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Exhibit 99.2

 

 

Financial Statements of

ACASTI PHARMA INC.

For the thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

Page 2

June 6, 2017

Montréal, Canada

*CPA auditor, CA, public accountancy permit No. A119178

 

ACASTI PHARMA INC.

Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

Financial Statements
Statements of Financial Position	1
Statements of Earnings and Comprehensive Loss	2
Statements of Changes in Equity	3
Statements of Cash Flows	5
Notes to Financial Statements	6

 

ACASTI PHARMA INC.

Statements of Financial Position

March 31, 2017, February 28, 2017 and February 29, 2016

		Notes				March 31, 2017				February 28, 2017 (Unaudited)				February 29, 2016
(thousands of Canadian dollars)							$				$				$
Assets
Current assets:
Cash and cash equivalents			22				9,772				10,573				3,027
Short-term investments							—				—				7,443
Receivables			4				206				166				399
Prepaid expenses							209				176				456
							10,187				10,915				11,325
Restricted short-term investment			5(b)				—				—				2,000
Equipment			7				2,881				2,870				287
Intangible assets			8				12,388				12,582				14,905
Total assets							25,456				26,367				28,517
Liabilities and Equity
Current liabilities:
Trade and other payables			9				2,126				2,390				1,126
Payable to parent corporation			5(c)				12				15				15
							2,138				2,405				1,141
Derivative warrant liabilities			10, 12(d)				209				187				156
Unsecured convertible debentures			11				1,406				1,389				—
Total liabilities							3,753				3,981				1,297
Equity:
Share capital			12				66,576				66,576				61,973
Other equity			11				309				309				—
Contributed surplus							5,693				5,607				4,875
Deficit							(50,875	)			(50,106	)			(39,628	)
Total equity							21,703				22,386				27,220
Commitments and contingencies			20
Total liabilities and equity							25,456				26,367				28,517

 

See accompanying notes to financial statements.

On behalf of the Board:

/s/Dr. Roderick Carter

/s/Jean-Marie Canan

Roderick Carter

Jean-Marie Canan

Chair of the Board

Director

 

ACASTI PHARMA INC.

Statements of Earnings and Comprehensive Loss

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 

						Thirteen-months ended				Month ended				Twelve-months ended				Year ended				Year ended
	Notes					March 31, 2017				March 31, 2017				February 28, 2017				February 29, 2016				February 28, 2015
										(Unaudited)				(Unaudited)
(thousands of Canadian dollars, except per share data)							$				$				$				$				$
Research and development expenses, net of government assistance of $330 (March 2017 - $45 (unaudited); February 2017- $285 (unaudited), 2016 - $349, 2015 - $264)							(7,653	)			(426	)			(7,227	)			(7,566	)			(8,822	)
General and administrative expenses							(3,557	)			(292	)			(3,265	)			(2,046	)			(3,573	)
Loss from operating activities							(11,210	)			(718	)			(10,492	)			(9,612	)			(12,395	)
Financial (expenses) income			14				(113	)			(29	)			(84	)			1,094				1,916
Change in fair value of warrant liabilities			10				(53	)			(22	)			(31	)			2,201				8,824
Net financial (expenses) income							(166	)			(51	)			(115	)			3,295				10,740
Net loss and comprehensive loss before income tax							(11,376	)			(769	)			(10,607	)			(6,317	)			(1,655	)
Deferred income tax recovery							129				—				129				—				—
Net loss and total comprehensive loss							(11,247	)			(769	)			(10,478	)			(6,317	)			(1,655	)
Basic and diluted loss per share			16				(1.01	)			(0.05	)			(0.97	)			(0.59	)			(0.16	)
Weighted average number of shares outstanding							11,094,512				14,702,556				10,788,075				10,659,936				10,617,704

 

See accompanying notes to financial statements

 

ACASTI PHARMA INC.

Statements of Changes in Equity

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 

						Share capital								Other				Contributed
		Notes				Number				Dollar				equity				surplus				Deficit				Total
(thousands of Canadian dollars)											$				$				$				$				$
Balance, February 29, 2016							10,712,038				61,973				—				4,875				(39,628	)			27,220
Net loss and total comprehensive
loss for the twelve-month
period (unaudited)							—				—				—				—				(10,478	)			(10,478	)
Net loss and total comprehensive
loss for the one-month period
(unaudited)							—				—				—				—				(769	)			(769	)
Net loss and total comprehensive
loss for the thirteen-month
period							—				—				—				—				(11,247	)			(11,247	)
							10,712,038				61,973				—				4,875				(50,875	)			15,973
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to equity holders
Public offering			12(b)				3,930,518				4,509				—				144				—				4,653
Issue of unsecured convertible     debentures, net of deferred
income tax expense of $129			11,18				—				—				309				—				—				309
Equity settled non-employee
share-based payment			12(b)				60,000				94				—				—				—				94
Share-based payment
transactions for the twelve-month
period (unaudited)			15				—				—				—				588				—				588
Share-based payment
transactions for the one-month
period (unaudited)			15				—				—				—				86				—				86
Share-based payment
transactions for the
thirteen-month period			15				—				—				—				674				—				674
Total contributions by and     distributions to equity holders
for the twelve-month period
(unaudited)							3,990,518				4,603				309				732				—				5,644
Total contributions by and
distributions to equity holders
for the one-month period
(unaudited)							—				—				—				86				—				86
Total contributions by and
distributions to equity holders
for the thirteen-month period							3,990,518				4,603				309				818				—				5,730
Balance at February 28, 2017     (unaudited)							14,702,556				66,576				309				5,607				(50,106	)			22,386
Balance at March 31, 2017							14,702,556				66,576				309				5,693				(50,875	)			21,703

See accompanying notes to financial statements.

 

ACASTI PHARMA INC.

Statements of Changes in Equity, Continued

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 

						Share capital								Other				Contributed
		Notes				Amount				Dollar				equity				surplus				Deficit				Total
(thousands of Canadian dollars)											$				$				$				$				$
Balance, February 28, 2015							10,644,440				61,628				—				4,911				(33,311	)			33,228
Net loss and total comprehensive
loss for the year							—				—				—				—				(6,317	)			(6,317	)
							10,644,440				61,628				—				4,911				(39,628	)			26,911
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to equity holders
Share-based payment
transactions			15				—				—				—				309				—				309
Issuance of shares			12(c)				50,000				101				—				(102	)			—				(1	)
Share options exercised			15				250				1				—				—				—				1
RSUs released							17,348				243				—				(243	)			—				—
Total contributions by and     distributions to equity holders							67,598				345				—				(36	)			—				309
Balance at February 29, 2016							10,712,038				61,973				—				4,875				(39,628	)			27,220

						Share capital								Other				Contributed
		Notes				Amount				Dollar				equity				surplus				Deficit				Total
(thousands of Canadian dollars)											$				$				$				$				$
Balance, February 28, 2014							10,586,258				61,027				407				3,502				(31,656	)			33,280
Net loss and total comprehensive loss for the year							—				—				—				—				(1,655	)			(1,655	)
							10,586,258				61,027				407				3,502				(33,311	)			31,625
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to equity holders
Share-based payment
transactions			15				—				—				—				1,553				—				1,553
Share options exercised			15				20,000				50				—				—				—				50
RSUs released							38,182				551				—				(551	)			—				—
Expiration of warrants							—				—				(407	)			407				—				—
Total contributions by and     distributions to equity holders							58,182				601				(407	)			1,409				—				1,603
Balance at February 28, 2015							10,644,440				61,628				—				4,911				(33,311	)			33,228

See accompanying notes to financial statements.

 

 

ACASTI PHARMA INC.

Statements of Cash Flows

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

						Thirteen-months ended				Month ended				Twelve-months ended				Year ended				Year ended
		Notes				March 31, 2017				March 31, 2017 (Unaudited)				February 28, 2017 (Unaudited)				February 29, 2016				February 28, 2015
(thousands of Canadian dollars)							$				$				$				$				$
Cash flows used in operating activities:
Net loss for the period							(11,247	)			(769	)			(10,478	)			(6,317	)			(1,655	)
Adjustments:
Depreciation of equipment			7				221				32				189				59				4
Amortization of intangible assets			8				2,517				194				2,323				2,336				2,331
Impairment loss related to intangible assets			8				—				—				—				339				—
Stock-based compensation			15				674				86				588				309				1,553
Net financial expenses (income)			14				166				51				115				(3,295	)			(10,740	)
Realized foreign exchange gain (loss)							48				(12	)			60				36				3
Deferred income tax recovery							(129	)			—				(129	)			—				—
							(7,750	)			(418	)			(7,332	)			(6,533	)			(8,504	)
Changes in non-cash operating items			17				792				(328	)			1,120				(41	)			1,306
Net cash used in operating activities							(6,958	)			(746	)			(6,212	)			(6,574	)			(7,198	)
Cash flows from (used in) investing activities:
Interest received							150				4				146				114				41
Acquisition of equipment			7, 17				(2,527	)			(24	)			(2,503	)			(276	)			(35	)
Acquisition of intangible assets			8				—				—				—				(92	)			(51	)
Acquisition of short-term investments							(12,765	)			—				(12,765	)			(11,954	)			(14,478	)
Maturity of short-term investments							22,030				—				22,030				20,437				22,150
Net cash (used in) investing activities							6,888				(20	)			6,908				8,229				7,627
Cash flows from (used in) financing activities:
Net proceeds from public offering			12(b)				5,010				(34	)			5,044				—				—
Net proceeds from private placement			11, 12(c)				1,872				(10	)			1,882				—				—
Proceeds from exercise of warrants and options							—				—				—				—				50
Share issue costs			12(d)				—				—				—				(1	)			—
Interest paid							(18	)			—				(18	)			(2	)			(4	)
Net cash from (used in) financing activities							6,864				(44	)			6,908				(3	)			46
Foreign exchange (loss) gain on cash and cash equivalents held in foreign currencies							(49	)			9				(58	)			64				160
Net increase (decrease) in cash and cash equivalents							6,745				(801	)			7,546				1,716				635
Cash and cash equivalents, beginning of period							3,027				10,573				3,027				1,311				676
Cash and cash equivalents, end of period							9,772				9,772				10,573				3,027				1,311

  Cash and cash equivalents is comprised of:

 

Cash			6,778				6,778				7,584				3,027				1,311
Cash equivalents			2,994				2,994				2,989				—				—

See accompanying notes to financial statements.

 

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

1. Reporting entity

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 545, Promenade du Centropolis, Laval, Québec, H7T 0A3. Neptune Technologies and Bioressources Inc. (Neptune or the parent) currently owns approximately 34% of the issued and outstanding Class A shares (Common Shares) of the Corporation. The Corporation, Neptune and Biodroga Nutraceuticals Inc., a subsidiary of Neptune, are collectively referred to as the “Group”.

Pursuant to a license agreement entered into with Neptune in August 2008, as amended, Acasti has been granted an exclusive worldwide license to use Neptune’s intellectual property to develop, clinically study and market new pharmaceutical products to treat human cardiovascular conditions. Neptune’s intellectual property is related to the extraction of ingredients from marine biomasses, such as krill. The eventual products are aimed at applications in the prescription drug, over-the-counter medicine and medical foods markets. In December 2012, the Corporation entered into a prepayment agreement with Neptune pursuant to which the Corporation exercised its option under the License Agreement to pay in advance all of the future royalties payable under the license which was exercised in fiscal 2014. As a result of the royalty prepayment, Acasti is no longer required to pay any royalties to Neptune under the License Agreement during its term for the use of the intellectual property under license. The license allows Acasti to exploit the intellectual property rights in order to develop novel active pharmaceutical ingredients (“APIs”) into commercial products for the prescription drugs and the medical food markets.

The Corporation is subject to a number of risks associated with the conduct of its clinical program and its results, the establishment of strategic alliances and the successful development of new pharmaceutical products and their marketing. The Corporation has incurred significant operating losses and negative cash flows from operations since inception. To date, the Corporation has financed its operations through the public offering and private placement of Common Shares and convertible debt, the proceeds from research grants and research tax credits, and the exercises of warrants, rights and options. To achieve the objectives of its business plan, Acasti plans to raise the necessary funds through additional securities offerings and the establishment of strategic alliances as well as additional research grants and research tax credits. The Corporation anticipates that the products developed by the Corporation will require approval from the U.S Food and Drug Administration and equivalent regulatory organizations in other countries before their sale can be authorized. The ability of the Corporation to ultimately achieve profitable operations is dependent on a number of factors outside of the Corporation’s control.

2. Basis of preparation

(a)

Statement of compliance:

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).  Beginning in fiscal 2017, the Corporation’s fiscal year end is on March 31. Fiscal 2017 is a transition year, and includes thirteen months of operations, beginning on March 1, 2016 and ending on March 31, 2017. As a result, the above financial statements and corresponding notes to financial statements include two unaudited periods: the one-month period ended March 31, 2017 and the twelve-month period ended February 28, 2017. The Canadian Securities regulator permits, in the transition year, the presentation of a thirteen-month period for the financial year ended March 31, 2017.

The financial statements were approved by the Board of Directors on June 6, 2017.

(b)

Basis of measurement:

The financial statements have been prepared on the historical cost basis, except for:

·	Stock-based compensation which is measured pursuant to IFRS 2, Share-based payments (Note 3(e) (ii)); and,

·	Derivative warrant liabilities measured at fair value on a recurring basis (Note 10).

 

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

2. Basis of preparation (continued):

(c)

Going concern uncertainty:

The Corporation has incurred operating losses and negative cash flows from operations since inception. The Corporation’s current assets of $10.2 million as at March 31, 2017 include cash and cash equivalents totalling $9.8 million, mainly generated by the net proceeds from the Public Offering and Private Placement completed on February 21, 2017 as well as the public offering completed on December 3, 2013 and private offering completed on February 7, 2014 (the Previous Offerings). The Corporation’s liabilities total $3.8 million at March 31, 2017 and are comprised primarily of $2.1 million in amounts due to or accrued for creditors, $1.4 million for unsecured convertible debentures and $0.2 million for derivative warrant liabilities. The Corporation’s current assets as at this date are projected to be significantly less than needed to support the current liabilities as at that date when combined with the projected level of expenses for the next twelve months, including not only the preparation for, but the planned initiation of the Phase 3 clinical study program for its drug candidate, CaPre. Additional funds will also be needed for the expected expenses for the total CaPre Phase 3 research and development phase beyond the next twelve months. In addition to having raised additional funds during the thirteen-month period ended March 31, 2017, the Corporation is working towards development of strategic partner relationships and plans to raise additional funds in the future, but there can be no assurance as to when or whether Acasti will complete any financing or strategic collaborations. In particular, raising financing is subject to market conditions and is not within the Corporation’s control. Additionally, although the Corporation intends to continue to rely on the support of Neptune for a portion of its general and administrative needs, the continuance of this support is outside of the Corporation’s control. If the Corporation does not raise additional funds, find one or more strategic partners or does not receive the continued support from its parent, it may not be able to realize its assets and discharge its liabilities in the normal course of business. As a result, there exists a material uncertainty that casts substantial doubt about the Corporation’s ability to continue as a going concern and, therefore, realize its assets and discharge its liabilities in the normal course of business. The Corporation currently has no other arranged sources of financing.

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

(d)

Functional and presentation currency:

These financial statements are presented in Canadian dollars, which is the Corporation’s functional currency.

(e)

Use of estimates and judgments:

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

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

Critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements include the following:

·	Identification of triggering events indicating that the intangible assets might be impaired.

·	The use of the going concern basis of preparation of the financial statements. At the end of each reporting period, management assesses the basis of preparation of the financial statements (Note 2(c)).

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

2. Basis of preparation (continued):

(e)

Use of estimates and judgments (continued):

Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year include the following:

·	Determination of the recoverable amount of the Corporation’s cash generating unit (“CGU”).

·	Measurement of derivative warrant liabilities (note 10) and stock-based compensation (note 15).

Also, management uses judgment to determine which research and development (“R&D”) expenses qualify for R&D tax credits and in what amounts. The Corporation recognizes the tax credits once it has reasonable assurance that they will be realized. Recorded tax credits are subject to review and approval by tax authorities and therefore, could be different from the amounts recorded.

3. Significant accounting policies:

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

(a)

Financial instruments:

A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party.

(i)

Non-derivative financial assets:

The Corporation has the following non-derivative financial assets: cash, cash equivalents, short-term investments and receivables. The Corporation determines the classification of its financial assets at initial recognition. The subsequent measurement of financial assets depends on their classification.

Financial assets and liabilities are offset and the net amount presented in the statements of financial position when, and only when, the Corporation has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Loans and receivables

The classification “loans and receivables” comprises financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses.

Cash, cash equivalents, short-term investments and receivables with maturities of less than one year are classified as loans and receivables.

Cash and cash equivalents comprise cash balances and highly liquid investments purchased three months or less from maturity.

(ii)

Non-derivative financial liabilities:

The Corporation has the following non-derivative financial liabilities: trade and other payables, payable to parent corporation and unsecured convertible debentures. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.

The Corporation derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

3. Significant accounting policies (continued):

(a)

Financial instruments (continued):

(iii)

Compound financial instruments:

Compound financial instruments are instruments that can be converted to share capital at the option of the holder, and the number of shares to be issued is fixed.

The unsecured convertible debentures are compound instruments and have been separated into liability and equity components. The liability component is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.

(iv)

Share capital:

Class A Common Shares are classified as equity. Incremental costs directly attributable to the issue of Common Shares and share options are recognized as a deduction from share capital, net of any tax effects.

(v)

Derivative financial instruments:

The Corporation has issued liability-classified derivatives over its own equity. Derivatives are recognized initially at fair value; attributable transaction costs are recognized in profit and loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and all changes in their fair value are recognized immediately in profit or loss.

(vi)

Other equity instruments:

Warrants, options and rights over the Corporation’s equity issued outside of share-based payment transactions that do not meet the definition of a liability instrument are recognized in equity.

(b)

Equipment:

(i)

Recognition and measurement:

Equipment is measured at cost less accumulated depreciation and accumulated impairment losses, if any.

Cost includes expenditures that are directly attributable to the acquisition of the asset, including all costs incurred in bringing the asset to its present location and condition.

Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.

Gains and losses on disposal of equipment are determined by comparing the proceeds from disposal with the carrying amount of equipment, and are recognized net within ''other income or expenses'' in profit or loss.

(ii)

Subsequent costs:

The cost of replacing a part of an equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Corporation, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of equipment are recognized in profit or loss as incurred.

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

3. Significant accounting policies (continued):

(b)

Equipment (continued):

(iii)

Depreciation:

Depreciation is recognized in profit or loss on either a straight-line basis or a declining basis over the estimated useful lives of each part of an item of equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Items of equipment are depreciated from the date that they are available for use or, in respect of assets not yet in service, from the date they are ready for their intended use.

The estimated useful lives and rates for the current and comparative periods are as follows:

 

Assets	Method	Period/Rate
Furniture and office equipment	Declining balance	20% to 30%
Computer equipment	Declining balance	30%
Laboratory equipment	Declining balance	30%
Production equipment	Straight-line	10 years

 

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted prospectively if appropriate.

(c)

Intangible assets:

(i)

Research and development:

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Corporation intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalized includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and borrowing costs on qualifying assets. Other development expenditures are recognized in profit or loss as incurred.

Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses. As of the reporting periods presented, the Corporation has not capitalized any development expenditure.

(ii)

Other intangible assets:

Patent costs

Patents for technologies that are no longer in the research phase are recorded at cost. Patent costs include legal fees to obtain patents and patent application fees. When the technology is still in the research and development phase, those costs are expensed as incurred.

Licenses

Licenses that are acquired by the Corporation and have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses.

 

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

3. Significant accounting policies (continued):

(c)

Intangible assets (continued):

(iii)

Subsequent expenditure:

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditure on internally generated goodwill and brands, are recognized in profit or loss as incurred.

(iv)

Amortization:

Amortization is calculated over the cost of the asset less its residual value.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative periods are as follows:

 

	Assets	Period
	Patents	20 years
	License	8 to 14 years

 

 

(d)

Impairment:

(i)

Financial assets:

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence, such as default or delinquency by a debtor, indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against the financial asset. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

(ii)

Non-financial assets:

The carrying amounts of the Corporation’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit, or “CGU”).

 

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

3. Significant accounting policies (continued):

(d)

Impairment (continued):

(ii)

Non-financial assets (continued):

The Corporation’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss.

Impairment losses recognized in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(e)

Employee benefits:

(i)

Short-term employee benefits:

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Corporation has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

(ii)

Share-based payment transactions:

The grant date fair value of share-based payment awards granted to employees is recognized as an employee expense, with a corresponding increase in contributed surplus, over the period that the employees unconditionally become entitled to the awards.  The grant date fair value takes into consideration market performance conditions when applicable. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date.

Share-based payment arrangements in which the Corporation receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Corporation.

(iii)

Termination benefits:

Termination benefits are recognized as an expense when the Corporation is committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Corporation has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting year, then they are discounted to their present value.

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

 

(f)

Provisions:

A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

(i)

Onerous contracts:

A provision for onerous contracts is recognized when the expected benefits to be derived by the Corporation from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Corporation recognizes any impairment loss on the assets associated with that contract.

(ii)

Contingent liability:

A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not within the control of the Corporation; or a present obligation that arises from past events (and therefore exists), but is not recognized because it is not probable that a transfer or use of assets, provision of services or any other transfer of economic benefits will be required to settle the obligation; or the amount of the obligation cannot be estimated reliably.

(g)

Government grants:

Government grants are recorded as a reduction of the related expense or cost of the asset acquired. Government grants are recognized when there is reasonable assurance that the Corporation has met the requirements of the approved grant program and there is reasonable assurance that the grant will be received.

Grants that compensate the Corporation for expenses incurred are recognized in profit or loss in reduction thereof on a systematic basis in the same years in which the expenses are recognized. Grants that compensate the Corporation for the cost of an asset are recognized in profit or loss on a systematic basis over the useful life of the asset.

(h)

Lease payments:

Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

(i)

Foreign currency:

Transactions in foreign currencies are translated into the functional currency at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Foreign currency differences arising on retranslation are recognized in profit or loss.

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

(j)

Finance income and finance costs:

Finance income comprises interest income on funds invested. Interest income is recognized as it accrues in profit or loss, using the effective interest method.

Finance costs comprise interest expense and accretion on borrowings, unwinding of the discount on provisions and impairment losses recognized on financial assets. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest method.

Foreign currency gains and losses are reported on a net basis.

The Corporation recognizes interest income as a component of investing activities and interest expense as a component of financing activities in the statements of cash flows.

(k)

Income tax:

Income tax expense comprises current and deferred taxes. Current and deferred taxes are recognized in profit or loss except to the extent that they relate to items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for temporary differences arising from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(l)

Earnings per share:

The Corporation presents basic and diluted earnings per share (“EPS”) data for its Class A shares (or “Common Shares”). Basic EPS is calculated by dividing the profit or loss attributable to the holders of Class A shares (Common Shares) of the Corporation by the weighted average number of Common Shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to the holders of Class A shares (Common Shares) and the weighted average number of Class A shares (Common Shares) outstanding adjusted for the effects of all dilutive potential Common Shares, which comprise warrants, rights and share options granted to employees.

(m)

Segment reporting:

An operating segment is a component of the Corporation that engages in business activities from which it may earn revenues and incur expenses. The Corporation has one reportable operating segment: the development and commercialization of pharmaceutical applications of its licensed rights for cardiovascular diseases. The majority of the Corporation’s assets are located in Canada, while one major production unit, with a carrying value of $2,394, is located in France.

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

(n)

Change in accounting policy:

Future accounting change:

The following new standards, and amendments to standards and interpretations, are not yet effective for the period ended March 31, 2017, and have not been applied in preparing these financial statements.

New standards and interpretations not yet adopted:

 

 

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

(ii) Amendments to IFRS 2 – Classification and Measurement of Share-Based Payment Transactions:

On June 20, 2016, the IASB issued amendments to IFRS 2, Share-Based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments apply for annual periods beginning on or after January 1, 2018. Earlier application is permitted. As a practical simplification, the amendments can be applied prospectively. Retrospective, or early application is permitted if information is available without the use of hindsight. The amendments provide requirements on the accounting for: the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; share-based payment transactions with a net settlement feature for withholding tax obligations; and a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. The Corporation intends to adopt the amendments to IFRS 2 in its financial statements for the annual period beginning on April 1, 2018. The Corporation has not yet assessed the impact of adoption of the amendments of IFRS 2, and does not intend to early adopt these amendments in its financial statements.

 

4. Receivables:

	Notes			March 31, 2017			February 28, 2017 (Unaudited)			February 29, 2016
					$			$			$
Sales tax receivables					89			83			182
Government assistance  and tax credits receivable	6				115			81			217
Other receivables					2			2			—
					206			166			399

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

5. Related parties:

(a)

Administrative and research and development expenses:

The Corporation was charged by Neptune for the purchase of research supplies and for certain costs incurred by Neptune for the benefit of the Corporation, as follows:

Thirteen-months ended						Month ended				Twelve-months ended				Year ended				Year ended
		March 31, 2017				March 31, 2017				February 28, 2017				February 29, 2016				February 28, 2015
						(Unaudited)				(Unaudited)
			$				$				$				$				$
Research and development expenses			60				1				59				371				344
General and administrative expenses			618				41				577				790				876
			678				42				636				1,161				1,220

The Corporation purchased from the parent company research and development supplies totaling $113, of which $73 as at March 31, 2017 and as at February 28, 2017 (unaudited) is recorded in prepaid expenses and will be expensed as used.

Where Neptune incurs specific incremental costs for the benefit of the Corporation, it charges those amounts directly. Costs that benefit more than one entity of the Group are charged by allocating a fraction of costs incurred by Neptune that is commensurate to the estimated fraction of services or benefits received by each entity for those items.

These charges do not represent all charges incurred by Neptune that may have benefited the Corporation. Also, these charges do not necessarily represent the cost that the Corporation would otherwise need to incur, should it not receive these services or benefits through the shared resources of Neptune.

(b)

Interest revenue:

On January 7, 2016 Neptune announced the acquisition of Biodroga Nutraceuticals Inc. As part of this transaction, the Corporation pledged an amount of $2 million (“Committed Funds”) to partly guarantee the financing for the said transaction (“Pledge Agreement”). Neptune had agreed to pay Acasti an annual fee on the Committed Funds outstanding at an annual rate of 9% during the first six months and 11% for the remaining term of the Pledge Agreement. On September 20, 2016, Neptune fully released the pledged amount. The Corporation recognized interest revenue in the amount of $89 for the thirteen-month period ended March 31, 2017, nil (unaudited) for the month ended March 31, 2017, $89 (unaudited) for the twelve-month period ended February 28, 2017 and $27 for the year ended February 29, 2016.

(c)

Payable to parent corporation:

Payable to parent corporation, primarily for general and administrative shared services, has no specified maturity date for payment or reimbursement and does not bear interest.

(d)

Key management personnel compensation:

The key management personnel are the officers of the Corporation, the members of the Board of Directors of the Corporation and of the parent company. They control in the aggregate less than 2% of the voting shares of the Corporation (1% in 2016 and 2% in 2015).

 

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

5. Related parties (continued):

(d)

Key management personnel compensation (continued):

Key management personnel compensation includes the following for the thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015:

Thirteen-months ended						Month ended				Twelve-months ended				Year ended				Year ended
		March 31, 2017				March 31, 2017				February 28, 2017				February 29, 2016				February 28, 2015
						(Unaudited)				(Unaudited)
			$				$				$				$				$
Short-term benefits			1,311				202				1,109				688				742
Severance			—				—				—				103				175
Share-based compensation costs			619				78				541				120				1,339
			1,930				280				1,650				911				2,256

6. Government assistance:

Government assistance is comprised of a government grant from the federal government and research and development investment tax credits receivable from the provincial government which relate to qualifiable research and development expenditures under the applicable tax laws. The amounts recorded as receivables are subject to a government tax audit and the final amounts received may differ from those recorded.

 

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

 

		$
	2029	11
	2030	30
	2031	45
	2032	431
	2333	441
	2034	436
	2035	519
	2036	286
	2037	251
		2,450

 

ACASTI PHARMA INC.

Notes to Financial Statements

Thirteen-month and one-month periods ended March 31, 2017, twelve-month period ended February 28, 2017 and years ended February 29, 2016 and February 28, 2015

 (thousands of Canadian dollars, except where noted and for share and per share amounts)

7. Equipment:

			Furniture and office equipment				Computer equipment				Laboratory equipment				Production equipment				Total
			$				$				$				$				$
Cost:
Balance at February 28, 2014			59				3				25				—				87
Additions			—				—				35				—				35
Balance at February 28, 2015			59				3				60				—				122
Additions			—				—				276				—				276
Balance at February 29, 2016			59				3				336				—				398
Additions for the twelve-month period
(Unaudited)			—				8				186				2,578				2,772
Balance at February 28, 2017 (Unaudited)			59				11				522				2,578				3,170
Additions for the one-month period (Unaudited)			—				—				—				43				43
Additions for the thirteen-month period			—				8				186				2,621				2,815
Balance at March 31, 2017			59				11				522				2,621				3,213
Accumulated depreciation:
Balance at February 28, 2014			45				3				—				—				48
Depreciation for the year			4				—				—				—				4
Balance at February 28, 2015			49				3				—				—				52
Depreciation for the year			3				—				56				—				59
Balance at February 29, 2016			52				3				56				—				111
Depreciation for the twelve-month period
(Unaudited)			7				1				129				52				189
Balance at February 28, 2017 (Unaudited)			59				4				185				52				300
Depreciation for the one-month period
(Unaudited)			—				—				11				21				32
Depreciation for thirteen-month period			7				1				140				73				221
Balance at March 31, 2017			59				4				196				73				332
Net carrying amounts:
February 29, 2016			7				—				280				—				287
February 28, 2017 (Unaudited)			—				7				337				2,526				2,870
March 31, 2017			—				7				326				2,548				2,881