
|
|
|
|
|
$
|
|
|
|
$
|
|
Salaries and benefits
|
|
|
434
|
|
|
|
412
|
|
Research contracts
|
|
|
499
|
|
|
|
4,978
|
|
Professional fees
|
|
|
154
|
|
|
|
164
|
|
Other
|
|
|
59
|
|
|
|
63
|
|
Government grants & tax
credits
|
|
|
(76
|
)
|
|
|
(75
|
)
|
Sub-total
|
|
|
1,070
|
|
|
|
5,542
|
|
Stock-based compensation
|
|
|
141
|
|
|
|
79
|
|
Depreciation and amortization
|
|
|
545
|
|
|
|
569
|
|
Total
|
|
|
1,756
|
|
|
|
6,190
|
|
General and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
June 30,
2020
|
|
|
|
June 30,
2019
|
|
|
|
|
$
|
|
|
|
$
|
|
Salaries and benefits
|
|
|
358
|
|
|
|
355
|
|
Professional fees
|
|
|
702
|
|
|
|
371
|
|
Other
|
|
|
241
|
|
|
|
242
|
|
Sub-total
|
|
|
1,301
|
|
|
|
968
|
|
Stock-based compensation
|
|
|
348
|
|
|
|
148
|
|
Total
|
|
|
1,649
|
|
|
|
1,116
|
|
Sales and Marketing Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
June 30,
2020
|
|
|
|
June 30,
2019
|
|
|
|
|
$
|
|
|
|
$
|
|
Salaries and benefits
|
|
|
390
|
|
|
|
189
|
|
Professional fees
|
|
|
98
|
|
|
|
386
|
|
Other
|
|
|
85
|
|
|
|
102
|
|
Sub-total
|
|
|
573
|
|
|
|
677
|
|
Stock-based compensation
|
|
|
143
|
|
|
|
23
|
|
Total
|
|
|
716
|
|
|
|
700
|
|
Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019
During the three months ended June 30, 2020, we continued to advance
the TRILOGY Phase 3 clinical program for CaPre in partnership with one of the world’s largest providers of biopharmaceutical
development and clinical outsourcing services. Research and development expenses before depreciation, amortization and stock-based
compensation expense for the three months ended June 30, 2020 totaled $1,070 compared to $5,542 for the three months ended June
30, 2019. The net decrease was mainly attributable to a reduction in research contracts expense due to the advancement of the Phase
3 clinical program, as it moved closer to completion.
General and administrative expenses totaled $1,301 before stock-based
compensation expense for the three months ended June 30, 2020 and increased by $333 from $968 for the three months ended June 30,
2019. The increase was mainly attributable to consulting, accounting and legal fees in connection with the conversion from IFRS
to U.S. GAAP.
Sales and marketing expenses were $573 before stock-based compensation
expense for the three months ended June 30, 2020 compared to $677 for the three months ended June 30, 2019. The decrease was mostly
due to a reduction in professional fees as a result of a planned delay in pre-launch marketing activities until the results of
the TRILOGY 2 Phase 3 clinical trial are obtained. The decrease was partially offset by an increase in salaries and benefits as
a result of headcount added in 2019 to the commercial team to support expanded business and market development activities.
Liquidity and Capital Resources
Share Capital Structure
Our authorized share capital consists of an unlimited number of
Class A, Class B, Class C, Class D and Class E shares, without par value. Issued and outstanding fully paid shares, stock options,
restricted shares units and warrants, were as follows for the periods ended:
|
|
|
June 30,
2020
|
|
|
|
March 31,
2020
|
|
|
|
|
Number outstanding
|
|
|
|
Number outstanding
|
|
Class A shares, voting, participating and without par value
|
|
|
92,488,385
|
|
|
|
90,209,449
|
|
Stock options granted and outstanding
|
|
|
9,936,486
|
|
|
|
9,936,486
|
|
May 2018 public offering of warrants exercisable at CAD$1.31, until May 9, 2023
|
|
|
6,593,750
|
|
|
|
6,593,750
|
|
Public offering broker warrants May 2018 exercisable at CAD$1.05 until May 9, 2023
|
|
|
222,976
|
|
|
|
222,976
|
|
December 2017 U.S. public offering of warrants exercisable at US$1.26, until December 19, 2022
|
|
|
7,072,962
|
|
|
|
7,072,962
|
|
December 2017 U.S. broker warrants exercisable at US$1.2625, until December 27, 2022
|
|
|
259,121
|
|
|
|
259,121
|
|
February 2017 public offering of warrants exercisable at CAD$2.15, until February 21, 2022
|
|
|
1,723,934
|
|
|
|
1,723,934
|
|
|
|
|
|
|
|
|
|
|
Total fully diluted shares
|
|
|
118,297,614
|
|
|
|
116,018,678
|
|
Cash Flows and Financial Condition Between the Three Months
Ended June 30, 2020 and 2019
Summary
As at June 30, 2020, cash and cash equivalents totaled $12,122,
a net decrease of $3,855 compared to cash and cash equivalents totaling $15,977 at June 30, 2019.
Operating activities
During the three months ended June 30, 2020 and June 30, 2019, our
operating activities used cash of $4,309 and $6,824, respectively. The decrease of $2,515 during the three months ended June 30,
2020, was due to the reduction of spending as the TRILOGY Phase 3 clinical trials were nearing completion, partly offset by the
timing of payment of invoices.
We expect that additional time and capital will be required by us
to file an NDA to obtain FDA approval for CaPre in the United States, to further scale-up our manufacturing capabilities, and to
complete marketing and other pre-commercialization activities, if our TRILOGY Phase 3 program is successful and we can proceed
to file an NDA. Consequently, we expect to require additional capital to fund our daily operating needs beyond the next fiscal
year-end. Based on a conservative estimate, we believe that our existing cash and cash equivalents will enable us to fund our operating
expenses and capital expenditure requirements through the first calendar quarter of 2021. To fully execute our business plan, we
plan to raise the necessary capital primarily through additional securities offerings and multiple sources of non-dilutive capital
such as grants or loans and strategic alliances. If we are unable to raise additional capital in sufficient amounts or on terms
acceptable to us, we may have to significantly delay the commercial launch of CaPre. Negative or inconclusive results in our TRILOGY
Phase 3 clinical program for CaPre may adversely affect our ability to raise additional capital and/or to complete strategic commercialization
partnerships to support the commercial launch of CaPre. Additional funding from third parties may not be available on acceptable
terms or at all to enable us to continue with the commercialization of CaPre.
Investing activities
During the three months ended June 30, 2020, we used cash of $36
to acquire equipment to reinforce our IT infrastructure. During the three months ended June 30, 2019, we generated cash of $5,518
due primarily to the maturity of marketable securities.
Financing activities
During the three-month period ended June 30, 2020, we generated
cash of $1,775 due to the net proceeds from the sale of shares under the “at-the-market”, or ATM, program.
During the three months ended June 30, 2019, our financing activities
generated $34 due to the exercise of warrants.
On June 29, 2020, we filed a registration statement on Form S-3
with the SEC to register up to US$200 million of common shares, warrants and units that may be offered and sold by us from time
to time. The Registration Statement was declared effective by the SEC on July 7, 2020.
ATM program
On February 14, 2019, we entered into an ATM sales agreement with
B. Riley FBR, Inc. (“B. Riley”) pursuant to which our common shares may be sold from time to time for aggregate gross
proceeds of up to $30 million, with sales only being made on the NASDAQ Stock Market. The common shares would be issued 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 ATM program has a 3-year term and requires us to pay between 3% and 4% commission to B. Riley based on volume of sales made.
During the three-month period ended June 30, 2020, a total of 2.3
million common shares were sold for total net proceeds of approximately $1.8 million under the ATM program. The shares were sold
at the prevailing market prices, which resulted in an average price of approximately $0.81 per share. Accordingly, proportional
costs of $10 related to the common shares sold have been reclassified from deferred financings costs to equity.
On June 29, 2020, we entered into an amended and restated sales
agreement, or the Sales Agreement, with B. Riley, Oppenheimer & Co. Inc. and H.C. Wainwright & Co., LLC, or collectively
the Agents, to amend the existing ATM program. Under the terms of the Sales Agreement, we may issue and sell from time to time
common shares, , having an aggregate offering price of up to $75 million through the Agents.
Subject to the terms and conditions of the Sales Agreement, the
Agents will use their commercially reasonable efforts to sell the common shares from time to time, based upon our instructions.
We have no obligation to sell any of the common shares and may at any time suspend sales under the Sales Agreement or terminate
the Sales Agreement in accordance with its terms. Under the terms of the Sales Agreement, we provided the Agents with customary
indemnification rights and the Agents will be entitled to compensation, at a commission rate equal to 3.0% of the gross proceeds
from each sale of common shares.
There are several conditions that must be met in order for us to
use the ATM, and the program only commits the Agents to use commercially reasonable efforts, and thus is not a guaranteed source
of financing. Further, the ATM may be cancelled by the Agents at their sole discretion at any time with 5 days’ notice. In
the event that we are unable to use our ATM, we would have to rely on other financing approaches and sources to obtain additional
new funding.
Costs incurred to register the Sales Agreement amounted to $130
and were recorded as deferred financing costs in the Consolidated Balance Sheet. Accordingly, the remaining balance of the costs
incurred during February 2019 for an amount of $115 were written off to financing expenses.
Transactions Subsequent to June 30, 2020
ATM Program
Subsequent to June 30, 2020, we sold a total of 4,404,152 common
shares through the ATM program, for net proceeds of approximately $3.4 million (net of commissions paid for approximately $0.1
million). The shares were sold at the prevailing market prices which resulted in an average price of approximately $0.80 per share.
Financial Position
The following table details the significant changes to the statements
of financial position as at June 30, 2020 compared to the prior fiscal year end at March 31, 2020:
Accounts
|
|
Increase
(Decrease) $
|
|
Comments
|
Cash and cash equivalents
|
|
|
(2,118
|
)
|
|
See cash flow statement
|
|
|
|
|
|
|
|
Receivables
|
|
|
(51
|
)
|
|
Timing of reimbursement of sales taxes
|
Deferred financing costs
|
|
|
9
|
|
|
Accounting and legal fees incurred in connection with the registration statement for common shares (S-3)
|
Prepaid expenses
|
|
|
(259
|
)
|
|
Expensing of insurance and other prepaid expenses
|
Equipment
|
|
|
16
|
|
|
Acquisition of equipment net of depreciation
|
Right of use asset
|
|
|
(12)
|
|
|
Adjustment to the net present value of lease contract for Sherbrooke
|
Intangible assets
|
|
|
(319
|
)
|
|
Amortization
|
Trade and other payables
|
|
|
(1,419
|
)
|
|
Timing of payments net of accruals
|
Derivative warrant liabilities
|
|
|
678
|
|
|
Change in fair value of derivative warrants
|
|
|
|
|
|
|
|
Lease liability
|
|
|
12
|
|
|
Adjustment to the net present value of lease contract for Sherbrooke
|
See the statement of changes in equity in our financial statements
for details of changes to the equity accounts during the three-month periods ended June 30, 2020 and 2019.
Treasury Operations
Our treasury policy is to invest cash that is not required immediately,
into instruments with an investment strategy based on capital preservation. Cash equivalents and marketable securities are primarily
made in guaranteed investment certificates, term deposits and high-interest savings accounts, which are issued and held with Canadian
chartered banks, highly rated promissory notes issued by government bodies and commercial paper. We hold cash denominated in both
U.S. and CAD dollars. Funds received in U.S. dollars from equity financings are invested as per our treasury policy in U.S. dollar
investments and converted to CAD dollars as needed to fulfill operational requirements and funding.
Derivative Warrant Liabilities
A total of 10,188,100 warrants were issued as part of our May 2018
public offering in Canada and recognized as derivative warrant liabilities with a fair value at inception of $3,323. During the
year ended March 31, 2020, a total of 3,594,350 warrants were exercised. As of June 30, 2020, the derivative warrant liability
for the remaining 6,593,750 warrants totaled $1,604, which represents the fair value of these warrants as at June 30, 2020. The
weighted average fair value of the warrants issued in the May 2018 public offering in Canada was determined to be CAD$0.39 per
warrant at inception and approximately CAD$0.33 (US $0.23) per warrant as at June 30, 2020.
On December 27, 2017, 9,801,861 warrants were issued as part of
our U.S. public offering and recognized as derivative warrant liabilities with a fair value at inception of $4,548. The December
2017 warrants are derivative warrant liabilities for accounting purposes due to the currency of the exercise price (US$) being
different from our Canadian dollar functional currency. During the year ended March 31, 2020, 2,728,899 warrants were exercised
(including 52,288 warrants exercised on a cashless basis). As of June 30, 2020, the derivative warrant liability for the remaining
7,072,962 warrants totaled $1,467, which represents the fair value of these warrants as at June 30, 2020. The weighted average
fair value of the 2017 warrants issued was determined to be CAD$0.60 per warrant at inception and approximately CAD$0.28 (US $0.21)
per warrant as at June 30, 2020.
The variance in the fair value of both existing derivative warrant
liabilities as at June 30, 2020 is mostly due to the fluctuations in our share price and the dilution factor.
Contractual Obligations and Commitments
As at June 30, 2020, our liabilities totaled $9,106, of which $5,979
was due within 1 year, and $3,071 related to derivative warrant liabilities that are expected to be settled in common shares.
A summary of the contractual obligations at June 30, 2020, is as
follows:
Contractual Obligations
|
|
|
Total
|
|
|
|
Less than
1 year
|
|
|
|
1 to 3 years
|
|
|
|
More than
3 years
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Trade and other payables
|
|
|
5,900
|
|
|
|
5,900
|
|
|
|
–
|
|
|
|
–
|
|
Operating lease obligations
|
|
|
140
|
|
|
|
80
|
|
|
|
60
|
|
|
|
–
|
|
RKO supply agreement
|
|
|
2,808
|
|
|
|
2,496
|
|
|
|
312
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,848
|
|
|
|
8,476
|
|
|
|
372
|
|
|
|
–
|
|
Lease
On March 5, 2020, we renewed the lease agreement for our research
and development and quality control laboratory facility located in Sherbrooke, Québec, resulting in an obligation of $160
over 24 months of the lease term. As at June 30, 2020, the remaining balance of the commitment amounted to $140.
RKO supply agreement
On October 25, 2019, we signed a supply agreement with Aker, to
purchase RKO for a committed volume of commercial starting material for CaPre at a fixed price for a total value of $3.1 million
(take or pay). The delivery of the RKO has been established following a calendar year basis and it is expected to be completed
in the 4th calendar quarter of 2021. As at June 30, 2020, the remaining balance of the commitment with Aker amounts
to $2.8 million.
Research and development contracts and contract
research organizations agreements
We utilize contract manufacturing organizations, for the development
and production of clinical materials and contract research organizations to perform services related to our clinical trials. Pursuant
to the agreements with these contract manufacturing organizations and contract research organizations, we have either the right
to terminate the agreements without penalties or under certain penalty conditions.
Contingencies
We evaluate contingencies on an ongoing basis and establish loss
provisions for matters in which losses are probable and the amount of the loss can be reasonably estimated.
On May 10, 2019, we announced the settlement regarding legal claims
made by our former chief executive officer with respect to the termination of his employment. Pursuant to the settlement agreement,
we agreed to issue 900,000 common shares valued at CAD$1.10 per share to our former CEO. In addition, we agreed to reimburse
the former CEO for legal fees of $48. Pursuant to the settlement agreement, we received a full and final release from the former
CEO on all procedures in connection with the termination of his employment. This settlement was accrued as a short-term liability
as at March 31, 2019 and the expense of $790 was included as part of general and administrative expenses. The case is closed, and
no further costs are expected.
Off-Balance Sheet Arrangements
As of the date of this quarterly report, we do not have any off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are
material to investors.
Use of estimates and measurement of uncertainty
The preparation of the financial statements in conformity with 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
derivative warrant liabilities and stock-based compensation. Estimates and assumptions are also involved in measuring the accrual
of services rendered with respect to research and developments expenditures at each reporting date, are determining which research
and development expenses qualify for research and development tax credits and in what amounts. We recognize the tax credits once
it has reasonable assurance that they will be realized. Recorded tax credits are subject to review and approval by tax authorities
and, therefore, could be different from the amounts recorded.
Critical Accounting Policies
Derivative warrant liabilities
The warrants forming part of the units issued in the May 2018 Canadian
public offering are derivative liabilities for accounting purposes given the fact that the warrant indenture contains certain contingent
provisions that allow for cash settlement. The warrants forming part of the units issued from the December 2017 U.S. public offering
are derivative liabilities for accounting purposes due to the currency of the exercise price being different from our functional
currency. The derivative warrant liabilities are required to be measured at fair value at each reporting date with changes in fair
value recognized in earnings. We use the Black-Scholes pricing model to determine the fair value. The model requires the assumption
of future stock price volatility, which is estimated based on weighted average historic volatility. Changes to the expected volatility
could cause significant variations in the estimated fair value of the derivative warrant liabilities.
Stock-based compensation
We have a stock-based compensation plan, which is described in note
15 of the annual consolidated financial statements and note 8 to the interim financial statements. We account for stock options
granted to employees based on the fair value method, with fair value determined using the Black-Scholes model. The Black Scholes
model requires certain assumptions such as future stock price volatility and expected life of the instrument. Expected volatility
is estimated based on weighted average historic volatility. The expected life of the instrument is estimated based on the average
of the vesting and contractual periods for employee awards as there is minimal prior exercises of options in which to establish
historical exercise experience; and contractual life is used for broker warrants. Under the fair value method, compensation cost
is measured at fair value at date of grant and is expensed over the award’s vesting period with a corresponding increase
in additional paid-in capital. For stock options granted to non-employees, we measure the grant-date fair value based on the equity
instruments issued. Compensation cost is measured when we obtain the goods, or the counterparty renders the service.
Financial Instruments
Credit risk
Credit risk is the risk of a loss if a customer or counterparty
to a financial asset fails to meet its contractual obligations. We have credit risk relating to cash, cash equivalents and marketable
securities, which we manage by dealing only with highly rated Canadian financial institutions. The carrying amount of financial
assets, as disclosed in the statements of financial position, represents our credit exposure at the reporting date.
Currency risk
We are exposed to the financial risk related to the fluctuation
of foreign exchange rates and the degrees of volatility of those rates. Foreign currency risk is limited to the portion of our
business transactions denominated in currencies other than the Canadian dollar. Fluctuations related to foreign exchange rates
could cause unforeseen fluctuations in our operating results.
A portion of the expenses, mainly related to research
contracts and purchase of production equipment, is incurred in U.S. dollars and in Euros, for which no financial hedging is required.
There is a financial risk related to the fluctuation in the value of the U.S. dollar and the Euro in relation to the Canadian
dollar. In order to minimize the financial risk related to the fluctuation in the value of the U.S. dollar in relation to the Canadian
dollar, funds which were part of U.S. dollar financings continue to be invested as short-term investments in the U.S. dollar.
Furthermore, a portion of our cash and cash equivalents
and marketable securities are denominated in U.S. dollars, further exposing us to fluctuations in the value of the U.S. dollar
in relation to the Canadian dollar.
The following table provides an indication of our significant
foreign exchange currency exposures as stated in Canadian dollars at the following dates:
|
|
June 30, 2020
|
|
June 30, 2019
|
Denominated in
|
|
|
US
$
|
|
|
|
Euro
|
|
|
|
US
$
|
|
|
|
Euro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
4,695
|
|
|
|
–
|
|
|
|
1,712
|
|
|
|
–
|
|
Marketable securities
|
|
|
–
|
|
|
|
–
|
|
|
|
26
|
|
|
|
–
|
|
Trade and other payables
|
|
|
(5,142
|
)
|
|
|
(161
|
)
|
|
|
(13,313
|
)
|
|
|
(33
|
)
|
|
|
|
(204
|
)
|
|
|
(161
|
)
|
|
|
(11,575
|
)
|
|
|
(33
|
)
|
The following exchange rates are those applicable to the
following periods and dates:
|
|
June 30, 2020
|
|
June 30, 2019
|
|
|
|
Average
|
|
|
|
Reporting
|
|
|
|
Average
|
|
|
|
Reporting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAD$ per US$
|
|
|
1.3855
|
|
|
|
1.3576
|
|
|
|
1.3377
|
|
|
|
1.3095
|
|
CAD$ per Euro
|
|
|
1.5255
|
|
|
|
1.525
|
|
|
|
1.5032
|
|
|
|
1.4887
|
|
Based on our foreign currency exposures noted above, varying
the above foreign exchange rates to reflect a 5% strengthening of the U.S. dollar and Euro would have an increase (decrease) in
net loss as follows, assuming that all other variables remain constant:
|
|
|
June 30, 2020
|
|
|
|
June 30, 2019
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in net loss
|
|
|
9
|
|
|
|
338
|
|
An assumed 5% weakening of the foreign currencies would
have an equal but opposite effect on the basis that all other variables remained constant.
Interest rate risk
Interest rate risk is the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of changes in market rates.
Our exposure to interest rate risk as at June 30, 2020
and June 30, 2019 was as follows:
Cash and cash equivalents
|
|
Short-term fixed interest rate
|
Marketable securities
|
|
Short-term fixed interest rate
|
Unsecured convertible debentures
|
|
Short-term fixed interest rate
|
Our capacity to reinvest the short-term amounts with
equivalent return will be impacted by variations in short-term fixed interest rates available on the market. Management believes
the risk we will realize a loss as a result of the decline in the fair value of our short-term investments is limited because these
investments have short-term maturities and are held to maturity.
Liquidity risk
Liquidity risk is the risk that we will not be able to
meet our financial obligations as they fall due. We manage liquidity risk through the management of our capital structure and financial
leverage. We also manage liquidity risk by continuously monitoring actual and projected cash flows. The Board of Directors reviews
and approves our operating budgets and reviews material transactions outside the normal course of business.
Our contractual obligations related to financial instruments
and other obligations and liquidity resources are presented in the liquidity and capital resources of this MD&A. See also “Note
2 - Going Concern Uncertainty” to the consolidated financial statements.
Future Accounting Changes
The following new standards, and amendments to standards
and interpretations, are not yet effective for the period ended June 30, 2020, and have not been applied in preparing our consolidated
financial statements.
In June 2016, the Financial Accounting Standards Board,
or FASB, issued ASU 2016-13-Financial Instruments-Credit Losses (Topic 326), which amends guidance on reporting credit losses for
assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost, the new guidance
eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate
of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost
basis of the financial assets to present the net amount expected to be collected. ASU 2016-13 will affect loans, debt securities,
trade receivables, net investments in leases, off balance sheet credit exposures, and any other financial assets not excluded from
the scope that have the contractual right to receive cash. ASU 2016-13 is effective for annual periods, and interim periods within
those annual periods, beginning after December 15, 2022. Management has not yet evaluated the impact of this ASU on the consolidated
financial statements.
In August 2018, the FASB issued ASU 2018-15-Intangibles-Goodwill
and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement
That is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs in such cloud computing arrangements
with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This ASU is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and early adoption is permitted.
Entities can choose to adopt the new guidance prospectively or retrospectively. Management has adopted the accounting standard
update. However, the adoption of this update did not have any impact on the reported amounts as at June 30, 2020.