10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-Q

______________________________________

(Mark One)

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

For the quarterly period ended June 30, 2021

or

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

For the transition period from                 to                 

Commission file number: 001-35776

______________________________________

Acasti Pharma Inc.

(Exact name of registrant as specified in its charter)

______________________________________

Québec, Canada	98-1359336
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

3009 boul. de la Concorde East, Suite 102

Laval, Québec, CA H7E 2B5

(Address of principal executive offices, including zip code)

450-686-4555

(Registrant’s telephone number, including area code)

______________________________________

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, no par value per share	ACST	NASDAQ Stock Market

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

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

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

The number of outstanding common shares of the registrant, no par value per share, as of August 12, 2021, was 208,375,549.

1

ACASTI PHARMA INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended June 30, 2021

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

● our strategy, future operations, prospects and the plans of our management with a goal to enhance shareholder value, including our proposed merger with Grace Therapeutics Inc. (“Grace”);

● the outcome of our formal review process to explore and evaluate strategic alternatives to enhance shareholder value;

● our intellectual property position and duration of our patent rights;

● the potential adverse effects that the COVID-19 pandemic may have on our business and operations;

● our need for additional financing, and our estimates regarding our future financing and capital requirements;

● our expectation regarding our financial performance, including our costs and expenses, liquidity, and capital resources; and

● our projected capital requirements to fund our anticipated expenses. 

● our ability to establish collaborations or obtain additional funding;

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

● we are able to complete our proposed merger with Grace;

● we are able to attract and retain key management and skilled personnel;

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

● we are able to take advantage of new business opportunities in the pharmaceutical industry;

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

● The shareholder litigation relating to our proposed merger with Grace is resolved in a manner favorable to us and we face no additional lawsuits or other proceedings, or any such matters, if they arise, are satisfactorily resolved;

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

● we are able to obtain the additional capital and financing we require when we need it;

In addition, the forward-looking information in this quarterly report is subject to a number of known and unknown risks, uncertainties and other factors, including those described in our annual report on Form 10-K under the heading “Item 1A. Risk Factors”, many of which are beyond our control, that could cause our actual results and developments to differ materially from those that are disclosed in or implied by the forward-looking information, including, among others:

Risks related to the Merger:

● The equity exchange ratio will not be adjusted in the event of any change in Acasti's share price;

● Because the merger will be completed after the date of the Acasti annual and special shareholders meeting and the Grace stockholder approval, you will not know, at the time of the Acasti annual and special shareholder meeting or the Grace stockholder approval, the market value of the Acasti common shares that Grace stockholders will receive upon completion of the merger;

● Failure to complete the merger could negatively impact the share prices and the future business and financial results of Acasti;

● The merger agreement contains provisions that could discourage a potential competing acquirer of either Acasti or Grace;

● The merger may be completed even though certain events occur prior to the closing that materially and adversely affect Acasti or Grace;

● If the conditions to the merger are not satisfied or waived, the merger may not occur. If the merger is consummated, it will result in substantial dilution to Acasti shareholders and may not deliver the anticipated benefits Acasti expects;

3

● The combined company may become involved in securities class action litigation that could divert management’s attention and harm the combined company’s business and insurance coverage may not be sufficient to cover all costs and damages;

● Acasti has received notice from Nasdaq of non-compliance with the Nasdaq Listing Rules;

Risks Related to Intellectual Property

● We may not realize any additional value in a strategic transaction for our intellectual property;

● It is difficult and costly to protect our intellectual property rights;

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

● Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect product candidates;

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

Risks Relating to Our Common Shares

● The price of our common shares may be volatile;

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

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

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

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

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

● If we fail to meet applicable listing requirements, the NASDAQ Stock Market or the TSXV may delist our common shares from trading, in which case the liquidity and market price of our common shares could decline;

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

● We are a “smaller reporting company” under the SEC’s disclosure rules and have elected to comply with the reduced disclosure requirements applicable to smaller reporting companies;

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

● U.S. investors may be unable to enforce certain judgments; and

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

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

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

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

4

PART I. FINANCIAL INFORMATION

Item 1: Financial Information

Unaudited Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Balance sheets	7
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss	8
Condensed Consolidated Interim Statements of Changes Shareholders’ Equity	9
Condensed Consolidated Interim Statements of Cash Flows	10
Notes to the Condensed Consolidated Interim Financial Statements	11

5

Condensed Consolidated Interim Financial Statements of
(Unaudited)

ACASTI PHARMA INC.

Three-month periods ended June 30, 2021 and 2020

6

ACASTI PHARMA INC.

Condensed Consolidated Interim Balance sheet

(Unaudited)

			June 30, 2021			March 31, 2021
(Expressed in thousands of U.S. dollars except share data)	Notes			$			$
Assets
Current assets:
Cash and cash equivalents				40,975			50,942
Short-term investments		4		16,747			9,789
Receivables				448			530
Assets held for sale		5		778			768
Prepaid expenses				1,439			343
Total current assets				60,387			62,372
Right of Use Asset				66			86
Total assets				60,453			62,458
Liabilities and Shareholders’ Equity
Current liabilities:
Trade and other payables				2,279			1,493
Lease liability				66			86
Total current liabilities				2,345			1,579
Derivative warrant liabilities		6		4,651			5,219
Total liabilities				6,996			6,798
Shareholders’ Equity:
Common shares	7(a)			197,194			197,194
Additional paid-in capital				10,970			10,817
Accumulated other comprehensive loss				(5,571	)		(6,333	)
Accumulated deficit				(149,136	)		(146,018	)
Total shareholder’s equity				53,457			55,660
Commitments and contingencies		12
Subsequent events		13
Total liabilities and shareholders’ equity				60,453			62,458

See accompanying notes to unaudited Interim financial statements.

7

ACASTI PHARMA INC.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

(Unaudited)

Three-month periods ended June 30, 2021 and 2020

			June 30, 2021			June 30, 2020
(Expressed in thousands of U.S. dollars except share data)	Notes			$			$
Research and development expenses, net of government assistance		8		(469	)		(1,756	)
General and administrative expenses				(2,676	)		(1,649	)
Sales and marketing expenses				-			(716	)
Loss from operating activities				(3,145	)		(4,121	)
Net financial Income (Expenses)		9		27			(545	)
Net loss and comprehensive loss				(3,118	)		(4,666	)
Basic and diluted loss per share				(0.01	)		(0.05	)
Weighted average number of shares outstanding				208,375,549			90,691,726

See accompanying notes to unaudited interim financial statements

8

ACASTI PHARMA INC.

Condensed Consolidated Interim Statements of Changes in Shareholder’s Equity

(Unaudited)

Three-month periods ended June 30, 2021 and 2020

			Common Shares
(Expressed in thousands of U.S. dollars except share data)	Notes		Number		Dollar		Additional Paid-in Capital		Accumulated other comprehensive loss			Accumulated Deficit		Total
						$		$		$		$			$
Balance, March 31, 2021				208,375,549		197,194		10,817		(6,333	)	(146,018	)		55,660
Net loss and total comprehensive loss for the period				-		-		-		-		(3,118	)		(3,118	)
Cumulative translation adjustment				-		-		-		762		-			762
Net proceeds from shares issued under the at-the-market (ATM) program	7(a)			-		-		-		-		-			-
Stock based compensation		10		-		-		153		-		-			153
Balance at June 30, 2021				208,375,549		197,194		10,970		(5,571	)	(149,136	)		53,457

			Common Shares
(Expressed in thousands of U.S. dollars except share data)	Notes		Number		Dollar		Additional Paid-in Capital		Accumulated other comprehensive loss			Accumulated Deficit			Total
						$		$		$			$			$
Balance, March 31, 2020				90,209,449		137,424		9,797		(7,887	)		(126,340	)		12,994
Net loss and total comprehensive loss for the period				-		-		-		-			(4,666	)		(4,666	)
Cumulative translation adjustment				-		-		-		308			-			308
Net proceeds from shares issued under the at-the-market (ATM) program	7(a)			2,278,936		1,765		-		-			-			1,765
Stock based compensation		10		-		-		635		-			-			635
Balance at June 30, 2020				92,488,385		139,189		10,432		(7,579	)		(131,006	)		11,036

9

ACASTI PHARMA INC.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

Three-month periods ended June 30, 2021 and 2020

			June 30, 2021			June 30, 2020
(Expressed in thousands of U.S. dollars except share data)	Notes			$			$
Cash flows used in operating activities:
Net loss for the period				(3,118	)		(4,666	)
Adjustments:
Amortization of intangible assets				-			462
Depreciation of equipment				-			86
Stock-based compensation		10		153			632
Change in fair value of warrant liabilities		6		(643	)		509
Write off-of deferred financing costs of at-the-market (ATM) program	7(a)			-			121
Unrealized foreign exchange loss (gain)				740			(134	)
Changes in non-cash working capital items		11		(533	)		(1,179	)
Net cash used in operating activities				(3,401	)		(4,169	)
Cash flows from (used in) investing activities:
Acquisition of equipment				-			(36	)
Acquisition of short-term investments				(8,301	)		-
Maturity of short-term investment				1,374			-
Net cash from (used in) investing activities				(6,927	)		(36	)
Cash flows from (used in) financing activities:
Net proceeds from issuance of common shares under the at-the-market (ATM)	7(a)			-			1,775
Deferred financing costs	7(a)			-			(140	)
Net cash from (used in) financing activities				-			1,635
Effect of exchange rate fluctuations on cash and cash equivalents				(511	)		(120	)
Translations effects on cash and cash equivalents related to reporting currency				872			572
Net (decrease) increase in cash and cash equivalents				(9,967	)		(2,118	)
Cash and cash equivalents, beginning of period				50,942			14,240
Cash and cash equivalents, end of period				40,975			12,122
Cash and cash equivalents are comprised of:
Cash				40,975			5,270
Cash equivalents				-			6,852

See accompanying notes to unaudited interim financial statements.

10

ACASTI PHARMA INC.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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

Three-month periods ended June 30,2021 and 2020

1. Nature of Operation:

Acasti Pharma Inc. (“Acasti” or the “Corporation”) is incorporated under the Business Corporations Act (Québec) (formerly Part 1A of the Companies Act (Québec)). The Corporation is domiciled in Canada and its registered office is located at 3009 boul. de la Concorde East, Suite 102, Laval, Québec, Canada H7E 2B5.

In January 2020 and August 2020, the Corporation released Phase 3 clinical study results for the Corporation’s lead drug candidate, CaPre. The TRILOGY studies did not to meet the primary endpoint which resulted in the Board of Directors making a decision not to proceed with a filing of an NDA with the FDA. With the completion of the TRILOGY studies research and development activities and expenses were reduced.

In September 2020, the Corporation commenced a formal process to explore and evaluate strategic alternatives to enhance shareholder value. Towards this end, the Corporation has engaged a financial advisor to assist in the process. The Corporation has also greatly reduced its commercial activities including a reduction in workforce to reduce operating expenses, while it evaluates these opportunities. In addition, some CaPre related equipment and other assets are classified as held for resale as they are expected to be sold.

In May 2021, the Corporation announced a definitive agreement to acquire Grace Therapeutics Inc. (“Grace”), a privately held emerging biopharmaceutical company focused on developing innovative drug delivery technologies for the treatment of rare and orphan diseases (the “Proposed Transaction”). Subject to the completion of the Proposed Transaction, the Corporation will acquire Grace’s pipeline of drug candidates. The Proposed Transaction has been approved by the boards of directors of both companies and is supported by Grace’s stockholders through voting and lock-up agreements with the Corporation. The transaction remains subject to approval of Acasti stockholders, as well as applicable stock exchanges. The Corporation remains subject to a number of risks similar to other companies in the biotechnology industry, including compliance with government regulations, protection of proprietary technology, dependence on third party contractors and consultants and product liability.

2. Summary of significant accounting policies:

Basis of presentation:

These unaudited Consolidated Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and on a basis consistent with those accounting principles followed by the Corporation and disclosed in note 2 of its most recent 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.

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. In prior years there was substantial doubt regarding the Corporation’s ability to realize its assets and discharge its liabilities and commitments in the ordinary course of business. During year ended March 31, 2021, the Corporation has raised net proceeds of $59.3 million under its At-the-Market (“ATM”) program. The Corporation’s assets as at June 30, 2021, include cash and cash equivalents and short-term investments totaling $57.7 million. The Corporation’s current liabilities total $2.3 million as at June 30, 2021 and are comprised primarily of amounts due to or accrued for creditors.

The Corporation’s ability to continue as a going concern is dependent upon its ability to achieve a successful strategic alternative and ultimately generate cashflows to meet its obligations. To date, the Corporation has financed its operations primarily through public offerings of common shares, private placements, and the proceeds from research tax credits, and will require additional financing in the future. Refer to note 1 Nature of Operation regarding the Corporation’s agreement to acquire Grace Therapeutics Inc. There is no assurance that a strategic transaction will be consummated, as completion of such transaction is not wholly within the Corporation’s control. As a result of the Corporation’s current liquidity profile, the reduction of operating expenses and limited liabilities management has assessed that substantial doubt no longer exists regarding the Corporation’s ability to continue as a going concern for one year from the issuance date of these financial statements.

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.

11

ACASTI PHARMA INC.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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

Three-month periods ended June 30,2021 and 2020

2. Summary of significant accounting policies (continued):

Estimates and assumptions include the measurement of derivative warrant liabilities (note 6) and stock-based compensation (note 10), assets held for sale (notes 5) and the take-or-pay contract (note 12(a)). Estimates and assumptions are also involved in measuring the accrual of services rendered with respect to research and developments expenditures at each reporting date, whether or not contingencies should be accrued for 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.

3. Recent accounting pronouncements

In June 2016, the Financial Accounting Standards Board 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.

4. Short-term investments

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

	June 30, 2021		March 31, 2021
		$		$
Term deposits issued in US currency earning interest at ranges between 0.23% and 0.35% and maturing on various dates from July 27, 2021 to December 20,2021		12,406		7,542
Term deposits issued in CAD currency earning interest at ranges between 0.53% and 0.60% and maturing on various dates from July 7, 2021 to December 20, 2021		4,341		2,247
Total short-term investments		16,747		9,789

5. Assets held for sale

During the period the Corporation committed to a plan and is actively marketing for sale Other assets and Equipment and has met the criteria for classification of assets held for sale: 

	June 30, 2021		March 31, 2021
		$		$
Other assets (a)		392		387
Equipment (b)		386		381
		778		768

a. Other assets

Other assets represent krill oil (RKO) held by the Corporation that was expected to be used in the conduct of research and development activities and commercial inventory scale up related to the development and commercialization of the CaPre drug candidate. Given that the development of CaPre will no longer be pursued, the Corporation is expected to sell this reserve. The other asset is being recorded at the fair value less costs to sell. Management’s estimate of the fair value of the RKO less cost -to sell, was based primarily on estimated market prices at year end obtained from an appraiser specializing in the krill oil market. Market prices have not changed materially since year end. These projections are based on Level 3 inputs of the fair value hierarchy and reflect management’s best estimate of market participants’ pricing of the assets as well as the general condition of the asset.

12

ACASTI PHARMA INC.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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

Three-month periods ended June 30,2021 and 2020

5. Assets held for sale (continued):

b. Equipment

June 30, 2021	Cost, net of impairment		Accumulated depreciation			Net book value
		$		$			$
Furniture and office equipment		17		(5	)		12
Computer equipment		95		(30	)		65
Laboratory equipment		592		(442	)		150
Production equipment		1,195		(1,036	)		159
		1,899		(1,513	)		386

Equipment is made up of laboratory, production, computer, and office equipment that was utilized in the development of CaPre. Similarly, to the intangible assets and Other assets, the announcement of the failed Phase 3 clinical trials for CaPre resulted in an impairment trigger for the laboratory and production equipment. The impairment loss is based on management’s estimate of the fair value of the equipment less cost -to sell, which is based primarily on estimated market prices obtained from brokers specialized in selling used equipment. These projections are based on Level 3 inputs of the fair value hierarchy and reflect the Corporation’s best estimate of market participants’ pricing of the assets as well as the general condition of the assets.

6. Derivative warrant liabilities:

In connection with the Canadian public offering closed on May 9, 2018, the Corporation issued a total 10,959,500 warrants. Each warrant entitles the holder thereof to acquire one common share at an exercise price of CAD $1.31 at any time until May 9, 2023. The warrants issued are derivative warrant liabilities given the warrant indenture contains certain contingent provisions that allow for cash settlement.

In connection with the U.S. public offering on December 27, 2017, the Corporation issued a total of 9,802,935 warrants. Each warrant entitles the holder thereof to acquire one common share at an exercise price of $1.26 at any time until December 27, 2022. The warrants issued are derivative warrant liabilities given the currency of the exercise price is different from the Corporation’s functional currency.

The derivative warrant liabilities are measured at fair value at each reporting period and the reconciliation of changes in fair value is presented in the following tables:

	Warrant liabilities issued May 2018					Warrant liabilities issued December 27, 2017
	June 30, 2021			June 30, 2020		June 30, 2021			June 30, 2020
		$			$		$			$
Balance – beginning of period		2,597			1,146		2,622			1,247
Change in fair value		(296	)		378		(347	)		131
Translation effect		38			80		37			89
Balance – end of period		2,339			1,604		2,312			1,467
Fair value per share issuable		0.35			0.23		0.33			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, 2021			March 31, 2021			June 30, 2021				March 31, 2021
Exercise price	CAD$	1.31		CAD$	1.31		USD$		1.26		USD$		1.26
Share price	CAD$	0.70		CAD$	0.76		USD$		0.56		USD$		0.60
Risk-free interest		0.97	%		1.39	%			0.87	%			0.92	%
Estimated life (years)		1.86			2.11				1.49				1.74
Expected volatility		163.54	%		156.00	%			178.31	%			171.12	%
Dividend	nil			nil				nil				nil

13

ACASTI PHARMA INC.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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

Three-month periods ended June 30,2021 and 2020

7. Capital and other components of equity:

(a) “At-the-market” sales agreement:

On February 14, 2019, the Corporation entered into an 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. 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, which has a three-year term, the Corporation may issue and sell from time-to-time common shares having an aggregate offering price of up to $75,000,000 through the Agents. 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 the Corporation’s instructions. The Corporation has no obligation to sell any of the common 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 common shares. The remaining balance of the costs incurred during February 2019 for an amount of $115 were written off to financing expenses.

During the three-month period ended June 30, 2021, no common shares were sold under the ATM program. During the three-month period ended June 30, 2020, 2.3 million common shares were sold for total net proceeds of approximately $1.8 million with commission, legal and costs related to the share sale amounting to $84. 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.

(b) Warrants:

The warrants of the Corporation are composed of the following as at June 30, 2021, and March 31, 2021:

	June 30, 2021				March 31, 2021
	Number outstanding		Amount		Number outstanding		Amount
				$				$
Liability
May 2018 public offering warrants 2018 (i)		6,593,750		2,339		6,593,750		2,597
Series December 2017 U.S. public offering warrants 2017 (ii)		7,072,962		2,312		7,072,962		2,622
		13,666,712		4,651		13,666,712		5,219
Equity
Public offering warrants
Public offering Broker warrants May 2018(iii)		1		-		1		-
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
		1,983,056		792		1,983,056		792

(i) Warrant to acquire one Common Share at an exercise price of CAD $1.31, expiring on May 9, 2023.

(ii) Warrant to acquire one Common Share at an exercise price of $1.26, expiring on December 27, 2022.

(iii) Warrant to acquire one Common Share at an exercise price of CAD $1.05, expiring on May 9, 2023.

(iv) Warrant to acquire one Common Share at an exercise price of $1.2625, expiring on December 19, 2022.

(v) Warrant to acquire one Common Share at an exercise price of CAD $2.15, expiring on February 21, 2022.

14

ACASTI PHARMA INC.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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

8. Government assistance:

Government assistance is comprised of a government grant from the Canadian federal government and research and development investment tax credits receivable from the 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, 2021, and June 30, 2020, the Corporation recorded nil and $50 respectively, as a reduction of research and development expenses in the Statement 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. In October 2020, the Corporation received correspondence from the NRC IRAP that the eligible amount awarded to the Corporation for non-dilutive and non-repayable funding was reduced from up to CAD $750,000 to up to CAD $326,357. During the three-month period ended June 30, 2021, and June 30, 2020, the Corporation claimed nil and $26 respectively, 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.

9. Net financial income (expenses):

	Three-month periods ended
	June 30, 2021			June 30, 2020
		$			$
Foreign exchange gain (loss)		(755	)		60
Financing costs		-			(121	)
Change in fair value of warrant liabilities		643			(509	)
Interest income		139			25
Financial income (expenses)		27			(545	)

10. Stock based compensation:

At June 30, 2021, the Corporation has in place a stock option plan for directors, officers, employees, and consultants of the Corporation (“Stock Option Plan”). An amendment of the Stock Option Plan was approved by shareholders on September 30, 2020. The amendment provides for an increase to the existing limits for common shares reserved for issuance under the Stock Option Plan as well as certain changes to the minimum vesting period applicable to options granted to directors under the Stock Option Plan. The Stock Option Plan continues to provide for the granting of options to purchase common shares. The exercise price of the stock options granted under this amended plan is not lower than the closing price of the common shares on the TSXV at the close of markets the day preceding the grant. The maximum number of common shares that may be issued upon exercise of options granted under the amended Stock Option Plan was increased from 11,719.910 representing 15% of the issued and outstanding common shares as of April 9, 2019, to 14,533,881 representing 15% of the issued and outstanding common shares as of August 26, 2020. The terms and conditions for acquiring and exercising options are set by the Corporation’s Board of Directors, subject among others, to the following limitations: the term of the options cannot exceed ten years and (i) all options granted to a director will be vested evenly on a monthly basis over a period of at least twelve (12) months, and (ii) all options granted to an employee will be vested evenly on a quarterly basis over a period of at least thirty-six (36) months.

The total number of 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.

15

ACASTI PHARMA INC.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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

Three-month periods ended June 30,2021 and 2020

10. Stock based compensation (continued):

The following table summarizes information about activities within the Stock Option Plan for the nine-month periods ended:

	June 30, 2021					June 30, 2020
	Weighted average exercise price		Number of options			Weighted average exercise price		Number of options
		CAD$					CAD$
Outstanding at beginning of period		1.04		7,294,919			1.00		9,936,486
Granted		-		-			-		-
Exercised		-		-			-		-
Forfeited		1.30		(63,941	)		-		-
Expired		-		-			-		-
Outstanding at end of period		1.04		7,230,978			1.00		9,936,486
Exercisable at end of period		1.14		5,376,373			1.28		4,132,146

No stock options were granted during the three periods ended June 30, 2021, and June 30, 2020. Compensation expense recognized under the Stock Option Plan for the three-month periods ended June 30, 2021, and June 30, 2020, was as follows:

	Three-month periods ended
	June 30, 2021		June 30, 2020
		$		$
Research and development expenses		50		141
General and administrative expenses		103		348
Sales and marketing expenses		-		143
		153		632

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.

11. Supplemental cash flow disclosure:

(a) Changes in non-cash operating items:

	Three-month periods ended
	June 30, 2021			June 30, 2020
		$			$
Receivables		93			71
Prepaid expenses		(653	)		294
Trade and other payables		27			(1,544	)
		(533	)		(1,179	)

16

ACASTI PHARMA INC.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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

Three-month periods ended June 30,2021 and 2020

12. Commitments and contingencies:

In the ordinary course of business, the Corporation is at times subject to various legal proceedings and disputes. The Corporation assess its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Corporation will incur a loss and the amount of the loss can be reasonably estimated, the Corporation records a liability in its consolidated financial statements. These legal contingencies may be adjusted to reflect any relevant developments. Where a loss is not probable or the amount of loss is not estimable, the Corporation does not accrue legal contingencies. While the outcome of legal proceedings is inherently uncertain, based on information currently available, management believes that it has established appropriate legal reserves. Any incremental liabilities arising from pending legal proceedings are not expected to have a material adverse effect on the Corporations financial position, results of operations, or cash flows. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the Corporation’s financial position, results of operations, or cash flows. No reserves or liabilities have been accrued as at June 30, 2021.

(a) Take or pay contract:

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 $3.1 million (take or pay). The delivery of the products must be completed by October 31, 2021. As at June 30, 2021, the remaining balance of the commitment with Aker amounts to $2.8 million. There are no termination provisions within the supply agreement. Management is currently assessing whether the Corporation can recover value from the raw krill oil product and given the uncertainty of recoverability, there is a risk that the Corporation may have a loss on this contract in the near term.

(b) Success fees

On September 23, 2020, the Corporation engaged Oppenheimer & Co., Inc., as its financial advisor to assist in the formal process to explore and evaluate strategic alternatives to enhance shareholder value. This arrangement includes the remaining fees of $800 based on the closing of the Proposed Transaction.

In October 2020 in connection with its strategic review process, the Corporation entered into retention incentive agreements with the Chief Executive Officer (“CEO”) and Chief Operating Officer (“COO”). The Agreements provide that the Corporation will pay each of the CEO and COO an amount of up to $125 in the event that certain milestones are met in relation to the monetization by the Corporation of its assets.

13. Subsequent events:

NASDAQ communication

On July 23, 2021, it was announced that on July 12, 2021 the NASDAQ Hearings Panel issued its decision, which extended the time for the Corporation to regain compliance with Listing Rule 5550(a) relating to the NASDAQ’s $1.00 minimum bid price requirement, subject to the following: 1) on or before August 26, 2021, the Corporation will hold a shareholders meeting to obtain approval for a share consolidation if needed at a ratio that will allow for long term compliance with Listing Rule 5550(a); and 2) on or before September 10, 2021, the Corporation will have regained compliance with Listing Rule 5550(a). The approval by NASDAQ of (i) the continued listing of the Corporation’s common shares on NASDAQ following the effective time of the merger and (ii) the listing of the Corporation’s common shares being issued to Grace stockholders in connection with the merger on NASDAQ at or prior to the effective time are conditions to the closing of the merger.

17

 

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, 2021, and for the three-month periods 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, 2021, and June 30, 2020.

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 this quarterly report and in our most recently filed annual report on Form 10-K.

This MD&A, approved by the Board of Directors on August 12, 2021, should be read in conjunction with our unaudited condensed consolidated interim financial statements for the three-month periods ended June 30, 2021, and 2020 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.

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 that has historically focused on the research, development, and commercialization of cardiometabolic prescription drugs using omega-3, or OM3 fatty acids derived from krill oil delivered both as free fatty acids and bound-to-phospholipid esters. OM3 fatty acids have extensive clinical evidence of safety and efficacy in lowering triglycerides in patients with hypertriglyceridemia, or HTG. Our lead product candidate was CaPre, an OM3 phospholipid therapeutic. As a result of missing the primary endpoint in each of our two TRILOGY phase 3 trials, we publicly disclosed that our board of directors had commenced a formal process to explore and evaluate a range of strategic alternatives to enhance shareholder value, and that it had engaged Oppenheimer & Co. as its financial advisor to assist in that process. Since that announcement, we continue to maintain an active pharmaceutical development business, including retaining key research and development, finance, and administrative personnel. We have completed a pooled analysis of the TRILOGY data and we have prepared a manuscript for publication, which has been submitted to a major journal. We continue to manage ongoing regulatory filing obligations with the Federal Drug Administration, or the FDA, and evaluate potential strategic partnerships for the continued clinical development of CaPre. We also continue to maintain and further develop valuable pharmaceutically relevant assets including additional patent filings and ongoing prosecutions, and maintenance of our commercial manufacturing equipment. Since September 2020, we increased our available cash by approximately $54.4 million through financing activities, which has served to strengthen our balance sheet while providing additional flexibility and leverage while we worked through our strategic evaluation process for the Company and advancement of a potential commercial partnership for CaPre. On May 7, 2021, we announced our intent to acquire Grace through an acquisition. Grace is a New Jersey-based life sciences company focused on novel and innovative drug delivery technologies designed to improve clinical outcomes in rare and orphan disease treatments. Grace’s scientific and product development efforts are focused in cardiovascular, central nervous system and gastrointestinal disorders.

Recent Developments

TRILOGY 1 & 2 Topline Results

Our two Phase 3 clinical trials, designated as TRILOGY 1 & 2 randomized a total of 242 and 278 patients respectively, and were designed to evaluate the efficacy, safety, and tolerability of CaPre in patients with severe hypertriglyceridemia. The top-line results were announced on January 13, 2020, and August 31, 2020, respectively, and neither TRILOGY 1 nor TRILOGY 2 met its primary endpoint for lowering triglycerides at 12 weeks due to an unexpectedly large placebo effect. CaPre was well tolerated in TRILOGY, with a safety profile similar to placebo, and consistent with our previously conducted Phase 2 and 3 studies. Given the outcome of the TRILOGY studies we will not file a New Drug Application (“NDA”) with the U.S. Food and Drug Administration (“FDA”) for patients with severe hypertriglyceridemia, and we do not plan to conduct additional clinical trials for CaPre. Instead, we plan to continue to advance discussions with third parties who are interested in pursuing clinical development and regulatory approval for CaPre.

Engaged Oppenheimer & Co. Inc. to Assist in Strategic Review

On September 29, 2020, we announced that we had commenced a formal process to explore and evaluate strategic alternatives to enhance shareholder value. Towards this end, we engaged Oppenheimer & Co., Inc. as our financial advisor to assist in the process. We have devoted significant time and resources to identifying and evaluating strategic alternatives, which led to the pending transaction with Grace announced on May 7, 2021. However, there can be no assurance that our proposed merger with Grace will close, or of the timing of any such outcome. We have also devoted significant time and resources to identify and evaluate potential strategic partnerships for CaPre; however, there can be no assurance that such activities will result in any agreements or transactions that will enhance shareholder value. We do not intend to make any further disclosures regarding the strategic process for CaPre unless and until a specific course of action is approved by our board of directors.

Definitive Agreement to Acquire Grace Therapeutics, Inc.

On May 7, 2021, we announced a definitive agreement to acquire Grace. Subject to shareholder approval, and the subsequent completion of the Proposed Transaction, we will acquire Grace’s pipeline of drug candidates addressing critical unmet medical needs for the treatment of rare and orphan diseases. The Proposed Transaction has been approved by the boards of directors of both companies and is supported by a majority of Grace stockholders through voting and lock-up agreements with Acasti. The transaction remains subject to approval of our shareholders, as well as applicable stock exchanges.

18

In connection with the Proposed Transaction, we will acquire Grace’s entire therapeutic pipeline consisting of three unique clinical stage and multiple pre-clinical stage assets supported by an intellectual property portfolio consisting of more than 40 granted and pending patents in various jurisdictions worldwide. Grace’s product candidates aim to improve clinical outcomes by applying proprietary formulation and drug delivery technologies to existing pharmaceutical compounds to achieve improvements over the current standard of care, or to provide treatment for diseases with no currently approved therapy. Grace’s three lead programs have all received Orphan Drug Designation from the FDA, which could provide up to seven years of marketing exclusivity in the United States upon the FDA’s approval of the NDA, provided that certain conditions are met.

Management and Operations

Subject to shareholder approval of the Proposed Transaction, the combined companies will be led by Jan D’Alvise as President and CEO and will continue to maintain our corporate headquarters in Laval, Quebec, Canada. It is expected that all Grace employees will transition to Acasti, and they will continue to maintain a research and development laboratory and commercial presence in North Brunswick, New Jersey. The new board of directors of the combined company will be composed of 4 representatives from Acasti and 3 representatives from Grace.

About the Proposed Transaction

Pending approval by our shareholders as well as applicable stock exchange approvals, Grace will merge with a new wholly owned subsidiary of Acasti. Grace stockholders will receive newly issued Acasti common shares pursuant to an equity exchange ratio formula set forth in the merger agreement. Under the terms of the definitive agreement, immediately following the consummation of the Proposed Transaction, Acasti’s shareholders on a pro forma basis would own not less than 55%, but as high as 58% of the combined company’s common shares, and Grace’s stockholders would own between 42% and 45% of the combined company’s common shares, in each case calculated on a fully-diluted basis, subject to upward adjustments in favor of Acasti shareholders based on each company’s capitalization and net cash balance as set forth in the merger agreement. For illustrative purposes, assuming no adjustments for each company’s capitalization and net cash balance and based on 208,375,549 Acasti common shares currently issued and outstanding, an aggregate of up to approximately 150,000,000 Acasti common would be issued to Grace stockholders as consideration for the Proposed Transaction.

In connection with the entering into the merger agreement, all significant stockholders of Grace have entered into voting and lock-up agreements with Acasti pursuant to which they have agreed, amongst other things to (i) vote their shares of Grace in favor of the Proposed Transaction, (ii) be subject to lock-up provisions for a period of 12 months (subject to certain exceptions), and (iii) support the election of board nominees specified in the voting and lock-up agreements through the 2023 annual general meeting of shareholders.

The Proposed Transaction is expected to close in the calendar third quarter of 2021, immediately following approval at an Acasti shareholders meeting, which is scheduled for August 26, 2021, as well as satisfaction of other closing conditions by each company specified in the definitive agreement.

Nasdaq Update

On May 11, 2021, Acasti received written notice from the NASDAQ Listing Qualifications Department notifying Acasti that based upon Acasti’s non- compliance with the $1.00 bid price requirement set forth in NASDAQ Listing Rule 5550(a) as of May 10, 2021, Acasti common shares were subject to delisting unless Acasti timely requested a hearing before the NASDAQ Hearings Panel. Acasti requested a hearing, which stayed any further action by NASDAQ pending the conclusion of the hearing process.

At the hearing on June 17, 2021, Acasti presented a detailed plan of compliance for the NASDAQ Hearing Panel’s consideration, which included Acasti’s commitment to implement a share consolidation if needed in connection with the Proposed Transaction.

On July 23, 2021, it was announced that on July 12, 2021 the NASDAQ Hearings Panel issued its decision, which extended the time for Acasti to regain compliance with Listing Rule 5550(a), subject to the following: 1) on or before August 26, 2021, Acasti will hold a shareholders meeting to obtain approval for a share consolidation if needed at a ratio that will allow for long term compliance with Listing Rule 5550(a); and 2) on or before September 10, 2021, Acasti will have regained compliance with Listing Rule 5550(a). The approval by NASDAQ of (i) the continued listing of Acasti’s common shares on NASDAQ following the effective time of the merger and (ii) the listing of the Acasti common shares being issued to Grace stockholders in connection with the merger on NASDAQ at or prior to the effective time are conditions to the closing of the merger.

COVID-19 Update

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

The extent to which the COVID-19 pandemic impacts our business and prospects 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.

Basis of Presentation of the Financial Statements

Our Condensed Consolidated Interim 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.

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. We have incurred operating losses and negative cash flows from operations since our inception. In prior years there was substantial doubt regarding our ability to realize our assets and discharge our liabilities and commitments in the ordinary course of business. Our assets as at June 30, 2021, include cash and cash equivalents and short-term investments totaling $57.7 million. Our current liabilities total $2.3 million as at June 30, 2021 and are comprised primarily of amounts due to or accrued for creditors.

Our ability to continue as a going concern is dependent upon our ability to achieve a successful completion of our proposed merger with Grace or another strategic alternative and ultimately generate cashflows to meet our obligations. To date, we have financed our operations primarily through public offerings of common shares, private placements, and the proceeds from research tax credits, and will require additional financing in the future. There is no assurance that our proposed merger with Grace or another strategic transaction will be consummated as such transaction is not wholly within our control. As a result of our current liquidity profile, the reduction of operating expenses and our limited liabilities, management has assessed that substantial doubt no longer exists regarding our ability to continue as a going concern for one year from the issuance date of these financial statements.

19

Comparative Financial Information for the Three-Month Periods Ended June 30, 2021, and 2020

	Three-month periods ended
	June 30, 2021			June 30, 2020
		$			$
Net loss		(3,118	)		(4,666	)
Basic and diluted (loss) per share		(0.01	)		(0.05	)
Total assets		60,453			20,142
Working capital1		58,042			7,985
Total non-current financial liabilities		4,651			3,127
Total shareholders’ equity		53,457			11,036

¹ 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. 

Statement of Net Loss

	Three-month periods ended
	June 30, 2021			June 30, 2020
		$			$
Research and development expenses		(469	)		(1,756	)
General and administrative expenses		(2,676	)		(1,649	)
Sales and marketing expenses		-			(716	)
Financial Income (expenses)		27			(545	)
Net loss		(3,118	)		(4,666	)

Results of Operations for the Three-Month Periods Ended June 30, 2021, and 2020

The net loss of $3,118 or $0.01 per share for the three months ended June 30, 2021, decreased by $1,548 from the net loss of $4,666 or $0.05 per share for the three months ended June 30, 2020.

The reduction in net loss resulted primarily from a decrease in research and development expenses of $1,287 the TRILOGY Phase 3 clinical program for CaPre has been completed. Sales and marketing expenses also decreased by $716 as a result of the discontinuation of CaPre commercialization activities due to the primary endpoint not being met in our TRILOGY 2 Phase 3 clinical trials. These decreases are offset by an increase of $1,027 related to General and administrative expenses from the prior period, due to legal and professional fees incurred in relation to the Proposed Transaction.

Net financial expenses decreased by $572 to a gain of $27 for the three months ended June 30, 2021, as compared to net financial expenses of $545 for the three months ended June 30, 2020. This is due mostly to a decrease from the change in fair value of the derivative warrant liability as compared to the comparative fiscal quarter in 2020 caused by a proportionately higher decrease in our quarter over quarter closing share price.

Two separate derivative warrant liabilities are included in the statement of financial position as at June 30, 2021, and June 30, 2020. 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.

20

Breakdown of Major Components of the Statement of Loss and Comprehensive Loss

Research and development expenses
	Three Months Ended
	June 30, 2021		June 30, 2020
		$		$
Salaries and benefits		294		434
Research contracts		76		499
Professional fees		16		154
Other		33		59
Government grants & tax credits		-		(76	)
Sub-total		419		1,070
Stock-based compensation		50		141
Depreciation and amortization		-		545
Total		469		1,756

General and administrative expenses
	Three Months Ended
	June 30, 2021		June 30, 2020
		$		$
Salaries and benefits		327		358
Professional fees		1,941		702
Other		305		241
Sub-total		2,573		1,301
Stock-based compensation		103		348
Depreciation		-		-
Total		2,676		1,649

Sales and marketing expenses
	Three Months Ended
	June 30, 2021		June 30, 2020
		$		$
Salaries and benefits		-		390
Professional fees		-		98
Other		-		85
Sub-total		-		573
Stock-based compensation		-		143
Total		-		716

During the three months ended September 30, 2020, we released our TRILOGY 2 Phase 3 clinical study results for CaPre. TRILOGY 2 failed to meet the primary endpoint, and consequently we will not be filing an NDA with the FDA. In addition to winding down our clinical programs for CaPre, we have discontinued our marketing activities to reduce operating expenses, while we evaluated a range of strategic alternatives. As a result, research and development expenses before depreciation, amortization and stock-based compensation expense for the three months ended June 30, 2021, totaled $419 compared to $1,070 for the three months ended June 30, 2020. The net decrease was mainly attributable to a reduction in research contracts associated with the completed TRILOGY trials as well as a reduction in headcount within the research and development and marketing departments.

General and administrative expenses totaled $2,573 before depreciation and stock-based compensation expense for the three-months ended June 30, 2021, and increased by $1,272 from $1,301 for the three months ended June 30, 2020. This increase is a result of increased legal and professional fees related to the Proposed Transaction.

Sales and marketing expenses were nil for the three months ended June 30, 2021, compared to $573 for the three months ended June 30, 2020. The decrease was due to an end to planned pre-launch marketing activities for CaPre.

Stock-based compensation expense decreased by $479 for the three-month period ended June 30, 2021, amount to a loss of $153, as compared to a loss of $632 for the three-month period ended June 30, 2020. The decrease in expense is due to forfeited options as well as the fact that no options have been granted in the three-month period ended June 30, 2021.

The depreciation expense decreased by $545 for the three-month period ended June 30, 2021, to nil as compared to $545 for the three-month period ended June 30, 2020. This is due to the impact of the equipment being classified as held for resale and no additional depreciation recognized.

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:

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	June 30, 2021 Number outstanding		March 31, 2021 Number outstanding
Class A shares, voting, participating and without par value		208,375,549		208,375,549
Stock options granted and outstanding		7,230,978		7,294,919
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		1		1
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		231,256,295		231,320,236

Cash Flows and Financial Condition Between the Three-Months Ended June 30, 2021, and 2020

Summary

As at June 30, 2021, cash and cash equivalents totaled $40,975, a net increase of $28,853 compared to cash and cash equivalents totaling $12,122 at June 30, 2020.

Operating activities

During the three months ended June 30, 2021, and June 30, 2020, the Corporation’s operating activities used cash of $3,401 and $4,169, respectively, further modified by changes in working capital, excluding cash.

Investing activities

During the three-months ended June 30, 2021, the Corporation’s investing activities used cash of $6,927, compared to cash used of $36 for the three months ended June 30, 2020. The increase in cash used of $6,891 is due to the increase in investments held and invested.

Financing activities

During the three-months ended June 30, 2021, the Corporation’s financing activities provided cash totaling nil, compared to cash generated of $1,635 due to proceeds from the sale of shares under the ATM program during the three months ended June 30, 2020.

ATM program 

On February 14, 2019, the Corporation entered into an ATM sales agreement with 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. On June 29, 2020, the Corporation entered into the Sales Agreement the Agents to amend the existing ATM program. Under the terms of the Sales Agreement, which has a three-year term, the Corporation may issue and sell from time-to-time common shares having an aggregate offering price of up to $75,000,000 through the Agents. 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 the Corporation’s instructions. The Corporation has no obligation to sell any of the common 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 common shares. The remaining balance of the costs incurred during February 2019 for an amount of $115 were written off to financing expenses.

During the three-month period ended June 30, 2021, no common shares were sold under the ATM program. During the three-month period ended June 30, 2020, 2.3 million common shares were sold for total net proceeds of approximately $1.8 million with commission, legal and costs related to the share sale amounting to $84. 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.

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Financial Position

The following table details the significant changes to the statements of financial position as at June 30, 2021, compared to the prior fiscal year end at March 31, 2021:

Accounts	Increase (Decrease) $	Comments
Cash and cash equivalents	(9,967)	See cash flow statement
Investments	6,958	Increase in cash available to invest
Receivables	(82)	Timing of reimbursement of sales taxes
Prepaid expenses	1,096	Renewal of insurance contract and other prepaid expenses
Other assets	5	Foreign exchange
Equipment	5	Foreign exchange
Right of use asset	(20)	Adjustment to the net present value of lease contract for Sherbrooke
Trade and other payables	788	Timing of payments net of accruals
Derivative warrant liabilities	568	Change in fair value of derivative warrants
Lease liability	(20)	Payment of lease liability

See the statement of changes in equity in our financial statements for details of changes to the equity accounts during the three-months periods ended June 30, 2021, and 2020.

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 appropriate to fulfill operational requirements and funding.

Assets Held for Sale

During the period we committed to a plan and are actively marketing for sale, Other Assets and Equipment which have met the criteria for classification of assets held for sale:

	June 30, 2021		March 31, 2021
		$		$
Other assets		392		387
Equipment		386		381
		778		768

Other assets

Other assets represent krill oil (RKO) held that was expected to be used in the conduct of research and development activities and commercial inventory scale up related to the development and commercialization of the CaPre drug. Given that the development of CaPre will no longer be pursued, we expected to sell this reserve. The Other asset is being recorded at the fair value less costs to sell. Management’s estimate of the fair value of the RKO less cost -to sell, is based primarily on estimated market prices at year end obtained from an appraiser specializing in the krill oil market. Market prices have not changed materially since year end. These projections are based on Level 3 inputs of the fair value hierarchy and reflect management’s best estimate of market participants’ pricing of the assets as well as the general condition of the asset.

Equipment

June 30, 2021	Cost, net of impairment		Accumulated depreciation			Net book value
		$		$			$
Furniture and office equipment		17		(5	)		12
Computer equipment		95		(30	)		65
Laboratory equipment		592		(442	)		150
Production equipment		1,195		(1,036	)		159
		1,899		(1,513	)		386

Equipment is made up of laboratory, production, computer, and office equipment that was utilized in the development of CaPre. Similarly, to the intangible assets and Other assets, the announcement of the failed Phase 3 clinical trials resulted in an impairment trigger for the laboratory and production equipment. The impairment loss is based on management’s estimate of the fair value of the equipment less cost -to sell, which is based primarily on estimated market prices obtained from brokers specialized in selling used equipment. These projections are based on Level 3 inputs of the fair value hierarchy and reflect our best estimate of market participants’ pricing of the assets as well as the general condition of the assets.

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Derivative Warrant Liabilities

A total of 10,959,500 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. As of June 30, 2021, the derivative warrant liability for the remaining 6,593,750 warrants totaled $2,339, which represents the fair value of these warrants as at June 30, 2021. 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 $0.44 (US $0.35) per warrant as at June 30, 2021. 

On December 27, 2017, 9,802,935 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. As of June 30, 2021, the derivative warrant liability for the remaining 7,072,962 warrants totaled $2,312, which represents the fair value of these warrants as at June 30, 2021. The weighted average fair value of the 2017 warrants issued was determined to be CAD $0.60 per warrant at inception and approximately CAD $0.41 (US $0.33) per warrant as at June 30, 2021. 

The variance in the fair value of both existing derivative warrant liabilities as at June 30, 2021, is mostly due to the fluctuations in our share price and the dilution factor.

Contractual Obligations and Commitments 

As at June 30, 2021, our liabilities totaled $6,996 of which $2,345 was due within 1 year, and $4,651 related to derivative warrant liabilities that are expected to be settled in common shares.

A summary of the contractual obligations at June 30, 2021, is as follows:

Contractual Obligations	Total		Less than 1 year		1 to 3 years		More than 3 years
		$		$		$		$
Trade and other payables		2,279		2,279		-		-
Operating lease obligations		66		66		-		-
RKO supply agreement		2,800		2,800		-		-
Total		5,145		5,145		-		-

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, 2021, the remaining balance of the commitment amounted to $66.

RKO supply agreement

On October 25, 2019, the Corporation signed a supply agreement with Aker, to purchase raw krill oil product for a committed volume of commercial starting material for CaPre for a total value of $3.1 million (take or pay). The delivery of the products must be completed by October 31, 2021. As at June 30, 2021, the remaining balance of the commitment with Aker amounts to $2.8 million. There are no termination provisions within the supply agreement. Management is currently assessing whether the Corporation can recover value from the raw krill oil product and given the uncertainty of recoverability, there is a risk that the Corporation may have a loss on this contract in the near term.

Financial advisor agreement

On September 23, 2020, the Corporation engaged Oppenheimer & Co., Inc., as its financial advisor to assist in the formal process to explore and evaluate strategic alternatives to enhance shareholder value. This arrangement includes fees the remaining fees of $800 to be paid by the Corporation based on the successful outcome of the strategic process.

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.

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.

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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, stock-based compensation, assets held for sale and the take or pay contract. Estimates and assumptions are also involved in measuring the accrual of services rendered with respect to research and development expenditures at each reporting date and determining which research and development expenses qualify for research and development tax credits and in what amounts. We recognize the tax credits once we have reasonable assurance that they will be realized. Recorded tax credits are subject to review and approval by tax authorities and, therefore, could be different from the amounts recorded. Estimates and assumptions are also utilized in the assessment of impairment of deferred financing costs, equipment, and intangibles.

Critical Accounting Policies

Impairment of Long-Lived Assets

We review the recoverability of our long-lived assets whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. The carrying amount is first compared with the undiscounted cash flows. If the carrying amount is higher than the sum of undiscounted cash flows, then we determine the fair value of the underlying asset group. Any impairment loss to be recognized is measured as the difference by which the carrying amount of the asset group exceeds the estimated fair value of the asset group.

Measurement of Assets Held for Sale

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

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 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 our 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, 2021				June 30, 2020
Denominated in	US $		Euro		US $			Euro
Cash and cash equivalents		48,526		-		4,695			-
Investments		15,381		-		-			-
Trade and other payables		(428)		-		(5,142	)		(161)
		63,479		-		(447	)		(161)

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

	June 30, 2021				June 30, 2020
	Average		Reporting		Average		Reporting
CAD$ per US$		1.2282		1.2398		1.3855		1.3576
CAD$ per Euro		1.4804		1.4702		1.5255		1.5250

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, 2021		June 30, 2020
		$		$
Increase (decrease) in net loss		3,935		(43	)

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, 2021, and 2020 was as follows:

Cash and cash equivalents	Short-term fixed interest rate
Investments	Short-term fixed interest rate

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

Liquidity risk

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

Our contractual obligations related to financial instruments and other obligations and liquidity resources are presented in the liquidity and capital resources of this MD&A.

Future Accounting Changes

The following new standards, and amendments to standards and interpretations, are not yet effective for the period ended March 31, 2021, and have not been applied in preparing our consolidated financial statements.

In June 2016, the Financial Accounting Standards Board, 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information relating to quantitative and qualitative disclosures about market risks is detailed in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, our management, with the participation of our CEO and CFO, has performed an evaluation of the effectiveness of our disclosure controls and procedures within the meaning of Rules 13a-15 (e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon this evaluation, our management has concluded that, as of June 30, 2021, our existing disclosure controls and procedures were effective. It should be noted that while our CEO and CFO believe that our disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect the disclosure controls and procedures to be capable of preventing all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable,  but not absolute, assurance that the objectives of the control system are met.

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Changes in Internal Control over Financial Reporting

No changes were made to our internal controls over financial reporting that occurred during the quarter ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Litigation Related to the Proposed Transaction

In connection with the Proposed Transaction, four stockholder lawsuits have been filed: 

(i) in the United States District Court for the Southern District of New York, captioned Bisel v. Acasti Pharma Inc. et al., Case No. 1:21-cv-06051 (the “Bisel Complaint”);

(ii) in the United States District Court for the District of Delaware, captioned Dawson v. Acasti Pharma Inc. et al., Case No. 1:21-cv-01039 (the “Dawson Complaint”); 

(iii)	in the United States District Court for the Eastern District of New York, captioned Weir v. Acasti Pharma Inc. et al., Case No. 1:21-cv-04151 (the “Weir Complaint”); and
(iv)	in the United States District Court for the Southern District of New York, captioned Castaldo v. Acasti Pharma Inc. et al., Case No. 1:21-cv-06567 (the “Castaldo Complaint”) (together with the Bisel Complaint, the Dawson Complaint and the Weir Complaint, the “Complaints”));

The Complaints generally allege that Acasti’s public disclosures pertaining to the Proposed Transaction omit material facts in purported violation of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and further that members of the Board of Directors are liable for those purported omissions under Section 20(a) of the Exchange Act. The relief sought in the Complaints includes, among other things, to enjoin the consummation of the Proposed Transaction pending disclosure of sufficient information, to award damages purportedly caused by the alleged omissions, and to award plaintiffs’ attorneys’ fees and other costs.

It is possible that additional lawsuits asserting similar claims could be filed. We strongly believe the allegations in the Complaints are frivolous and without merit, and plan to vigorously defend against them.

Item 1A. Risk Factors

Other than as set forth below, there have been no material changes from the risk factors disclosed in our most recently filed annual report on Form 10-K.

Lawsuits have been filed, and other lawsuits may be filed, against us and members of our board of directors challenging the Proposed Transaction, and an adverse ruling in any such lawsuit may delay or prevent the completion of the Proposed Transaction or result in an award of damages against us.

In connection with the Proposed Transaction, four shareholder lawsuits have been filed: 

(i) in the United States District Court for the Southern District of New York, captioned Bisel v. Acasti Pharma Inc. et al., Case No. 1:21-cv-06051 (the “Bisel Complaint”);

(ii) in the United States District Court for the District of Delaware, captioned Dawson v. Acasti Pharma Inc. et al., Case No. 1:21-cv-01039 (the “Dawson Complaint”); 

(iii) in the United States District Court for the Eastern District of New York, captioned Weir v. Acasti Pharma Inc. et al., Case No. 1:21-cv-04151 ( the “Weir Complaint”)); and

(iv) in the United States District Court for the Southern District of New York, captioned Castaldo v. Acasti Pharma Inc. et al., Case No. 1:21-cv-06567 (the “Castaldo Complaint”) (together with the Bisel Complaint, the Dawson Complaint and the Weir Complaint, the “Complaints”));

The Complaints generally allege that Acasti’s public disclosures pertaining to the Proposed Transaction omit material facts in purported violation of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and further that members of the Board of Directors are liable for those purported omissions under Section 20(a) of the Exchange Act. The relief sought in the Complaints includes, among other things, to enjoin the consummation of the Proposed Transaction pending disclosure of sufficient information, to award damages purportedly caused by the alleged omissions, and to award plaintiffs’ attorneys’ fees and other costs. It is possible that additional lawsuits asserting similar claims could be filed. We strongly believe the allegations in the Complaints are frivolous and without merit, and plan to vigorously defend against them. The results of complex legal proceedings are difficult to predict and could delay or prevent the completion of the Proposed Transaction. The existence of litigation relating to the Proposed Transaction could impact the likelihood of obtaining shareholder approval of the Proposed Transaction. Moreover, the pending litigation is, and any future additional litigation could be, time consuming and expensive and could divert management’s attention away from its regular business.

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We have received notice from NASDAQ of non-compliance with the NASDAQ Listing Rules.

On May 11, 2021, we received written notice from the NASDAQ Listing Qualifications Department notifying us that based upon our non-compliance with the $1.00 bid price requirement set forth in NASDAQ Listing Rule 5550(a) as of May 10, 2021, our common shares were subject to delisting unless we timely requested a hearing before the NASDAQ Hearings Panel. We requested a hearing, which stayed any further action by NASDAQ pending the conclusion of the hearing process. At the hearing, on June 17, 2021, we presented a detailed plan of compliance for the NASDAQ Listing Panel’s consideration, which included our commitment to implement the reverse stock split to evidence compliance with NASDAQ’s listing rules. On July 12, 2021, the NASDAQ Hearings Panel issued its decision, which extended the time for us to regain compliance with Listing Rule 5550(a), subject to the following: 1) on or before August 26, 2021, we will hold a shareholders meeting to obtain approval for a reverse split at a ratio that will allow for long term compliance with Listing Rule 5550(a); and 2) on or before September 10, 2021, we will have regained compliance with Listing Rule 5550(a). The approval by NASDAQ of (i) the continued listing of our common shares on NASDAQ following the effective time of the Proposed Transaction and (ii) the listing of our common shares being issued to Grace stockholders in connection with the Proposed Transaction on NASDAQ at or prior to the effective time are conditions to the closing of the Proposed Transaction.

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

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of May 7, 2021, among Acasti Pharma Inc., Grace Therapeutics Inc. and Acasti Pharma U.S., Inc. (incorporated by reference to Exhibit 2.1 of from Form 8-K (File No. 001-35776) filed with the Commission on May 7, 2021)
3.1	Articles of Incorporation (incorporated by reference to Exhibit 4.1 from Form S-8 (File No. 333-191383) filed with the Commission on September 25, 2013)
3.2	Amended and Restated General By-Law (incorporated by reference to Exhibit 99.1 from Form 6-K (File No. 001-35776) filed with the Commission on February 21, 2017)
3.3	Advance Notice bylaw No. 2013-1 (incorporated by reference to Exhibit 4.3 from Form S-8 (File No. 333-191383) filed with the Commission on September 25, 2013)
4.1	Specimen Certificate for Common Shares of Acasti Pharma Inc. (incorporated by reference to Exhibit 2.1 from Form 20-F (File No. 001-35776) filed with the Commission on June 6, 2014)
4.2	Warrant Indenture dated December 3, 2013, between Acasti Pharma Inc. and Computershare Trust Company of Canada (incorporated by reference to Exhibit 99.1 from Form 6-K (File No. 001-35776) filed with the Commission on December 3, 2013)
4.3	Warrant Indenture dated February 21, 2017, between Acasti Pharma Inc. and Computershare Trust Company of Canada (incorporated by reference to Exhibit 2.3 from Form 20-F (File No. 001-35776) filed with the Commission on June 27, 2017)
4.4	Warrant Agency Agreement dated December 27, 2017, between Acasti Pharma Inc. and Computershare Inc. and its wholly-owned subsidiary, Computershare Trust Company N.A. (incorporated by reference to Exhibit 2.4 from Form 20-F (File No. 001-35776) filed with the Commission on June 29, 2018)
4.5	Amended and Restated Warrant Indenture dated May 10, 2018, between Acasti Pharma Inc. and Computershare Trust Company of Canada (incorporated by reference to Exhibit 2.5 from Form 20-F (File No. 001-35776) filed with the Commission on June 29, 2018)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 12, 2021

ACASTI PHARMA INC.
By:	/s/ Janelle D’Alvise
	Name: Janelle D’Alvise
	Title: President and Chief Executive Officer and Director (Principal Executive Officer)
By:	/s/ Brian Ford
	Name: Brian Ford
	Title: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Janelle D’Alvise, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Acasti Pharma Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2021

/s/ Janelle D’Alvise

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian Ford, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Acasti Pharma Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2021

/s/ Brian Ford

CFO, Finance

EX-32.1

Exhibit 32.1

SECTION 906 CERTIFICATION

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) in connection with the quarterly report on Form 10-Q of Acasti Pharma Inc. for the quarterly period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer hereby certifies, to such officer’s knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Acasti Pharma Inc.

/s/ Janelle D’Alvise
Name:	Janelle D’Alvise
Title:	Chief Executive Officer
Date:	August 12, 2021

This certification accompanies the Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed “filed” by Acasti Pharma Inc. for purposes of §18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.

EX-32.2

Exhibit 32.2

SECTION 906 CERTIFICATION

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) in connection with the quarterly report on Form 10-Q of Acasti Pharma Inc. for the quarterly period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer hereby certifies, to such officer’s knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Acasti Pharma Inc.

/s/ Brian Ford
Name:	Brian Ford
Title:	CFO, Finance
Date:	August 12, 2021

This certification accompanies the Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed “filed” by Acasti Pharma Inc. for purposes of §18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.

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Document And Entity Information - shares	3 Months Ended
	Jun. 30, 2021	Aug. 12, 2021
Document Information [Line Items]
Entity Central Index Key	0001444192
Entity Registrant Name	Acasti Pharma Inc.
Amendment Flag	false
Current Fiscal Year End Date	--03-31
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2021
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Transition Report	false
Entity File Number	001-35776
Entity Incorporation, State or Country Code	CA
Entity Tax Identification Number	98-1359336
Entity Address, Address Line One	3009 boul. de la Concorde East, Suite 102
Entity Address, City or Town	Laval
Entity Address, State or Province	QC
Entity Address, Country	CA
Entity Address, Postal Zip Code	H7E 2B5
City Area Code	450
Local Phone Number	686-4555
Title of 12(b) Security	Common Shares, no par value per share
Trading Symbol	ACST
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		208,375,549

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Condensed Consolidated Interim Balance sheet (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Current assets:
Cash and cash equivalents	$ 40,975	$ 50,942
Short-term investments	16,747	9,789
Receivables	448	530
Assets held for sale	778	768
Prepaid expenses	1,439	343
Total current assets	60,387	62,372
Right of Use Asset	66	86
Total assets	60,453	62,458
Current liabilities:
Trade and other payables	2,279	1,493
Lease liability	66	86
Total current liabilities	2,345	1,579
Derivative warrant liabilities	4,651	5,219
Total liabilities	6,996	6,798
Shareholders’ Equity:
Common shares	197,194	197,194
Additional paid-in capital	10,970	10,817
Accumulated other comprehensive loss	(5,571)	(6,333)
Accumulated deficit	(149,136)	(146,018)
Total shareholder’s equity	53,457	55,660
Commitments and contingencies
Total liabilities and shareholders’ equity	$ 60,453	$ 62,458

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Condensed Consolidated Interim Statements of Loss and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Research and development expenses, net of government assistance	$ (469)	$ (1,756)
General and administrative expenses	(2,676)	(1,649)
Sales and marketing expenses	0	(716)
Loss from operating activities	(3,145)	(4,121)
Net financial Income (Expenses)	27	(545)
Net loss and comprehensive loss	$ (3,118)	$ (4,666)
Basic and diluted loss per share (in dollars per share)	$ (0.01)	$ (0.05)
Weighted average number of shares outstanding (in shares)	208,375,549	90,691,726

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Condensed Consolidated Interim Statements of Changes in Shareholder's Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Mar. 31, 2020	90,209,449
Balance at Mar. 31, 2020	$ 137,424	$ 9,797	$ (7,887)	$ (126,340)	$ 12,994
Net loss and total comprehensive loss for the period				(4,666)	(4,666)
Cumulative translation adjustment			308		308
Stock Issued During Period, Shares, New Issues (in shares)	2,278,936
Net proceeds from shares issued under the at-the-market (ATM) program	$ 1,765				1,765
Stock based compensation	$ 0	635			635
Stock based compensation (in shares)	0
Balance (in shares) at Jun. 30, 2020	92,488,385
Balance at Jun. 30, 2020	$ 139,189	10,432	(7,579)	(131,006)	11,036
Balance (in shares) at Mar. 31, 2021	208,375,549
Balance at Mar. 31, 2021	$ 197,194	10,817	(6,333)	(146,018)	55,660
Net loss and total comprehensive loss for the period				(3,118)	(3,118)
Cumulative translation adjustment			762		762
Stock Issued During Period, Shares, New Issues (in shares)	0
Net proceeds from shares issued under the at-the-market (ATM) program	$ 0				0
Stock based compensation	$ 0	153			153
Balance (in shares) at Jun. 30, 2021	208,375,549
Balance at Jun. 30, 2021	$ 197,194	$ 10,970	$ (5,571)	$ (149,136)	$ 53,457

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Condensed Consolidated Interim Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cash flows used in operating activities:
Net loss for the period	$ (3,118)	$ (4,666)
Adjustments:
Amortization of intangible assets	0	462
Depreciation of equipment	0	86
Stock-based compensation	153	632
Change in fair value of warrant liabilities	(643)	509
Write off-of deferred financing costs of at-the-market (ATM) program	0	121
Unrealized foreign exchange loss (gain)	740	(134)
Changes in non-cash working capital items	(533)	(1,179)
Net cash used in operating activities	(3,401)	(4,169)
Cash flows from (used in) investing activities:
Acquisition of equipment	0	(36)
Acquisition of short-term investments	(8,301)	0
Maturity of short-term investment	1,374	0
Net cash from (used in) investing activities	(6,927)	(36)
Cash flows from (used in) financing activities:
Net proceeds from issuance of common shares under the at-the-market (ATM)	0	1,775
Deferred financing costs	0	(140)
Net cash from (used in) financing activities	0	1,635
Effect of exchange rate fluctuations on cash and cash equivalents	(511)	(120)
Translations effects on cash and cash equivalents related to reporting currency	872	572
Net (decrease) increase in cash and cash equivalents	(9,967)	(2,118)
Cash and cash equivalents, beginning of period	50,942	14,240
Cash and cash equivalents, end of period	40,975	12,122
Cash and cash equivalents are comprised of:
Cash	40,975	5,270
Cash equivalents	$ 0	$ 6,852

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Note 1 - Nature of Operation

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Nature of Operations [Text Block]

1. Nature of Operation:

Acasti Pharma Inc. (“Acasti” or the “Corporation”) is incorporated under the Business Corporations Act (Québec) (formerly Part 1A of the Companies Act (Québec)). The Corporation is domiciled in Canada and its registered office is located at 3009 boul. de la Concorde East, Suite 102, Laval, Québec, Canada H7E 2B5.

In January 2020 and August 2020, the Corporation released Phase 3 clinical study results for the Corporation’s lead drug candidate, CaPre. The TRILOGY studies did not to meet the primary endpoint which resulted in the Board of Directors making a decision not to proceed with a filing of an NDA with the FDA. With the completion of the TRILOGY studies research and development activities and expenses were reduced.

In September 2020, the Corporation commenced a formal process to explore and evaluate strategic alternatives to enhance shareholder value. Towards this end, the Corporation has engaged a financial advisor to assist in the process. The Corporation has also greatly reduced its commercial activities including a reduction in workforce to reduce operating expenses, while it evaluates these opportunities. In addition, some CaPre related equipment and other assets are classified as held for resale as they are expected to be sold.

In May 2021, the Corporation announced a definitive agreement to acquire Grace Therapeutics Inc. (“Grace”), a privately held emerging biopharmaceutical company focused on developing innovative drug delivery technologies for the treatment of rare and orphan diseases (the “Proposed Transaction”). Subject to the completion of the Proposed Transaction, the Corporation will acquire Grace’s pipeline of drug candidates. The Proposed Transaction has been approved by the boards of directors of both companies and is supported by Grace’s stockholders through voting and lock-up agreements with the Corporation. The transaction remains subject to approval of Acasti stockholders, as well as applicable stock exchanges. The Corporation remains subject to a number of risks similar to other companies in the biotechnology industry, including compliance with government regulations, protection of proprietary technology, dependence on third party contractors and consultants and product liability.

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Note 2 - Summary of Significant Accounting Policies

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2. Summary of significant accounting policies:

Basis of presentation:

These unaudited Consolidated Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and on a basis consistent with those accounting principles followed by the Corporation and disclosed in note 2 of its most recent 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.

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. In prior years there was substantial doubt regarding the Corporation’s ability to realize its assets and discharge its liabilities and commitments in the ordinary course of business. During year ended March 31, 2021, the Corporation has raised net proceeds of $59.3 million under its At-the-Market (“ATM”) program. The Corporation’s assets as at June 30, 2021, include cash and cash equivalents and short-term investments totaling $57.7 million. The Corporation’s current liabilities total $2.3 million as at June 30, 2021 and are comprised primarily of amounts due to or accrued for creditors.

The Corporation’s ability to continue as a going concern is dependent upon its ability to achieve a successful strategic alternative and ultimately generate cashflows to meet its obligations. To date, the Corporation has financed its operations primarily through public offerings of common shares, private placements, and the proceeds from research tax credits, and will require additional financing in the future. Refer to note 1 Nature of Operation regarding the Corporation’s agreement to acquire Grace Therapeutics Inc. There is no assurance that a strategic transaction will be consummated, as completion of such transaction is not wholly within the Corporation’s control. As a result of the Corporation’s current liquidity profile, the reduction of operating expenses and limited liabilities management has assessed that substantial doubt no longer exists regarding the Corporation’s ability to continue as a going concern for one year from the issuance date of these financial statements.

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 6) and stock-based compensation (note 10), assets held for sale (notes 5) and the take-or-pay contract (note 12(a)). Estimates and assumptions are also involved in measuring the accrual of services rendered with respect to research and developments expenditures at each reporting date, whether or not contingencies should be accrued for 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.

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Note 3 - Recent Accounting Pronouncements

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Accounting Standards Update and Change in Accounting Principle [Text Block]

3. Recent accounting pronouncements

In June 2016, the Financial Accounting Standards Board 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.

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Note 4 - Short-term Investments

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

4. Short-term investments

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

	June 30, 2021		March 31, 2021
		$		$
Term deposits issued in US currency earning interest at ranges between 0.23% and 0.35% and maturing on various dates from July 27, 2021 to December 20,2021		12,406		7,542
Term deposits issued in CAD currency earning interest at ranges between 0.53% and 0.60% and maturing on various dates from July 7, 2021 to December 20, 2021		4,341		2,247
Total short-term investments		16,747		9,789

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Note 5 - Assets Held for Sale

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

5. Assets held for sale

During the period the Corporation committed to a plan and is actively marketing for sale Other assets and Equipment and has met the criteria for classification of assets held for sale: 

	June 30, 2021		March 31, 2021
		$		$
Other assets (a)		392		387
Equipment (b)		386		381
		778		768

a. Other assets

Other assets represent krill oil (RKO) held by the Corporation that was expected to be used in the conduct of research and development activities and commercial inventory scale up related to the development and commercialization of the CaPre drug candidate. Given that the development of CaPre will no longer be pursued, the Corporation is expected to sell this reserve. The other asset is being recorded at the fair value less costs to sell. Management’s estimate of the fair value of the RKO less cost -to sell, was based primarily on estimated market prices at year end obtained from an appraiser specializing in the krill oil market. Market prices have not changed materially since year end. These projections are based on Level 3 inputs of the fair value hierarchy and reflect management’s best estimate of market participants’ pricing of the assets as well as the general condition of the asset.

b. Equipment

June 30, 2021	Cost, net of impairment		Accumulated depreciation			Net book value
		$		$			$
Furniture and office equipment		17		(5	)		12
Computer equipment		95		(30	)		65
Laboratory equipment		592		(442	)		150
Production equipment		1,195		(1,036	)		159
		1,899		(1,513	)		386

Equipment is made up of laboratory, production, computer, and office equipment that was utilized in the development of CaPre. Similarly, to the intangible assets and Other assets, the announcement of the failed Phase 3 clinical trials for CaPre resulted in an impairment trigger for the laboratory and production equipment. The impairment loss is based on management’s estimate of the fair value of the equipment less cost -to sell, which is based primarily on estimated market prices obtained from brokers specialized in selling used equipment. These projections are based on Level 3 inputs of the fair value hierarchy and reflect the Corporation’s best estimate of market participants’ pricing of the assets as well as the general condition of the assets.

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Note 6 - Derivative Warrant Liabilities

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

6. Derivative warrant liabilities:

In connection with the Canadian public offering closed on May 9, 2018, the Corporation issued a total 10,959,500 warrants. Each warrant entitles the holder thereof to acquire one common share at an exercise price of CAD $1.31 at any time until May 9, 2023. The warrants issued are derivative warrant liabilities given the warrant indenture contains certain contingent provisions that allow for cash settlement.

In connection with the U.S. public offering on December 27, 2017, the Corporation issued a total of 9,802,935 warrants. Each warrant entitles the holder thereof to acquire one common share at an exercise price of $1.26 at any time until December 27, 2022. The warrants issued are derivative warrant liabilities given the currency of the exercise price is different from the Corporation’s functional currency.

The derivative warrant liabilities are measured at fair value at each reporting period and the reconciliation of changes in fair value is presented in the following tables:

	Warrant liabilities issued May 2018					Warrant liabilities issued December 27, 2017
	June 30, 2021			June 30, 2020		June 30, 2021			June 30, 2020
		$			$		$			$
Balance – beginning of period		2,597			1,146		2,622			1,247
Change in fair value		(296	)		378		(347	)		131
Translation effect		38			80		37			89
Balance – end of period		2,339			1,604		2,312			1,467
Fair value per share issuable		0.35			0.23		0.33			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, 2021			March 31, 2021			June 30, 2021				March 31, 2021
Exercise price	CAD$	1.31		CAD$	1.31		USD$		1.26		USD$		1.26
Share price	CAD$	0.70		CAD$	0.76		USD$		0.56		USD$		0.60
Risk-free interest		0.97	%		1.39	%			0.87	%			0.92	%
Estimated life (years)		1.86			2.11				1.49				1.74
Expected volatility		163.54	%		156.00	%			178.31	%			171.12	%
Dividend	nil			nil				nil				nil

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Note 7 - Capital and Other Components of Equity

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

7. Capital and other components of equity:

(a) “At-the-market” sales agreement:

On February 14, 2019, the Corporation entered into an 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. 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, which has a three-year term, the Corporation may issue and sell from time-to-time common shares having an aggregate offering price of up to $75,000,000 through the Agents. 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 the Corporation’s instructions. The Corporation has no obligation to sell any of the common 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 common shares. The remaining balance of the costs incurred during February 2019 for an amount of $115 were written off to financing expenses.

During the three-month period ended June 30, 2021, no common shares were sold under the ATM program. During the three-month period ended June 30, 2020, 2.3 million common shares were sold for total net proceeds of approximately $1.8 million with commission, legal and costs related to the share sale amounting to $84. 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.

(b) Warrants:

The warrants of the Corporation are composed of the following as at June 30, 2021, and March 31, 2021:

	June 30, 2021				March 31, 2021
	Number outstanding		Amount		Number outstanding		Amount
				$				$
Liability
May 2018 public offering warrants 2018 (i)		6,593,750		2,339		6,593,750		2,597
Series December 2017 U.S. public offering warrants 2017 (ii)		7,072,962		2,312		7,072,962		2,622
		13,666,712		4,651		13,666,712		5,219
Equity
Public offering warrants
Public offering Broker warrants May 2018(iii)		1		-		1		-
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
		1,983,056		792		1,983,056		792

(i) Warrant to acquire one Common Share at an exercise price of CAD $1.31, expiring on May 9, 2023.

(ii) Warrant to acquire one Common Share at an exercise price of $1.26, expiring on December 27, 2022.

(iii) Warrant to acquire one Common Share at an exercise price of CAD $1.05, expiring on May 9, 2023.

(iv) Warrant to acquire one Common Share at an exercise price of $1.2625, expiring on December 19, 2022.

(v) Warrant to acquire one Common Share at an exercise price of CAD $2.15, expiring on February 21, 2022.

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Note 8 - Government Assistance

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Government Assistance [Text Block]

8. Government assistance:

Government assistance is comprised of a government grant from the Canadian federal government and research and development investment tax credits receivable from the 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, 2021, and June 30, 2020, the Corporation recorded nil and $50 respectively, as a reduction of research and development expenses in the Statement 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. In October 2020, the Corporation received correspondence from the NRC IRAP that the eligible amount awarded to the Corporation for non-dilutive and non-repayable funding was reduced from up to CAD $750,000 to up to CAD $326,357. During the three-month period ended June 30, 2021, and June 30, 2020, the Corporation claimed nil and $26 respectively, 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.

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Note 9 - Net Financial Income (Expenses)

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Other Income and Other Expense Disclosure [Text Block]

9. Net financial income (expenses):

	Three-month periods ended
	June 30, 2021			June 30, 2020
		$			$
Foreign exchange gain (loss)		(755	)		60
Financing costs		-			(121	)
Change in fair value of warrant liabilities		643			(509	)
Interest income		139			25
Financial income (expenses)		27			(545	)

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Note 10 - Stock Based Compensation

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

10. Stock based compensation:

At June 30, 2021, the Corporation has in place a stock option plan for directors, officers, employees, and consultants of the Corporation (“Stock Option Plan”). An amendment of the Stock Option Plan was approved by shareholders on September 30, 2020. The amendment provides for an increase to the existing limits for common shares reserved for issuance under the Stock Option Plan as well as certain changes to the minimum vesting period applicable to options granted to directors under the Stock Option Plan. The Stock Option Plan continues to provide for the granting of options to purchase common shares. The exercise price of the stock options granted under this amended plan is not lower than the closing price of the common shares on the TSXV at the close of markets the day preceding the grant. The maximum number of common shares that may be issued upon exercise of options granted under the amended Stock Option Plan was increased from 11,719.910 representing 15% of the issued and outstanding common shares as of April 9, 2019, to 14,533,881 representing 15% of the issued and outstanding common shares as of August 26, 2020. The terms and conditions for acquiring and exercising options are set by the Corporation’s Board of Directors, subject among others, to the following limitations: the term of the options cannot exceed ten years and (i) all options granted to a director will be vested evenly on a monthly basis over a period of at least twelve (12) months, and (ii) all options granted to an employee will be vested evenly on a quarterly basis over a period of at least thirty-six (36) months.

The total number of 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.

The following table summarizes information about activities within the Stock Option Plan for the nine-month periods ended:

	June 30, 2021					June 30, 2020
	Weighted average exercise price		Number of options			Weighted average exercise price		Number of options
		CAD$					CAD$
Outstanding at beginning of period		1.04		7,294,919			1.00		9,936,486
Granted		-		-			-		-
Exercised		-		-			-		-
Forfeited		1.30		(63,941	)		-		-
Expired		-		-			-		-
Outstanding at end of period		1.04		7,230,978			1.00		9,936,486
Exercisable at end of period		1.14		5,376,373			1.28		4,132,146

No stock options were granted during the three periods ended June 30, 2021, and June 30, 2020. Compensation expense recognized under the Stock Option Plan for the three-month periods ended June 30, 2021, and June 30, 2020, was as follows:

	Three-month periods ended
	June 30, 2021		June 30, 2020
		$		$
Research and development expenses		50		141
General and administrative expenses		103		348
Sales and marketing expenses		-		143
		153		632

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.

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Note 11 - Supplemental Cash Flow Disclosure

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

11. Supplemental cash flow disclosure:

(a) Changes in non-cash operating items:

	Three-month periods ended
	June 30, 2021			June 30, 2020
		$			$
Receivables		93			71
Prepaid expenses		(653	)		294
Trade and other payables		27			(1,544	)
		(533	)		(1,179	)

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Note 12 - Commitments and Contingencies

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

12. Commitments and contingencies:

In the ordinary course of business, the Corporation is at times subject to various legal proceedings and disputes. The Corporation assess its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Corporation will incur a loss and the amount of the loss can be reasonably estimated, the Corporation records a liability in its consolidated financial statements. These legal contingencies may be adjusted to reflect any relevant developments. Where a loss is not probable or the amount of loss is not estimable, the Corporation does not accrue legal contingencies. While the outcome of legal proceedings is inherently uncertain, based on information currently available, management believes that it has established appropriate legal reserves. Any incremental liabilities arising from pending legal proceedings are not expected to have a material adverse effect on the Corporations financial position, results of operations, or cash flows. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the Corporation’s financial position, results of operations, or cash flows. No reserves or liabilities have been accrued as at June 30, 2021.

(a) Take or pay contract:

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 $3.1 million (take or pay). The delivery of the products must be completed by October 31, 2021. As at June 30, 2021, the remaining balance of the commitment with Aker amounts to $2.8 million. There are no termination provisions within the supply agreement. Management is currently assessing whether the Corporation can recover value from the raw krill oil product and given the uncertainty of recoverability, there is a risk that the Corporation may have a loss on this contract in the near term.

(b) Success fees

On September 23, 2020, the Corporation engaged Oppenheimer & Co., Inc., as its financial advisor to assist in the formal process to explore and evaluate strategic alternatives to enhance shareholder value. This arrangement includes the remaining fees of $800 based on the closing of the Proposed Transaction.

In October 2020 in connection with its strategic review process, the Corporation entered into retention incentive agreements with the Chief Executive Officer (“CEO”) and Chief Operating Officer (“COO”). The Agreements provide that the Corporation will pay each of the CEO and COO an amount of up to $125 in the event that certain milestones are met in relation to the monetization by the Corporation of its assets.

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Note 13 - Subsequent Events

3 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Subsequent Events [Text Block]

13. Subsequent events:

NASDAQ communication

On July 23, 2021, it was announced that on July 12, 2021 the NASDAQ Hearings Panel issued its decision, which extended the time for the Corporation to regain compliance with Listing Rule 5550(a) relating to the NASDAQ’s $1.00 minimum bid price requirement, subject to the following: 1) on or before August 26, 2021, the Corporation will hold a shareholders meeting to obtain approval for a share consolidation if needed at a ratio that will allow for long term compliance with Listing Rule 5550(a); and 2) on or before September 10, 2021, the Corporation will have regained compliance with Listing Rule 5550(a). The approval by NASDAQ of (i) the continued listing of the Corporation’s common shares on NASDAQ following the effective time of the merger and (ii) the listing of the Corporation’s common shares being issued to Grace stockholders in connection with the merger on NASDAQ at or prior to the effective time are conditions to the closing of the merger.

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Significant Accounting Policies (Policies)

3 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of presentation:

These unaudited Consolidated Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and on a basis consistent with those accounting principles followed by the Corporation and disclosed in note 2 of its most recent 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.

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. In prior years there was substantial doubt regarding the Corporation’s ability to realize its assets and discharge its liabilities and commitments in the ordinary course of business. During year ended March 31, 2021, the Corporation has raised net proceeds of $59.3 million under its At-the-Market (“ATM”) program. The Corporation’s assets as at June 30, 2021, include cash and cash equivalents and short-term investments totaling $57.7 million. The Corporation’s current liabilities total $2.3 million as at June 30, 2021 and are comprised primarily of amounts due to or accrued for creditors.

The Corporation’s ability to continue as a going concern is dependent upon its ability to achieve a successful strategic alternative and ultimately generate cashflows to meet its obligations. To date, the Corporation has financed its operations primarily through public offerings of common shares, private placements, and the proceeds from research tax credits, and will require additional financing in the future. Refer to note 1 Nature of Operation regarding the Corporation’s agreement to acquire Grace Therapeutics Inc. There is no assurance that a strategic transaction will be consummated, as completion of such transaction is not wholly within the Corporation’s control. As a result of the Corporation’s current liquidity profile, the reduction of operating expenses and limited liabilities management has assessed that substantial doubt no longer exists regarding the Corporation’s ability to continue as a going concern for one year from the issuance date of these financial statements.

Use of Estimates, Policy [Policy Text Block]

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 6) and stock-based compensation (note 10), assets held for sale (notes 5) and the take-or-pay contract (note 12(a)). Estimates and assumptions are also involved in measuring the accrual of services rendered with respect to research and developments expenditures at each reporting date, whether or not contingencies should be accrued for 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.

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Note 4 - Short-term Investments (Tables)

3 Months Ended

Jun. 30, 2021

Notes Tables

Marketable Securities [Table Text Block]

	June 30, 2021		March 31, 2021
		$		$
Term deposits issued in US currency earning interest at ranges between 0.23% and 0.35% and maturing on various dates from July 27, 2021 to December 20,2021		12,406		7,542
Term deposits issued in CAD currency earning interest at ranges between 0.53% and 0.60% and maturing on various dates from July 7, 2021 to December 20, 2021		4,341		2,247
Total short-term investments		16,747		9,789

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Note 5 - Assets Held for Sale (Tables)

3 Months Ended

Jun. 30, 2021

Notes Tables

Disposal Groups, Including Discontinued Operations [Table Text Block]

	June 30, 2021		March 31, 2021
		$		$
Other assets (a)		392		387
Equipment (b)		386		381
		778		768

June 30, 2021	Cost, net of impairment		Accumulated depreciation			Net book value
		$		$			$
Furniture and office equipment		17		(5	)		12
Computer equipment		95		(30	)		65
Laboratory equipment		592		(442	)		150
Production equipment		1,195		(1,036	)		159
		1,899		(1,513	)		386

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Note 6 - Derivative Warrant Liabilities (Tables)

3 Months Ended

Jun. 30, 2021

Notes Tables

Schedule of Derivative Liabilities at Fair Value [Table Text Block]

	Warrant liabilities issued May 2018					Warrant liabilities issued December 27, 2017
	June 30, 2021			June 30, 2020		June 30, 2021			June 30, 2020
		$			$		$			$
Balance – beginning of period		2,597			1,146		2,622			1,247
Change in fair value		(296	)		378		(347	)		131
Translation effect		38			80		37			89
Balance – end of period		2,339			1,604		2,312			1,467
Fair value per share issuable		0.35			0.23		0.33			0.21

Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]

	Warrant liabilities issued May 2018						Warrant liabilities issued December 27, 2017
	June 30, 2021			March 31, 2021			June 30, 2021				March 31, 2021
Exercise price	CAD$	1.31		CAD$	1.31		USD$		1.26		USD$		1.26
Share price	CAD$	0.70		CAD$	0.76		USD$		0.56		USD$		0.60
Risk-free interest		0.97	%		1.39	%			0.87	%			0.92	%
Estimated life (years)		1.86			2.11				1.49				1.74
Expected volatility		163.54	%		156.00	%			178.31	%			171.12	%
Dividend	nil			nil				nil				nil

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Note 7 - Capital and Other Components of Equity (Tables)

3 Months Ended

Jun. 30, 2021

Notes Tables

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

	June 30, 2021				March 31, 2021
	Number outstanding		Amount		Number outstanding		Amount
				$				$
Liability
May 2018 public offering warrants 2018 (i)		6,593,750		2,339		6,593,750		2,597
Series December 2017 U.S. public offering warrants 2017 (ii)		7,072,962		2,312		7,072,962		2,622
		13,666,712		4,651		13,666,712		5,219
Equity
Public offering warrants
Public offering Broker warrants May 2018(iii)		1		-		1		-
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
		1,983,056		792		1,983,056		792

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Note 9 - Net Financial Income (Expenses) (Tables)

3 Months Ended

Jun. 30, 2021

Notes Tables

Schedule of Other Nonoperating Income (Expense) [Table Text Block]

	Three-month periods ended
	June 30, 2021			June 30, 2020
		$			$
Foreign exchange gain (loss)		(755	)		60
Financing costs		-			(121	)
Change in fair value of warrant liabilities		643			(509	)
Interest income		139			25
Financial income (expenses)		27			(545	)

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Note 10 - Stock Based Compensation (Tables)

3 Months Ended

Jun. 30, 2021

Notes Tables

Share-based Payment Arrangement, Option, Activity [Table Text Block]

	June 30, 2021					June 30, 2020
	Weighted average exercise price		Number of options			Weighted average exercise price		Number of options
		CAD$					CAD$
Outstanding at beginning of period		1.04		7,294,919			1.00		9,936,486
Granted		-		-			-		-
Exercised		-		-			-		-
Forfeited		1.30		(63,941	)		-		-
Expired		-		-			-		-
Outstanding at end of period		1.04		7,230,978			1.00		9,936,486
Exercisable at end of period		1.14		5,376,373			1.28		4,132,146

Share-based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block]

	Three-month periods ended
	June 30, 2021		June 30, 2020
		$		$
Research and development expenses		50		141
General and administrative expenses		103		348
Sales and marketing expenses		-		143
		153		632

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Note 11 - Supplemental Cash Flow Disclosure (Tables)

3 Months Ended

Jun. 30, 2021

Notes Tables

Cash Flow, Operating Capital [Table Text Block]

	Three-month periods ended
	June 30, 2021			June 30, 2020
		$			$
Receivables		93			71
Prepaid expenses		(653	)		294
Trade and other payables		27			(1,544	)
		(533	)		(1,179	)

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Note 2 - Summary of Significant Accounting Policies (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Mar. 31, 2021	Jun. 30, 2021
Proceeds from Issuance of Common Stock, Net	$ 59,300
Cash, Cash Equivalents, and Short-term Investments, Total		$ 57,700
Liabilities, Current, Total	$ 1,579	$ 2,345

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Note 4 - Short-term Investments - Marketable Securities (Details) $ in Thousands, $ in Thousands	Jun. 30, 2021 USD ($)	Jun. 30, 2021 CAD ($)	Mar. 31, 2021 USD ($)	Mar. 31, 2021 CAD ($)
Term deposits issued in US currency earning interest at ranges between 0.23% and 0.35% and maturing on various dates from July 27, 2021 to December 20,2021	$ 16,747		$ 9,789
Deposits [Member]
Term deposits issued in US currency earning interest at ranges between 0.23% and 0.35% and maturing on various dates from July 27, 2021 to December 20,2021	$ 12,406		$ 7,542
Canadian Deposits [Member]
Term deposits issued in US currency earning interest at ranges between 0.23% and 0.35% and maturing on various dates from July 27, 2021 to December 20,2021		$ 4,341		$ 2,247

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Note 4 - Short-term Investments - Marketable Securities (Details) (Parentheticals)	Jun. 30, 2021	Mar. 31, 2021
Deposits [Member] | Minimum [Member]
Investment, interest	0.23%	0.23%
Investment, maturity date	Jul. 27, 2021	Jul. 27, 2021
Deposits [Member] | Maximum [Member]
Investment, interest	0.35%	0.35%
Investment, maturity date	Dec. 20, 2021	Dec. 20, 2021
Canadian Deposits [Member] | Minimum [Member]
Investment, interest	0.53%	0.53%
Investment, maturity date	Jul. 07, 2021	Jul. 07, 2021
Canadian Deposits [Member] | Maximum [Member]
Investment, interest	0.60%	0.60%
Investment, maturity date	Dec. 20, 2021	Dec. 20, 2021

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Note 5 - Assets Held for Sale - Summary of Assets Held for Sale (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Mar. 31, 2021
Disposal Group, Including Discontinued Operation, Assets, Current, Total	$ 778	$ 768
Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Other assets (a)	392	387
Equipment (b)	386	381
Disposal Group, Including Discontinued Operation, Assets, Current, Total	778	$ 768
Equipment held-for-sale, cost	1,899
Equipment held-for-sale, accumulated depreciation	(1,513)
Equipment held-for-sale, impairment loss	386
Disposal Group, Held-for-sale, Not Discontinued Operations [Member] | Furniture and Office Equipment [Member]
Equipment held-for-sale, cost	17
Equipment held-for-sale, accumulated depreciation	(5)
Equipment held-for-sale, impairment loss	12
Disposal Group, Held-for-sale, Not Discontinued Operations [Member] | Computer Equipment [Member]
Equipment held-for-sale, cost	95
Equipment held-for-sale, accumulated depreciation	(30)
Equipment held-for-sale, impairment loss	65
Disposal Group, Held-for-sale, Not Discontinued Operations [Member] | Laboratory Equipment [Member]
Equipment held-for-sale, cost	592
Equipment held-for-sale, accumulated depreciation	(442)
Equipment held-for-sale, impairment loss	150
Disposal Group, Held-for-sale, Not Discontinued Operations [Member] | Production Equipment [Member]
Equipment held-for-sale, cost	1,195
Equipment held-for-sale, accumulated depreciation	(1,036)
Equipment held-for-sale, impairment loss	$ 159

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Note 6 - Derivative Warrant Liabilities (Details Textual)	Jun. 30, 2021 $ / shares shares	Mar. 31, 2021 shares	May 09, 2018 $ / shares shares	Dec. 22, 2017 $ / shares shares
Class of Warrant or Right, Outstanding (in shares)	1,983,056	1,983,056
Warrants Issued in May 2018 [Member]
Class of Warrant or Right, Outstanding (in shares)			10,959,500
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right (in shares)	1		1
Class of Warrant or Right, Exercise Price of Warrants or Rights (in CAD per share) | $ / shares	$ 1.31		$ 1.31
Over-Allotment Option Warrants Issued December 2017 [Member]
Class of Warrant or Right, Outstanding (in shares)				9,802,935
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right (in shares)				1
Class of Warrant or Right, Exercise Price of Warrants or Rights (in CAD per share) | $ / shares				$ 1.26

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Note 6 - Derivative Warrant Liabilities - Changes in Fair Value (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Warrants Issued in May 2018 [Member]
Balance – beginning of period	$ 2,597	$ 1,146
Change in fair value	(296)	378
Translation effect	38	80
Balance – end of period	$ 2,339	$ 1,604
Fair value per share issuable (in dollars per share)	$ 0.35	$ 0.23
Warrants Issued December 27, 2017 [Member]
Balance – beginning of period	$ 2,622	$ 1,247
Change in fair value	(347)	131
Translation effect	37	89
Balance – end of period	$ 2,312	$ 1,467
Fair value per share issuable (in dollars per share)	$ 0.33	$ 0.21

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Note 6 - Derivative Warrant Liabilities - Assumptions (Details)	Jun. 30, 2021	Mar. 31, 2021
Measurement Input, Exercise Price [Member] | Warrants Issued in May 2018 [Member]
Derivative warrant liability, measurement input	1.31	1.31
Measurement Input, Exercise Price [Member] | Warrants Issued December 27, 2017 [Member]
Derivative warrant liability, measurement input	1.26	1.26
Measurement Input, Share Price [Member] | Warrants Issued in May 2018 [Member]
Derivative warrant liability, measurement input	0.70	0.76
Measurement Input, Share Price [Member] | Warrants Issued December 27, 2017 [Member]
Derivative warrant liability, measurement input	0.56	0.60
Measurement Input, Risk Free Interest Rate [Member] | Warrants Issued in May 2018 [Member]
Derivative warrant liability, measurement input	0.0097	0.0139
Measurement Input, Risk Free Interest Rate [Member] | Warrants Issued December 27, 2017 [Member]
Derivative warrant liability, measurement input	0.0087	0.0092
Measurement Input, Expected Term [Member] | Warrants Issued December 27, 2017 [Member]
Derivative warrant liability, measurement input	1.49	1.74
Measurement Input, Expected Term [Member] | Broker Warrants Issued May 2018 [Member]
Derivative warrant liability, measurement input	1.86	2.11
Measurement Input, Price Volatility [Member] | Warrants Issued in May 2018 [Member]
Derivative warrant liability, measurement input	1.6354	1.5600
Measurement Input, Price Volatility [Member] | Warrants Issued December 27, 2017 [Member]
Derivative warrant liability, measurement input	1.7831	1.7112

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Note 7 - Capital and Other Components of Equity (Details Textual)			1 Months Ended	3 Months Ended		12 Months Ended
	Jun. 29, 2020 USD ($)	Feb. 14, 2019 USD ($) shares	Feb. 28, 2019 USD ($)	Jun. 30, 2021 USD ($) $ / shares shares	Jun. 30, 2020 USD ($) shares	Mar. 31, 2021 USD ($)	Jun. 30, 2021 $ / shares shares	May 09, 2018 $ / shares shares
At-the-market Sales Agreement, Common Stock, Maximum Amount | $	$ 75,000,000	$ 30,000,000
At-the-market Sales Agreement, Term (Year)		3 years
At-the-market Sales Agreement, Underwriter Fees, Percentage of Sales	3.00%
Write Off of Deferred Financing Costs of At-the-Market Program | $			$ 115,000	$ 0	$ 121,000
Proceeds from Issuance of Common Stock, Net | $						$ 59,300,000
Warrants Issued in May 2018 [Member]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right (in shares) | shares				1			1	1
Class of Warrant or Right, Exercise Price of Warrants or Rights (in CAD per share) | $ / shares							$ 1.31	$ 1.31
Warrants Issued December 27, 2017 [Member]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right (in shares) | shares				1			1
Class of Warrant or Right, Exercise Price of Warrants or Rights (in CAD per share) | $ / shares				$ 1.26
Broker Warrants Issued May 2018 [Member]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right (in shares) | shares				1			1
Class of Warrant or Right, Exercise Price of Warrants or Rights (in CAD per share) | $ / shares							$ 1.05
Broker Warrants Issued December 2017 [Member]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right (in shares) | shares				1			1
Class of Warrant or Right, Exercise Price of Warrants or Rights (in CAD per share) | $ / shares				$ 1.2625
Warrants Issued in Connection with Public Offering February 2017 [Member]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right (in shares) | shares				1			1
Class of Warrant or Right, Exercise Price of Warrants or Rights (in CAD per share) | $ / shares							$ 2.15
At-the-market Offering [Member]
Stock Issued During Period, Shares, New Issues (in shares) | shares		0		0	2,300,000
Proceeds from Issuance of Common Stock, Net | $				$ 1,800,000
Commission Costs Related to Share Sale | $				$ 84,000
Sale of Stock, Average Price Per Share (in dollars per share) | $ / shares				$ 0.81
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs | $				$ 10,000
Minimum [Member]
At-the-market Sales Agreement, Underwriter Fees, Percentage of Sales		3.00%
Maximum [Member]
At-the-market Sales Agreement, Underwriter Fees, Percentage of Sales		4.00%

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Note 7 - Capital and Other Components of Equity - Warrants (Details) - USD ($) $ in Thousands		Jun. 30, 2021	Mar. 31, 2021
Number outstanding (in shares)		1,983,056	1,983,056
Amount		$ 792	$ 792
Number outstanding (in shares)		1,983,056	1,983,056
Amount		$ 792	$ 792
Over-Allotment Option Warrants Issued in May 2018 [Member]
Number outstanding (in shares)	[1]	6,593,750	6,593,750
Amount	[1],[2]	$ 2,339	$ 2,597
Number outstanding (in shares)	[1]	6,593,750	6,593,750
Amount	[1],[2]	$ 2,339	$ 2,597
Warrants Issued December 27, 2017 [Member]
Number outstanding (in shares)	[3]	7,072,962	7,072,962
Amount	[3]	$ 2,312	$ 2,622
Number outstanding (in shares)	[3]	7,072,962	7,072,962
Amount	[3]	$ 2,312	$ 2,622
Derivative Liability Warrants [Member]
Number outstanding (in shares)		13,666,712	13,666,712
Amount		$ 4,651	$ 5,219
Number outstanding (in shares)		13,666,712	13,666,712
Amount		$ 4,651	$ 5,219
Broker Warrants Issued May 2018 [Member]
Number outstanding (in shares)	[4]	1	1
Amount	[4]	$ 0	$ 0
Number outstanding (in shares)	[4]	1	1
Amount	[4]	$ 0	$ 0
Broker Warrants Issued December 2017 [Member]
Number outstanding (in shares)	[2]	259,121	259,121
Amount	[2]	$ 161	$ 161
Number outstanding (in shares)	[2]	259,121	259,121
Amount	[2]	$ 161	$ 161
Warrants Issued in Connection with Public Offering February 2017 [Member]
Number outstanding (in shares)	[2]	1,723,934	1,723,934
Amount	[2]	$ 631	$ 631
Number outstanding (in shares)	[2]	1,723,934	1,723,934
Amount	[2]	$ 631	$ 631

[1] Warrant to acquire one Common Share at an exercise price of CAD $1.31, expiring on May 9, 2023.

[2] Warrant to acquire one Common Share at an exercise price of CAD $2.15, expiring on February 21, 2022.

[3] Warrant to acquire one Common Share at an exercise price of $1.26, expiring on December 27, 2022.

[4] Warrant to acquire one Common Share o at an exercise price of CAD $1.05, expiring on May 9, 2023.

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Note 8 - Government Assistance (Details Textual) $ in Thousands, $ in Thousands	1 Months Ended		3 Months Ended
	Oct. 31, 2020 CAD ($)	Sep. 30, 2019 CAD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)
Proceeds from NRC IRAP			$ 0	$ 26
Maximum [Member]
Award in Non-dilutive and Non-repayable Funding From NRC IRAP	$ 326,357	$ 750,000
Research and Development Expense [Member]
Government Assistance			$ 0	$ 50

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Note 9 - Net Financial Income (Expenses) - Financial Income (Expenses) (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Foreign exchange gain (loss)	$ (755)	$ 60
Financing costs	0	(121)
Change in fair value of warrant liabilities	643	(509)
Interest income	139	25
Financial income (expenses)	$ 27	$ (545)

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Note 10 - Stock Based Compensation (Details Textual) - Stock Option Plan [Member] - shares			3 Months Ended		12 Months Ended
	Aug. 26, 2020	Apr. 09, 2019	Jun. 30, 2021	Jun. 30, 2020	Mar. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)	14,533,881	11,719.910
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Outstanding Stock Maximum	15.00%	15.00%
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)	10 years
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Outstanding Stock Maximum Per Person					2.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)			0	0
Consultant [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Outstanding Stock Maximum Per Person					2.00%
Related Party [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Outstanding Stock Maximum Per Person					2.00%

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Note 10 - Stock Based Compensation - Activities Within the Stock Option Plan (Details) - Stock Option Plan [Member] - $ / shares	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Outstanding, weighted average exercise price (in CAD per share)	$ 1.04	$ 1.00
Outstanding, number of options (in shares)	7,294,919	9,936,486
Granted, weighted average exercise price (in CAD per share)	$ 0	$ 0
Granted, number of options (in shares)	0	0
Exercised, weighted average exercise price (in CAD per share)	$ 0	$ 0
Exercised, number of options (in shares)	0	0
Forfeited, weighted average exercise price (in CAD per share)	$ 1.30	$ 0
Forfeited, number of options (in shares)	(63,941)	0
Expired, weighted average exercise price (in CAD per share)	$ 0	$ 0
Expired, number of options (in shares)	0	0
Outstanding, weighted average exercise price (in CAD per share)	$ 1.04	$ 1.00
Outstanding, number of options (in shares)	7,230,978	9,936,486
Exercisable, weighted average exercise price (in CAD per share)	$ 1.14	$ 1.28
Exercisable at end of period (in shares)	5,376,373	4,132,146

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Note 10 - Stock Based Compensation - Compensation Expense (Details) - Stock Option Plan [Member] - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Compensation expense	$ 153	$ 632
Research and Development Expense [Member]
Compensation expense	50	141
General and Administrative Expense [Member]
Compensation expense	103	348
Selling and Marketing Expense [Member]
Compensation expense	$ 0	$ 143

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Note 11 - Supplemental Cash Flow Disclosure - Changes in Working Capital Items (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Receivables	$ 93	$ 71
Prepaid expenses	(653)	294
Trade and other payables	27	(1,544)
Increase (Decrease) in Working Capital	$ (533)	$ (1,179)

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Note 12 - Commitments and Contingencies (Details Textual) - USD ($) $ in Thousands	Jun. 30, 2021	Oct. 31, 2020	Sep. 23, 2020	Oct. 25, 2019
Chief Executive Officer [Member]
Retention Incentive Agreement, Continued Employment Until April 30, 2021 or Closing Transaction With Third Party			$ 800
Chief Executive Officer and Chief Operating Officer [Member]
Retention Incentive Agreement, Maximum Conditional Incentives		$ 125
RKO Supply Agreement [Member]
Purchase Obligation, Total				$ 3,100
Purchase Commitment, Remaining Minimum Amount Committed	$ 2,800