What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-06-21 compared with 2021-06-22 · 602 added, 347 removed, 115 unchanged (89% of the section changed)

Market for Registrant’s Common Equity, Related Shareholder

Matters and Issuer Purchases of Equity Securities

Market Information

Our common shares are traded on The Nasdaq Capital Market and the TSX Venture

Exchange under the symbol “ACST.”

As of June 22, 2021, there were approximately 26 holders of record of our

common shares.

The actual number of shareholders is greater than this number of record holders and includes shareholders who are beneficial

owners but whose shares are held in street name by brokers and other nominees.

We do not anticipate paying any cash dividend on our common shares in the

foreseeable future.

We presently intend to retain future earnings to finance the expansion and growth of our business.

Any future determination

to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations,

capital requirements and other factors the board of directors deems relevant.

In addition, the terms of any future debt or credit facility

may preclude us from paying dividends.

Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information

Our common shares are traded on The Nasdaq Capital Market and the TSX Venture Exchange under the symbol “ACST.”

As of June 21, 2022, there were 39 holders of record of our common shares.

The actual number of our shareholders is greater than this number of record holders because most of our shareholders are beneficial owners whose shares are held in street name by brokers and other nominees.

We do not anticipate paying any cash dividend on our common shares in the foreseeable future.

We presently intend to retain any future earnings to finance the expansion and growth of our business.

Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and other factors the board of directors deems relevant.

In addition, the terms of any future debt or credit facility may preclude us from paying dividends.

The following is a summary of certain U.S.

federal income tax considerations

arising from and relating to the acquisition, ownership, and disposition of our common shares to a U.S.

Holder (as defined below) as capital

This summary provides only general information and does not purport to

be a complete analysis or listing of all potential U.S.

federal income tax considerations arising from and relating to the acquisition, ownership, and disposition of our common shares to a U.S.

Holder (as defined below) as capital assets.

This summary provides only general information and does not purport to be a complete analysis or listing of all potential U.S.

federal income tax consequences that may apply to a U.S.

Holder as a result of

the acquisition, ownership, and disposition of our common shares.

In addition, this summary does not take into account the individual

facts and circumstances of any particular U.S.

Holder as a result of the acquisition, ownership, and disposition of our common shares.

In addition, this summary does not take into account the individual facts and circumstances of any particular U.S.

Holder that may affect the U.S.

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Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S.

federal income tax advice with

respect to any U.S.

federal income tax advice with respect to any U.S.

Holder should consult its own tax advisor regarding the U.S.

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No legal opinion from U.S.

legal counsel or ruling from the Internal Revenue

Service, or IRS, has been requested, or will be obtained, regarding the U.S.

legal counsel or ruling from the IRS, has been requested, or will be obtained, regarding the U.S.

federal income tax consequences to U.S.

Holders of the acquisition,

ownership, and disposition of our common shares.

This summary is not binding on the IRS, and the IRS is not precluded from taking a position

that is different from, and contrary to, the positions taken in this summary.

In addition, because the authorities on which this summary

is based are subject to various interpretations, the IRS and the U.S.

courts could disagree with one or more of the positions taken in

this summary.

Holders of the acquisition, ownership, and disposition of our common shares.

This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary.

In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S.

courts could disagree with one or more of the positions taken in this summary.

Scope of this Disclosure

This summary is based on the Code, U.S.

Treasury Regulations promulgated

thereunder (whether final, temporary or proposed), published IRS rulings, judicial decisions, published administrative positions of the

IRS, and the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September

26, 1980, as amended (the Canada-U.S.

Treasury Regulations promulgated thereunder (whether final, temporary or proposed), published IRS rulings, judicial decisions, published administrative positions of the IRS, and the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the Canada-U.S.

Tax Treaty), in each case, as in effect as of the date of this report.

Any of the authorities on

which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive

Unless otherwise discussed, this summary does not discuss the potential effects, whether adverse or beneficial, of any proposed

For purposes of this summary, a “U.S.

Holder” is a beneficial

owner of common shares that, for U.S.

federal income tax purposes, is (a) an individual who is a citizen or resident of the United States,

(b) a corporation, or other entity classified as a corporation for U.S.

federal income tax purposes, that is created or organized in or

under the laws of the U.S., any state in the United States or the District of Columbia, (c) an estate if the income of such estate is

subject to U.S.

federal income tax regardless of the source of such income, or (d) a trust if (i) such trust has validly elected to be

treated as a U.S.

Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive basis.

Unless otherwise discussed, this summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation.

For purposes of this summary, a “U.S.

Holder”

is a beneficial owner of common shares that, for U.S.

federal income tax purposes, is (a) an individual who is a citizen or resident of the United States, (b) a corporation, or other entity classified as a corporation for U.S.

federal income tax purposes, that is created or organized in or under the laws of the U.S., any state in the United States or the District of Columbia, (c) an estate if the income of such estate is subject to U.S.

federal income tax regardless of the source of such income, or (d) a trust if (i) such trust has validly elected to be treated as a U.S.

person for U.S.

federal income tax purposes or (ii) a U.S.

court is able to exercise primary supervision over the administration

of such trust and one or more U.S.

court is able to exercise primary supervision over the administration of such trust and one or more U.S.

persons have the authority to control all substantial decisions of such trust.

Holders Subject to Special U.S.

Federal Income Tax Rules Not

Federal Income Tax Rules Not Addressed

This summary does not address the U.S.

federal income tax consequences

applicable to U.S.

federal income tax consequences applicable to U.S.

Holders that are subject to special provisions under the Code, including, but not limited to, the following U.S.

Holders that are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax deferred

Holders that are financial institutions, insurance companies, real estate investment trusts, or regulated investment

Holders that are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax deferred accounts;

Holders that are financial institutions, insurance companies, real estate investment trusts, or regulated investment companies;

Holders that are dealers in securities or currencies or U.S.

Holders that are traders in securities that elect to

apply a mark-to-market accounting method;

Holders that have a “functional currency” other than the U.S.

Holders that are traders in securities that elect to apply a mark-to-market accounting method;

Holders that have a “functional currency”

other than the U.S.

Holders subject to the alternative minimum tax provisions of the Code;

Holders that own common shares as part of a straddle,

hedging transaction, conversion transaction, integrated transaction, constructive sale, or other arrangement involving more than one position;

Holders that own common shares as part of a straddle, hedging transaction, conversion transaction, integrated transaction, constructive sale, or other arrangement involving more than one position;

Holders that acquired common shares through the exercise of employee stock options or otherwise as compensation for services;

Holders that hold common shares other than as a capital asset within the meaning of Section 1221 of the Code;

that beneficially own (directly, indirectly or by attribution) 10% or more of our equity securities (by vote or value);

Holders that beneficially own (directly, indirectly or by attribution) 10% or more of our equity securities (by vote or value);

Holders that are subject to special provisions under the Code, including U.S.

Holders described above, should consult their own tax

advisor regarding the U.S.

Holders described above, should consult their own tax advisor regarding the U.S.

federal, U.S.

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federal income tax purposes holds common shares, the U.S.

federal income tax consequences to that partnership and the partners of that

partnership generally will depend on the activities of the partnership and the status of the partners.

Partners of entities that are classified

as partnerships for U.S.

federal income tax consequences to that partnership and the partners of that partnership generally will depend on the activities of the partnership and the status of the partners.

Partners of entities that are classified as partnerships for U.S.

federal income tax purposes should consult their own tax advisors regarding the U.S.

federal income tax consequences

arising from and relating to the acquisition, ownership and disposition of the common shares.

federal income tax consequences arising from and relating to the acquisition, ownership and disposition of the common shares.

Tax Consequences Other than U.S.

Federal Income Tax Consequences

Not Addressed

Federal Income Tax Consequences Not Addressed

This summary does not address the U.S.

estate and gift, alternative minimum,

state, local or non-U.S.

estate and gift, alternative minimum, state, local or non-U.S.

tax consequences to U.S.

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estate and gift, alternative minimum, state, local and non-U.S.

tax consequences

arising from and relating to the acquisition, ownership, and disposition of our common shares.

Federal Income Tax Considerations of the Acquisition, Ownership,

and Disposition of Common Shares

tax consequences arising from and relating to the acquisition, ownership, and disposition of our common shares.

Federal Income Tax Considerations of the Acquisition, Ownership, and Disposition of Common Shares

Distributions on Common Shares

Subject to the discussion under “—Passive Foreign Investment

Company Rules” below, a U.S.

Holder that receives a distribution, including a constructive distribution or a taxable stock distribution,

with respect to the common shares generally will be required to include the amount of that distribution in gross income as a dividend

(without reduction for any Canadian income tax withheld from such distribution) to the extent of our current or accumulated “earnings

and profits” (as computed for U.S.

Subject to the discussion under “—Passive Foreign Investment Company Rules”

below, a U.S.

Holder that receives a distribution, including a constructive distribution or a taxable stock distribution, with respect to the common shares generally will be required to include the amount of that distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of our current or accumulated “earnings and profits”

(as computed for U.S.

federal income tax purposes).

To the extent that a distribution exceeds our current and accumulated

“earnings and profits”, the excess amount will be treated (a) first, as a tax-free return of capital to the extent of a U.S.

Holder’s adjusted tax basis in the common shares with respect to which the distribution is made (resulting in a corresponding reduction

in the tax basis of those common shares) and, (b) thereafter, as gain from the sale or exchange of those common shares (see the more detailed

discussion at “—Disposition of Common Shares” below).

We do not intend to calculate our current or accumulated earnings

and profits for U.S.

To the extent that a distribution exceeds our current and accumulated “earnings and profits”, the excess amount will be treated (a) first, as a tax-free return of capital to the extent of a U.S.

Holder’s adjusted tax basis in the common shares with respect to which the distribution is made (resulting in a corresponding reduction in the tax basis of those common shares) and, (b) thereafter, as gain from the sale or exchange of those common shares (see the more detailed discussion at “—Disposition of Common Shares”

We do not intend to calculate our current or accumulated earnings and profits for U.S.

federal income tax purposes and, therefore, will not be able to provide U.S.

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Holders should consult their own tax advisors regarding whether distributions from us should be treated as dividends for U.S.

income tax purposes.

Dividends paid on our common shares generally will not be eligible for the “dividends received deduction”

federal income tax purposes.

Dividends paid on our common shares generally will not be eligible for the “dividends received deduction”

allowed to corporations under the Code with respect to dividends received from U.S.

corporations.

A dividend paid by us generally will be taxed at the preferential tax rates

applicable to long-term capital gains if, among other requirements, (a) we are a “qualified foreign corporation” (as defined

below), (b) the U.S.

Holder receiving the dividend is an individual, estate, or trust, and (c) the dividend is paid on common shares that

have been held by the U.S.

Holder for at least 61 days during the 121-day period beginning 60 days before the “ex-dividend date”

A dividend paid by us generally will be taxed at the preferential tax rates applicable to long-term capital gains if, among other requirements, (a) we are a “qualified foreign corporation”

(as defined below), (b) the U.S.

Holder receiving the dividend is an individual, estate, or trust, and (c) the dividend is paid on common shares that have been held by the U.S.

Holder for at least 61 days during the 121-day period beginning 60 days before the “ex-dividend date”

(i.e., the first date that a purchaser of the common shares will not be entitled to receive the dividend).

For purposes of the rules described in the preceding paragraph, we generally

will be a “qualified foreign corporation”, or a QFC, if (a) we are eligible for the benefits of the Canada-U.S.

or (b) our common shares are readily tradable on an established securities market in the United States, within the meaning provided in

However, even if we satisfy one or more of the requirements, we will not be treated as a QFC if we are classified as a PFIC

(as discussed below) for the taxable year during which we pay the applicable dividend or for the preceding taxable year.

rules are complex, and each U.S.

Holder should consult its own tax advisor regarding the application of those rules to them in their particular

circumstances.

Even if we satisfy one or more of the requirements, as noted below, there can be no assurance that we will not be a PFIC

in the current taxable year or become a PFIC in the future.

For purposes of the rules described in the preceding paragraph, we generally will be a “qualified foreign corporation”, or a QFC, if (a) we are eligible for the benefits of the Canada-U.S.

Tax Treaty, or (b) our common shares are readily tradable on an established securities market in the United States, within the meaning provided in the Code.

However, even if we satisfy one or more of the requirements, we will not be treated as a QFC if we are classified as a PFIC (as discussed below) for the taxable year during which we pay the applicable dividend or for the preceding taxable year.

The dividend rules are complex, and each U.S.

Holder should consult its own tax advisor regarding the application of those rules to them in their particular circumstances.

Even if we satisfy one or more of the requirements, as noted below.

Thus, there can be no assurance that we will qualify as a QFC.

Disposition of Common Shares

Subject to the discussion under “—Passive Foreign Investment

Company Rules” below, a U.S.

Holder will recognize gain or loss on the sale or other taxable disposition of common shares (that

is treated as a sale or exchange for U.S.

Subject to the discussion under “—Passive Foreign Investment Company Rules”

below, a U.S.

Holder will recognize gain or loss on the sale or other taxable disposition of common shares (that is treated as a sale or exchange for U.S.

federal income tax purposes) equal to the difference, if any, between (a) the U.S.

of the amount realized on the date of the sale or disposition and (b) the U.S.

Holder’s adjusted tax basis (determined in U.S.

in the common shares sold or otherwise disposed of.

Any such gain or loss generally will be capital gain or loss, which will be long-term

capital gain or loss if the common shares are held for more than one year.

Holder's initial tax basis in the common shares generally

will equal the U.S.

dollar value of the amount realized on the date of the sale or disposition and (b) the U.S.

Holder’s adjusted tax basis (determined in U.S.

dollars) in the common shares sold or otherwise disposed of.

Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if the common shares are held for more than one year.

Holder's initial tax basis in the common shares generally will equal the U.S.

dollar cost of such common shares.

Holder should consult its own tax advisor as to the tax treatment of

dispositions of common shares in exchange for Canadian dollars.

Holder should consult its own tax advisor as to the tax treatment of dispositions of common shares in exchange for Canadian dollars.

Preferential tax rates apply to long-term capital gains of a U.S.

that is an individual, estate, or trust.

Holder that is an individual, estate, or trust.

There are currently no preferential tax rates for long-term capital gains of a U.S.

is a corporation.

Holder that is a corporation.

Deductions for capital losses are subject to complex limitations.

Passive Foreign Investment Company Rules

If we are or become a PFIC, the preceding sections of this summary may

not describe the U.S.

If we are or become a PFIC, the preceding sections of this summary may not describe the U.S.

federal income tax consequences to U.S.

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Passive Foreign Investment Company Status .

Special, generally unfavorable, rules apply to the ownership and disposition

of the stock of a PFIC.

Special, generally unfavorable, rules apply to the ownership and disposition of the stock of a PFIC.

federal income tax purposes, a non-U.S.

corporation is classified as a PFIC if:

at least 75% of its gross income for the taxable year is “passive”

income (referred to as the “income test”);

at least 50% of the average value of its assets held during the

taxable year is attributable to assets that produce passive income or are held for the production of passive income (referred to as the

“asset test”).

at least 75% of its gross income for the taxable year is “passive”

income (referred to as the “income test”);

at least 50% of the average value of its assets held during the taxable year is attributable to assets that produce passive income or are held for the production of passive income (referred to as the “asset test”).

Passive income generally includes the following types of income:

dividends, royalties, rents, annuities, interest, and income equivalent

net gains from the sale or exchange of property that gives rise

to dividends, interest, royalties, rents, or annuities and certain gains from the commodities transactions.

In determining whether we are a PFIC, we will be required to take into

account a pro rata portion of the income and assets of each corporation in which we own, directly or indirectly, at least 25% by value.

dividends, royalties, rents, annuities, interest, and income equivalent to interest;

net gains from the sale or exchange of property that gives rise to dividends, interest, royalties, rents, or annuities and certain gains from the commodities transactions.

In determining whether we are a PFIC, we will be required to take into account a pro rata portion of the income and assets of each corporation in which we own, directly or indirectly, at least 25% by value.

As described above, PFIC status of a non-U.S.

corporation depends on the

relative values of certain categories of assets and the relative amount of certain kinds of income for a taxable year.

Therefore, our

status as a PFIC for any given taxable year depends upon the financial results for such year and upon relative valuations, which are subject

to change and beyond our ability to predict or control.

Based on our most recent financial statements and projections and given uncertainty

regarding the composition of our future income and assets, there is a significant risk that we may have been classified as a PFIC for

the taxable year that ended on March 31, 2021, and may be classified as a PFIC for our current taxable year and possibly subsequent years.

corporation depends on the relative values of certain categories of assets and the relative amount of certain kinds of income for a taxable year.

Therefore, our status as a PFIC for any given taxable year depends upon the financial results for such year and upon relative valuations, which are subject to change and beyond our ability to predict or control.

Based on our most recent financial statements and projections and given uncertainty regarding the composition of our future income and assets, there is a significant risk that we may have been classified as a PFIC for the taxable year that ended on March 31, 2022 and may be classified as a PFIC for our current taxable year and possibly subsequent years.

However, PFIC status is fundamentally factual in nature, depends on the application of complex U.S.

federal income tax rules (which are

subject to differing interpretations), generally cannot be determined until the close of the taxable year in question and is determined

In addition, in evaluating the risk that we may be classified as a PFIC for our current taxable year and subsequent years, we

have not taken into account any changes to the composition of our income and assets that may result from the merger.

Accordingly, there

can be no assurance that we will not be a PFIC in our current taxable year or subsequent years.

federal income tax rules (which are subject to differing interpretations), generally cannot be determined until the close of the taxable year in question and is determined annually.

Accordingly, there can be no assurance that we will not be a PFIC in our current taxable year or subsequent years.

The PFIC rules are complex, and each U.S.

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Default PFIC Rules Under Section 1291 of the Code.

Generally, if we are or have been treated as a PFIC for any taxable year

during a U.S.

Holder’s holding period of common shares, subject to the special rules described below applicable to a U.S.

who makes a Mark-to-Market Election or a QEF Election (each as defined below), any “excess distribution” with respect to the

common shares would be allocated ratably over the U.S.

Holder’s holding period.

The amounts allocated to the taxable year of the

excess distribution and to any year before we became a PFIC would be taxed as ordinary income.

The amount allocated to each other taxable

year would be subject to tax at the highest rate in effect for individuals or corporations in that taxable year, as appropriate, and an

interest charge would be imposed on the amount allocated to that taxable year.

Distributions made in respect of common shares during a

taxable year will be excess distributions to the extent they exceed 125% of the average of the annual distributions on common shares received

Generally, if we are or have been treated as a PFIC for any taxable year during a U.S.

Holder’s holding period of common shares, subject to the special rules described below applicable to a U.S.

Holder who makes a Mark-to-Market Election or a QEF Election (each as defined below), any “excess distribution”

with respect to the common

shares would be allocated ratably over the U.S.

Holder’s holding period.

The amounts allocated to the taxable year of the excess distribution and to any year before we became a PFIC would be taxed as ordinary income.

The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations in that taxable year, as appropriate, and an interest charge would be imposed on the amount allocated to that taxable year.

Distributions made in respect of common shares during a taxable year will be excess distributions to the extent they exceed 125% of the average of the annual distributions on common shares received by the U.S.

Holder during the preceding three taxable years or the U.S.

Holder’s holding period, whichever is shorter.

dividends generally will not be qualified dividend income if we are a PFIC in the taxable year of payment or the preceding year.

Generally, if we are treated as a PFIC for any taxable year during which

Holder owns common shares, any gain on the disposition of the common shares would be treated as an excess distribution and would

be allocated ratably over the U.S.

Holder’s holding period and subject to taxation in the same manner as described in the preceding

paragraph and would not be eligible for the preferential long-term capital gains rate.

Certain elections (including the Mark-to-Market Election and the QEF Election,

as defined and discussed below) may sometimes be used to mitigate the adverse impact of the PFIC rules on U.S.

Holders, but these elections

may accelerate the recognition of taxable income and have other adverse results.

Holder’s holding period, whichever is shorter.

In addition, dividends generally will not be qualified dividend income if we are a PFIC in the taxable year of payment or the preceding year.

Generally, if we are treated as a PFIC for any taxable year during which a U.S.

Holder owns common shares, any gain on the disposition of the common shares would be treated as an excess distribution and would be allocated ratably over the U.S.

Holder’s holding period and subject to taxation in the same manner as described in the preceding paragraph and would not be eligible for the preferential long-term capital gains rate.

Certain elections (including the Mark-to-Market Election and the QEF Election, as defined and discussed below) may sometimes be used to mitigate the adverse impact of the PFIC rules on U.S.

Holders, but these elections may accelerate the recognition of taxable income and have other adverse consequences.

Each current or prospective U.S.

Holder should consult its own tax advisor

regarding potential status of us as a PFIC, the possible effect of the PFIC rules to such holder in their particular circumstances, information

reporting required if we were treated as a PFIC and the availability of any election that may be available to the holder to mitigate adverse

Holder should consult its own tax advisor regarding potential status of us as a PFIC, the possible effect of the PFIC rules to such holder in his, her or its particular circumstances, information reporting required if we were treated as a PFIC and the availability of any election that may be available to the U.S.

holder to mitigate adverse U.S.

federal income tax consequences of holding shares in a PFIC.

QEF Election.

Holder of common shares in a PFIC generally would not be subject

to the PFIC rules discussed above if the U.S.

Holder had made a timely and effective election (a “QEF Election”) to treat

us as a “qualified electing fund” (a “QEF”).

Holder of common shares in a PFIC generally would not be subject to the PFIC rules discussed above if the U.S.

Holder had made a timely and effective election (a “QEF Election”) to treat us as a “qualified electing fund”

(a “QEF”).

Instead, such U.S.

Holder would be subject to U.S.

federal income

tax on its pro rata share of our (i) net capital gain, which would be taxed as long-term capital gain to such U.S.

and (ii) ordinary earnings, which would be taxed as ordinary income to such U.S.

Holder, in each case regardless of whether such amounts

are actually distributed to such U.S.

federal income tax on its pro rata share of our (i) net capital gain, which would be taxed as long-term capital gain to such U.S.

Holder, and (ii) ordinary earnings, which would be taxed as ordinary income to such U.S.

Holder, in each case regardless of whether such amounts are actually distributed to such U.S.

However, a U.S.

Holder that makes a QEF Election may, subject to certain limitations, elect

to defer payment of current U.S.

Holder that makes a QEF Election may, subject to certain limitations, elect to defer payment of current U.S.

federal income tax on such amounts, subject to an interest charge.

Holder is not a corporation,

any such interest paid will be treated as “personal interest,” which is not deductible.

Holder that makes a timely and effective QEF Election generally

(a) may receive a tax-free distribution from us to the extent that such distribution represents our “earnings and profits”

Holder is not a corporation, any such interest paid will be treated as “personal interest,”

which is not deductible.

Holder that makes a timely and effective QEF Election generally (a) may receive a tax-free distribution from us to the extent that such distribution represents our “earnings and profits”

that were previously included in income by such U.S.

Holder because of such QEF Election and (b) will adjust such U.S.

tax basis in the common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election.

Holder’s tax basis in the common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election.

In addition, for U.S.

federal income tax purposes, a U.S.

Holder that makes a timely QEF Election generally will recognize capital gain

or loss on the sale or other taxable disposition of the common shares.

A QEF Election will be treated as “timely” if such QEF Election

is made for the first taxable year in the U.S.

Holder’s holding period for the common shares in which we are a PFIC.

may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S.

Holder that makes a timely QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of the common shares.

A QEF Election will be treated as “timely”

if such QEF Election is made for the first taxable year in the U.S.

Holder’s holding period for the common shares in which we are a PFIC.

Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S.

Holder files a U.S.

federal income

tax return for such first year.

federal income tax return for such first year.

Holder makes a QEF Election after the first taxable year in the U.S.

Holder’s holding

period for the common shares in which we are a PFIC, then, in addition to filing the QEF Election documents, a U.S.

Holder may elect to

recognize gain (which will be taxed under the rules discussed under “— Default PFIC Rules Under Section 1291 of the Code ”)

as if the common shares were sold on the qualification date.

The “qualification date” is the first day of the first taxable

year in which we are a QEF with respect to such U.S.

Holder’s holding period for the common shares in which we are a PFIC, then, in addition to filing the QEF Election documents, a U.S.

Holder may elect to recognize gain (which will be taxed under the rules discussed under “—

Default PFIC Rules Under Section 1291 of the Code ”) as if the common shares were sold on the qualification date.

The “qualification date”

is the first day of the first taxable year in which we are a QEF with respect to such U.S.

The election to recognize such gain can only be made if such U.S.

holding period for the common shares includes the qualification date.

Holder’s holding period for the common shares includes the qualification date.

By electing to recognize such gain, such U.S.

Holder will be deemed

to have made a timely QEF Election.

Holder will be deemed to have made a timely QEF Election.

In addition, under very limited circumstances, it is possible that a U.S.

Holder might make a retroactive

QEF Election if such U.S.

Holder might make a retroactive QEF Election if such U.S.

Holder failed to file the QEF Election documents in a timely manner.

Holder fails to make a QEF Election

for the first taxable year in the U.S.

Holder’s holding period for the common shares in which we are a PFIC and does not elect to

recognize gain as if the common shares were sold on the qualification date, such holder will not be treated as having made a “timely”

QEF Election and will continue to be subject to the special adverse taxation rules discussed above under “— Default PFIC

Rules Under Section 1291 of the Code ”.

A QEF Election will apply to the taxable year for which such QEF Election

is made and to all subsequent taxable years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of

such QEF Election.

Holder makes a QEF Election and, in a subsequent taxable year, we cease to be a PFIC, the QEF Election will

remain in effect (although it will not be applicable) during those taxable years in which we are not a PFIC.

Accordingly, if we become

a PFIC in another subsequent taxable year, the QEF Election will be effective, and the U.S.

Holder will be subject to the rules described

above during any such subsequent taxable year in which we qualify as a PFIC.

Holder cannot make and maintain a valid QEF Election unless we provide

Holder fails to make a QEF Election for the first taxable year in the U.S.

Holder’s holding period for the common shares in which we are a PFIC and does not elect to recognize gain as if the common shares were sold on the qualification date, such holder will not be treated as having made a “timely”

QEF Election and will continue to be subject to the special adverse taxation rules discussed above under “—

Default PFIC Rules Under Section 1291 of the Code ”.

A QEF Election will apply to the taxable year for which such QEF Election is made and to all subsequent taxable years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election.

Holder makes a QEF Election and, in a subsequent taxable year, we cease to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those taxable years in which we are not a PFIC.

Accordingly, if we become a PFIC in another subsequent taxable year, the QEF Election will be effective, and the U.S.

Holder will be subject to the rules described above during any such subsequent taxable year in which we qualify as a PFIC.

Holder cannot make and maintain a valid QEF Election unless we provide certain U.S.

tax information necessary to make such an election.

On an annual basis, we intend to use commercially reasonable efforts

to make available to U.S.

Holders, upon their written request (a) timely information as to our status as a PFIC, and (b) for each year

in which we are a PFIC, information and documentation that a U.S.

Holder making a QEF Election with respect to us is required to obtain

On an annual basis, we intend to use commercially reasonable efforts to make available to U.S.

Holders, upon their written request (a) timely information as to our status as a PFIC, and (b) for each year in which we are a PFIC, information and documentation that a U.S.

Holder making a QEF Election with respect to us is required to obtain for U.S.

federal income tax purposes.

Holder should consult its own tax advisor regarding the availability of, and procedure

for making, a QEF Election with respect to us.

Holder should consult its own tax advisor regarding the availability of, and procedure for making, a QEF Election with respect to us.

Mark-to-Market Election.

Holder of common shares in a PFIC would not be subject to the PFIC

rules discussed above under “— Default PFIC Rules Under Section 1291 of the Code ” if the U.S.

Holder had made

a timely and effective election to mark the PFIC common shares to market (a “Mark-to-Market Election”).

Holder may make a Mark-to-Market Election with respect to the common

shares only if such shares are marketable stock.

Such shares generally will be “marketable stock” if they are regularly traded

on a “qualified exchange,” which is defined as (a) a national securities exchange that is registered with the SEC, (b) the

national market system established pursuant to section 11A of the Exchange Act, or (c) a non-U.S.

securities exchange that is regulated

or supervised by a governmental authority of the country in which the market is located, provided that (i) such non-U.S.

trading volume, listing, financial disclosure, surveillance, and other requirements, and the laws of the country in which such non-U.S.

Holder of common shares in a PFIC would not be subject to the PFIC rules discussed above under “—

Default PFIC Rules Under Section 1291 of the Code ”

Holder had made a timely and effective election to mark the PFIC common shares to market (a “Mark-to-Market Election”).

Holder may make a Mark-to-Market Election with respect to the common shares only if such shares are marketable stock.

Such shares generally will be “marketable stock”

if they are regularly traded on a “qualified exchange,”

which is defined as (a) a national securities exchange that is registered with the SEC, (b) the national market system established pursuant to section 11A of the Exchange Act, or (c) a non-U.S.

securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such non-U.S.

exchange has trading volume, listing, financial disclosure, surveillance, and other requirements, and the laws of the country in which such non-U.S.

exchange is located, together with the rules of such non-U.S.

exchange, ensure that such requirements are actually enforced and (ii) the

rules of such non-U.S.

exchange, ensure that such requirements are actually enforced and (ii) the rules of such non-U.S.

exchange ensure active trading of listed stocks.

Our common shares will generally be treated as “regularly

traded” in any calendar year in which more than a de minimis quantity of common shares is traded on a qualified

exchange for at least 15 days during each calendar quarter.

Holder should consult its own tax advisor with respect to the availability

of a Mark-to-Market Election with respect to the common shares.

Our common shares will generally be treated as “regularly traded”

in any calendar year in which more than a de minimis quantity of common shares is traded on a qualified exchange for at least 15 days during each calendar quarter.

Holder should consult its own tax advisor with respect to the availability of a Mark-to-Market Election with respect to the common shares.

In general, a U.S.

Holder that makes a timely Mark-to-Market Election with

respect to the common shares will include in ordinary income, for each taxable year in which we are a PFIC, an amount equal to the excess,

if any, of (a) the fair market value of the common shares as of the close of such taxable year over (b) such U.S.

Holder’s tax basis

in such shares.

Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the lesser of (a)

the excess, if any, of (i) such U.S.

Holder’s adjusted tax basis in the common shares over (ii) the fair market value of such shares

as of the close of such taxable year or (b) the excess, if any, of (i) the amount included in ordinary income because of such Mark-to-Market

Election for prior taxable years over (ii) the amount allowed as a deduction because of such Mark-to-Market Election for prior taxable

Holder that makes a timely Mark-to-Market Election with respect to the common shares will include in ordinary income, for each taxable year in which we are a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the common shares as of the close of such taxable year over (b) such U.S.

Holder’s tax basis in such shares.

Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the lesser of (a) the excess, if any, of (i) such U.S.

Holder’s adjusted tax basis in the common shares over (ii) the fair market value of such shares as of the close of such taxable year or (b) the excess, if any, of (i) the amount included in ordinary income because of such Mark-to-Market Election for prior taxable years over (ii) the amount allowed as a deduction because of such Mark-to-Market Election for prior taxable years.

Holder makes a Mark-to-Market Election after the first taxable year in which we are a PFIC and such U.S.

Holder has not

made a timely QEF Election with respect to us, the PFIC rules described above under “— Default PFIC Rules Under Section

1291 of the Code ” will apply to certain dispositions of, and distributions on, the common shares, and the U.S.

mark-to-market income for the year of the election.

If we were to cease being a PFIC, a U.S.

Holder that marked its common shares to market

would not include mark-to-market gain or loss with respect to its common shares for any taxable year that we were not a PFIC.

Holder that makes a Mark-to-Market Election generally will also

adjust such U.S.

Holder’s tax basis in his common shares to reflect the amount included in gross income or allowed as a deduction

because of such Mark-to-Market Election.

In addition, upon a sale or other taxable disposition of the common shares subject to a Mark-to-Market

Election, any gain or loss on such disposition will be ordinary income or loss (to the extent that such loss does not to exceed the excess,

if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior taxable years over (b) the amount

allowed as a deduction because of such Mark-to-Market Election for prior taxable years).

A Mark-to-Market Election applies to the taxable

year in which such Mark-to-Market Election is made and to each subsequent taxable year unless the common shares cease to be “marketable

stock” or the IRS consents to revocation of such election.

Holder should consult its own tax advisor regarding the availability

of, and procedure for making, a Mark-to-Market Election with respect to the common shares.

Holder has not made a timely QEF Election with respect to us, the PFIC rules described above under “—

Default PFIC Rules Under Section 1291 of the Code ”

will apply to certain dispositions of, and distributions on, the common shares, and the U.S.

Holder’s mark-to-market income for the year of the election.

If we were to cease being a

Holder that marked its common shares to market would not include mark-to-market gain or loss with respect to its common shares for any taxable year that we were not a PFIC.

Holder that makes a Mark-to-Market Election generally will also adjust such U.S.

Holder’s tax basis in his common shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election.

In addition, upon a sale or other taxable disposition of the common shares subject to a Mark-to-Market Election, any gain or loss on such disposition will be ordinary income or loss (to the extent that such loss does not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior taxable years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior taxable years).

A Mark-to-Market Election applies to the taxable year in which such Mark-to-Market Election is made and to each subsequent taxable year unless the common shares cease to be “marketable stock”

or the IRS consents to revocation of such election.

Holder should consult its own tax advisor regarding the availability of, and procedure for making, a Mark-to-Market Election with respect to the common shares.

If we were to be treated as a PFIC in any taxable year, a U.S.

generally be required to file an annual report with the IRS containing such information as the U.S.

Holder will generally be required to file an annual report with the IRS containing such information as the U.S.

Treasury Department may require.

Holder should consult its own tax advisor regarding our potential

status as a PFIC, the possible effect of the PFIC rules to such holder and information reporting required if we were a PFIC, as well as

the availability of any election that may be available to the holder to mitigate adverse U.S.

federal income tax consequences of holding

shares in a PFIC.

Holder should consult its own tax advisor regarding our potential status as a PFIC, the possible effect of the PFIC rules to such holder and information reporting required if we were a PFIC, as well as the availability of any election that may be available to the holder to mitigate adverse U.S.

federal income tax consequences of holding shares in a PFIC.

Receipt of Foreign Currency

The amount of a distribution paid in Canadian dollars or Canadian dollar

proceeds received on the sale or other taxable disposition of common shares will generally be equal to the U.S.

dollar value of the currency

on the date of receipt.

The amount of a distribution paid in Canadian dollars or Canadian dollar proceeds received on the sale or other taxable disposition of common shares will generally be equal to the U.S.

dollar value of the currency on the date of receipt.

If any Canadian dollars received with respect to the common shares are later converted into U.S.

1 unchanged sentence

Holders may realize foreign currency gain or loss on the conversion.

Any gain or loss generally will be treated as ordinary income or

loss and generally will be from sources within the United States for U.S.

Any gain or loss generally will be treated as ordinary income or loss and generally will be from sources within the United States for U.S.

foreign tax credit purposes.

Holder should consult

its own tax advisor concerning the possibility of foreign currency gain or loss if any such currency is not converted into U.S.

on the date of receipt.

Holder should consult its own tax advisor concerning the possibility of foreign currency gain or loss if any such currency is not converted into U.S.

dollars on the date of receipt.

Foreign Tax Credit

Subject to certain limitations, a U.S.

Holder who pays (whether directly

or through withholding) Canadian or other non-U.S.

income tax with respect to the common shares may be entitled, at the election of the

Holder who pays (whether directly or through withholding) Canadian or other non-U.S.

income tax with respect to the common shares may be entitled, at the election of the U.S.

Holder, to receive either a deduction or a credit for Canadian or other non-U.S.

income tax paid.

Dividends paid on common shares

generally will constitute income from sources outside the United States.

Any gain from the sale or other taxable disposition of the common

shares by a U.S.

Dividends paid on common shares generally will constitute income from sources outside the United States.

Any gain from the sale or other taxable disposition of the common shares by a U.S.

Holder generally will constitute U.S.

source income.

The foreign tax credit rules (including the limitations with respect

thereto) are complex, and each U.S.

Holder should consult its own tax advisor regarding the foreign tax credit rules, having regard to

such holder’s particular circumstances.

The foreign tax credit rules (including the limitations with respect thereto) are complex, and each U.S.

Holder should consult its own tax advisor regarding the foreign tax credit rules, having regard to such holder’s particular circumstances.

Information Reporting;

Backup Withholding

Generally, information reporting and backup withholding will apply to distributions

on, and the payment of proceeds from the sale or other taxable disposition of, the common shares unless (i) the U.S.

Holder is a corporation

or other exempt entity, or (ii) in the case of backup withholding, the U.S.

Holder provides a correct taxpayer identification number,

certifies that the U.S.

Holder is not subject to backup withholding and otherwise complies with the applicable requirements of the backup

withholding rules.

Generally, information reporting and backup withholding will apply to distributions on, and the payment of proceeds from the sale or other taxable disposition of, the common shares unless (i) the U.S.

Holder is a corporation or other exempt entity, or (ii) in the case of backup withholding, the U.S.

Holder provides a correct taxpayer identification number, certifies that the U.S.

Holder is not subject to backup withholding and otherwise complies with the applicable requirements of the backup withholding rules.

Backup withholding is not an additional tax.

Any amount withheld generally

will be creditable against a U.S.

Holder’s U.S.

federal income tax liability or refundable to the extent that it exceeds such liability

provided the required information is provided to the IRS in a timely manner.

Any amount withheld generally will be creditable against a U.S.

Holder’s U.S.

federal income tax liability or refundable to the extent that it exceeds such liability provided the required information is provided to the IRS in a timely manner.

In addition, certain categories of U.S.

Holders must file information returns

with respect to their investment in a non-U.S.

Holders must file information returns with respect to their investment in a non-U.S.

For example, certain U.S.

Holders must file IRS Form 8938 with respect to

certain “specified foreign financial assets” (such as the common shares) with an aggregate value in excess of US$50,000 (and,

in some circumstances, a higher threshold).

Failure to do so could result in substantial penalties and in the extension of the statute

of limitations with respect to such holder’s U.S.

Holders must file IRS Form 8938 with respect to certain “specified foreign financial assets”

(such as the common shares) with an aggregate value in excess of US$50,000 (and, in some circumstances, a higher threshold).

Failure to do so could result in substantial penalties and in the extension of the statute of limitations with respect to such holder’s U.S.

federal income tax returns.

Holder should consult its own tax advisor

regarding application of the information reporting and backup withholding rules to it in connection with an investment in our common shares.

Holder should consult its own tax advisor regarding application of the information reporting and backup withholding rules to it in connection with an investment in our common shares.

Medicare Contribution Tax

Holders that are individuals, estates or certain trusts generally

will be subject to a 3.8% Medicare contribution tax on, among other things, dividends on, and capital gains from the sale or other taxable

disposition of, common shares, subject to certain limitations and exceptions.

Holder should consult its own tax advisor regarding

possible application of this additional tax to income earned in connection with an investment in our common shares.

Holders that are individuals, estates or certain trusts generally will be subject to a 3.8% Medicare contribution tax on, among other things, dividends on, and capital gains from the sale or other taxable disposition of, common shares, subject to certain limitations and exceptions.

Holder should consult its own tax advisor regarding possible application of this additional tax to income earned in connection with an investment in our common shares.

Recent Sales of Unregistered Securities

Issuer Repurchases of Equity Securities

Selected Financial Data

Not applicable.

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

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto found elsewhere in this annual report.

This annual report contains forward-looking statements within the meaning of the U.S.

Private Securities Litigation Reform Act of 1995.

These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements.

For a detailed discussion of these risks and uncertainties, see Item 1A, “Risk Factors”

of this annual report.

We caution readers not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this annual report.

We undertake no obligation to update forward-looking statements which reflect events or circumstances occurring after the date of this annual report, unless required by applicable securities laws.

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 financial position as at March 31, 2022 and for the twelve-month periods then ended.

This MD&A explains the material variations in our operations, financial position and cash flows for the years ended March 31, 2022 and 2021.

Market data and certain industry data and forecasts included in this MD&A were obtained from internal corporation surveys, market research, and publicly available information, reports of governmental agencies and industry publications and 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 made.

Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based upon our management’s 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 under Item 1.A “Risk Factors”

in this annual report.

While we believe our internal business, research is reliable and the market definitions we use in this MD&A are appropriate, neither our business research nor the definitions we use have been verified by any independent source.

This MD&A, approved by the Board of Directors on June 21, 2022, should be read in conjunction with our audited consolidated financial statements for the year ended March 31, 2022, and 2021.

Our audited 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.

Basis of Presentation of the Financial Statements

Our consolidated financial statements, which include the accounts of our subsidiaries AIAG and Acasti Pharma US, have been prepared in accordance with GAAP and the rules and regulations of the SEC related to annual reports filed on Form 10-K.

All intercompany transactions and balances are eliminated on consolidation.

Our assets as at March 31, 2022, include cash and cash equivalents and short-term investments totalling $43.7 million and intangible assets and goodwill totalling $83.1 million.

Our current liabilities total $3.3 million as at March 31, 2022 and are comprised primarily of amounts due to or accrued for creditors.

Comparative Financial Information for the years ended March 31, 2022 and 2021

Increase (Decrease)

Basic and diluted loss per share

Working capital 1

Total non-current liabilities

Total shareholders’

Working capital is calculated by subtracting total current liabilities of $3,260 at March 31, 2022 ($1,579 at March 31, 2021) from total current assets of $45,531 at March 31, 2022 ($62,372 at March 31, 2021).

Because there is no standard method endorsed by GAAP, the results may not be comparable to similar measurements presented by other public companies.

Results of Operations

Comparison of the year ended March 31, 2022, and 2021

The following table summarizes our results of operations for the year ended March 31, 2022 and 2021:

Increase (Decrease)

Operating expenses

Cost of sales of products

Research and development expenses, net of government assistance

General and administrative expenses

Sales and marketing expenses

Impairment of Intangible assets

Impairment of Equipment

Impairment of Other assets and prepaids

Loss from operating activities

Financial income (expenses)

Income tax recovery

The net loss of $9,819 or $0.27 per share for the year ended March 31, 2022, decreased by $9,859 from the net loss of $19,678 or $1.33 per share for the year ended March 31, 2021.

Revenue and cost of sales of products

In October 2020, we entered into a short term agreement with the Centre Integre Universitaire et des services sociaux de L’Estrie –

Centre hospitalier Universitaire de Sherbrooke to start producing and selling viral transport medium tubes to be utilized in testing related to the COVID-19 pandemic, for which we generated revenues of $196 for the year ended March 31, 2021.

We did not engage in any production and sales under this agreement during the year ended March 31, 2022.

Research and development expenses

Research and development expenses consist primarily of:

fees paid to external service providers such as clinical research organizations and contract manufacturing organizations related to clinical trials, including contractual obligations for clinical development, clinical sites, manufacturing and scale-up, and formulation of clinical drug supplies;

fees paid to contract service providers related to drug discovery efforts including chemistry and biology services;

patent-related services;

salaries and related expenses for personnel, including expense related to stock options.

We record research and development expenses as incurred.

Our research and development during the year ended March 31, 2022 was focused primarily on our clinical development programs GTX 104, GTX 102, and GTX 101 drug candidates, which were acquired in the Grace merger on August 27, 2021.

Research and development expenses during the year ended March 31, 2021, related to the completion of our TRILOGY Phase 3 clinical program for CaPre.

The following table summarizes our research and development expenses:

Research and development expenses

Increase (Decrease)

Third-party contract research expenses:

Clinical development programs:

Other third-party contract research expenses

Professional fees

Other research and development costs

Government grants & tax credits

Total third-party research and development expenses 1

Salaries and benefits

Stock-based compensation

Depreciation and amortization

1 Total third-party research and development expenses is calculated before salaries, depreciation, amortization and stock-based compensation.

Because there is no standard method endorsed by GAAP, the results may not be comparable to similar measurements presented by other public companies.

Total third-party research and development expenses before salaries and benefits, depreciation, amortization and stock-based compensation expenses for the year ended March 31, 2022, totalled $3,095 compared to $1,445 for the year ended March 31, 2021.

This resulted in an increase $1,650 related mostly to the initiation of clinical development programs GTX 104, GTX 102 and GTX 101, which we acquired through the merger with Grace.

Third-party contract research expenses related to GTX 104 amounted to $1,796 from the date our acquisition of Grace as our PK bridging study was initiated and progressed.

Third party contract research expenses of $61 related to GTX 102 are a related to the progression of CMC phase 1 work.

Third party contract research expenses of $538 related to GTX 101 were mostly related to non-clinical studies and CMC non-clinical work.

The program related increases for GTX 104, GTX 102 and GTX 101 were offset by a decrease of $193, related to other third-party contract research expenses.

These expenses related to non-clinical outside services and IP legal costs to support and maintain our patents for our three clinical programs GTX 104, GTX 102 and GTX 101 drug candidates.

Other third-party contract research expenses for the year end March 31, 2021, related to expenses incurred through the completion and termination of the TRILOGY phase 3 clinical program.

The increase of third party-contract research expenses of were offset by a decrease of $150 of professional fees and an increase of $450 in tax research credits.

Salaries and benefits increased by $558 to $2,017 for the year ended March 31, 2022, from $1,459 for the year ended March 31, 2021.

The increase is related to additional R&D headcount since the date of the Grace merger, as well as the renewal of our employee incentive bonus program.

Government tax credits increased by $450 due to the increased government credit eligible research activities related to our clinical programs GTX 104, GTX 102 and GTX 101.

General and administrative expenses

General and administrative expenses consisted primarily of salaries and related benefits, including share-based compensation, related to our executive, finance, legal, and support functions.

Other general and administrative expenses include professional fees for auditing, tax, consulting, rent and utilities and insurance.

General and administrative expenses

Increase (Decrease)

Salaries and benefits

Professional fees

General and administrative expense before stock-based compensation and depreciation 1

Stock-based compensation

1 General and administrative sub-total expenses is calculated before stock-based compensation and depreciation.

Because there is no standard method endorsed by GAAP, the results may not be comparable to similar measurements presented by other public companies.

General and administrative expenses totalled $8,421 before stock-based compensation and depreciation expense for the year ended March 31, 2022, and increased by $3,736 from $4,685 for the year ended March 31, 2021.

This increase was a result of increased legal, tax, accounting and other professional fees related to the Grace merger, and the renewal of our at-the-market program.

In addition, salaries and benefits increased by $424 due to the accruals related to the renewal of our employee incentive bonus program.

Sales and marketing

Sales and marketing expenses consist primarily of salaries and related benefits, including share-based compensation, related to our commercial functions.

Sales and marketing expenses

Increase (Decrease)

Salaries and benefits

Professional fees

Sales and Marketing expenses before stock-based compensation 1

Stock-based compensation

1 Sales and marketing sub-total expenses is calculated before stock-based compensation.

Because there is no standard method endorsed by GAAP, the results may not be comparable to similar measurements presented by other public companies.

Sales and marketing expenses before stock-based compensation expense were $470 for the year ended March 31, 2022, compared to $1,149 for the year ended March 31, 2021.

The decrease of $679 was mostly due to a reduction in salaries of $779 due to a reduction in headcount associated with the CaPre program.

Aggregate stock-based compensation expense decreased by $163 to $1,337, for the year ended March 31, 2022, as compared to $1,174 for the year ended March 31, 2021.

This increase was due to the timing of the stock options granted during the year ended March 31, 2022 and year ended March 31, 2021.

Aggregate depreciation and amortization expense decreased by $924 for the year ended March 31, 2022, to nil as compared to $924 for the year ended March 31, 2021.

This decrease was due to the impact of equipment being classified as held for resale during the year ended March 31, 2021 and no subsequent additional depreciation being 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 (all amounts in the table below give effect to the 1-for-8 share consolidation we completed on August 31, 2021):

Class A shares, voting, participating and without par value

Stock options granted and outstanding

May 2018 Canadian public offering of warrants exercisable at CAD$10.48 until May 9, 2023

December 2017 U.S.

public offering of warrants exercisable at US$10.08 until December 19, 2022

December 2017 U.S.

public offering broker warrants exercisable at US$10.10 until December 27, 2022

February 2017 Canadian public offering of warrants exercisable at CAD$17.20 until February 21, 2022

Total fully diluted shares

Cash Flows and Financial Condition between the years ended March 31, 2022 and March 31, 2021

As at March 31, 2022, cash and cash equivalents totalled $30,339, a net decrease of $20,603 compared to cash and cash equivalents totalling $50,942 at March 31, 2021.

During the year ended March 31, 2021, we received net proceeds of approximately $59.3 million from our at the market (ATM) program.

During the year ended March 31, 2022, we did not have financing activities and used existing cash balances for operations purposes.

Operating activities

During the years ended March 31, 2022 and 2021, our operating activities used cash of $17,234 and $14,319 respectively.

Investing activities

During the years ended March 31, 2022 and 2021, we used cash of $3,522 and $9,858 respectively due primarily to the acquisition of investments offset by the maturity of investments.

Financing activities

During the year ended March 31, 2022, our financing activities provided cash totalling nil, compared to cash generated of $59,490 due to proceeds from the sale of shares under our ATM, program.

On June 29, 2020, we entered into an amended and restated sales agreement (the “Sales Agreement”) with B.

Riley FBR, Inc., Oppenheimer & Co.

Wainwright & Co., LLC (collectively, the “Agents”) to amend our ATM program.

Under the terms of the Sales Agreement, which has a three-year term, we 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 our instructions.

We have no obligation to sell any of the common shares and may at any time suspend sales under the Sales Agreement.

We and the Agents may terminate the Sales Agreement in accordance with its terms.

Under the terms of the Sales Agreement, we have 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.

On November 10, 2021, we filed a prospectus supplement relating to our ATM program to restore available capacity to $75,000,000.

The common shares sold under the ATM will be distributed at market prices prevailing at the time of the sale and, as a result, prices may vary between purchasers and during the period of distribution.

The volume and timing of sales under the ATM program, if any, will be determined at the sole discretion of our board of directors and management.

During the year ended March 31, 2022, no common shares were sold under the ATM program.

During the year ended March 31, 2021, 14.7 million common shares were sold for total net proceeds of approximately $59.3 million with related commissions, legal expenses and costs amounting to $2 million.

The common shares were sold at the prevailing market prices, which resulted in an average price of $4.16 per share.

Accordingly, proportional costs of $18 related to the common shares sold have been reclassified from deferred financings costs to equity.

Total costs incurred relating to the ATM were initially recorded as deferred financing costs in the consolidated balance sheet.

During the year ended March 31, 2021, the remaining balance of the costs incurred of $264 were written off to financing expenses.

Financial Position

The following table details the significant changes to the statements of financial position as at March 31, 2022, compared to the prior fiscal year end at March 31, 2021:

Cash and cash equivalents

See cash flow statement

Increase in cash available to invest

Timing of reimbursement of sales taxes

Assets held for sale

Impairment of RKO and Foreign exchange

Prepaid expenses

Renewal of insurance contract and other prepaid expenses (advances to US vendors) offset by impairment of prepaid RKO

Right of use asset

Adjustment to the net present value of lease contract for Sherbrooke

Intangible assets

Related to acquisition of Grace (IPR&D)

Related to acquisition of Grace

Trade and other payables

Timing of payments net of accruals

Lease liability

Future obligations offset by payment of lease liability

Derivative warrant liabilities

Change in fair value of derivative warrants

Deferred tax liability

Related to acquisition of Grace

See the statement of changes in equity in our financial statements for details of changes to the equity accounts since March 31, 2021.

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 Canadian 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 Canadian dollars as appropriate to fulfil operational requirements and funding.

Acquisition of Grace

On August 27, 2021, we completed the acquisition of Grace Therapeutics.

In connection with the share-for-share noncash transaction, Grace was merged with a new wholly owned subsidiary of Acasti and became a wholly owned subsidiary of Acasti.

Grace was subsequently renamed Acasti Pharma US Inc.

As a result of the merger, we acquired 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.

Under the terms of the merger, each issued and outstanding share of Grace common stock was automatically converted into the right to receive Acasti common shares equal to the equity exchange ratio set forth in the merger agreement.

Consideration for Acquisition

A total of 18,241,233 common shares of Acasti were issued to Grace stockholders as consideration for the acquisition.

Total common shares issued

Acasti share price (closing share price on August 27, 2021)

Fair value of common shares issued

Our acquisition of Grace has been accounted for as a business combination using the acquisition method of accounting.

This acquisition method requires, among other things, that assets acquired, and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

The valuation of assets acquired, and liabilities assumed was finalized during the fourth quarter of the year ended March 31, 2022.

Measurement period adjustments to the preliminary purchase price allocation during 2022 included (i) an increase to intangible assets of $4,602;

(ii) an increase to Goodwill of $12,964;

(iii) an increase to deferred tax liability of $17,536;

and (iv) other individually insignificant adjustments to identifiable net assets of $30.

The adjustments primarily resulted from the completion of the valuation of the intangible assets based on facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date.

The following table summarizes the final fair value of assets acquired and liabilities assumed as of the acquisition date:

Assets acquired and liabilities assumed

Cash and equivalents

Prepaid expenses and other current assets

Intangible assets –

in-process research and development

Accounts payable and accrued expenses

Deferred tax liability

Total assets acquired and liabilities assumed

Intangible assets of $69,810 relate to the value of in-process research and development (“IPR&D”) related to Grace’s therapeutic pipeline, consisting of three unique clinical stage programs/assets.

The value of which has been attributed as follows:

Intangible assets –

in-process research and development

Goodwill of $12,964 was calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized.

Acquired In-Process Research and Development

In a business combination, the fair value of IPR&D acquired is capitalized and accounted for as indefinite-lived intangible assets, and not amortized until the underlying project receives regulatory approval, at which point the intangible assets will be accounted for as a definite-lived intangible assets or discontinued.

If discontinued, the intangible asset will be written off.

R&D costs incurred after the acquisition are expensed as incurred.

The estimated fair values of identifiable intangible assets were determined using the multi-period excess earnings method, which is a valuation methodology that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows that an asset would generate over its remaining useful life.

The significant assumptions used in the valuation are the discount rate, the probability of clinical success of research and development programs, obtaining regulatory approval and forecasted net sales.

Goodwill and indefinite-lived assets are not amortized but are subject to an impairment review annually and more frequently when indicators of impairment exist.

An impairment of goodwill could occur if the carrying amount of a reporting unit exceeds the fair value of that reporting unit.

An impairment of indefinite-lived intangible assets would occur if the fair value of the intangible asset is less than the carrying value.

Acquisition-related expenses, which were comprised primarily of regulatory, financial advisory and legal fees, totalled $3.2 million for the year ended March 31, 2022, and were included in general and administrative expenses in the condensed consolidated interim statements of earnings.

The net loss attributed to Grace in the consolidated statement of loss for the year ended March 31, 2022, since the date of acquisition is immaterial.

Pro Forma Financial Information

The following table presents the unaudited pro forma combined results of operations of Acasti and Grace for the year ended March 31, 2022, as if the acquisition of Grace had occurred on April 1, 2020:

Year ended March 31, 2022

Assets Held for Sale

We determined to actively market for sale Other assets and Equipment and have met the criteria for classification of assets held for sale:

March 31, 2022

March 31, 2021

Other assets (a)

Equipment (b)

Other assets represent krill oil (RKO) held by us that was expected to be used in the conduct of R&D activities and commercial inventory scale up related to the development and commercialization of our previous drug candidate, CaPre.

Given that the development of CaPre will no longer be pursued, we expect to sell this reserve.

The other asset is being recorded at the fair value less costs to sell, which has resulted in an impairment loss of $249 (2021- $413).

Management’s estimate of the fair value of the RKO less cost -to sell, is based primarily on estimated market prices obtained from an appraiser specialized in the krill oil market.

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.

The total impairment loss recognized, includes amounts paid for krill oil in advance, but not yet received and was recorded as a prepaid asset.

March 31, 2022

Cost, net of impairment

Furniture and office equipment

Computer equipment

Laboratory equipment

Production equipment

March 31, 2021

Furniture and office equipment

Computer equipment

Laboratory equipment

Production equipment

For the year ended March 31, 2021, depreciation expense was $143 and was included in research and development expenses.

Equipment is made up of laboratory, production, computer and office equipment that was utilized in the development of CaPre.

Given that the development of CaPre will no longer be pursued by the Corporation, it is expected to sell this equipment.

Similar, to how the intangible assets are treated, the announcement of the outcomes of the TRILOGY 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 the management’s best estimate of market participants’

pricing of the assets as well as the general condition of the assets.

Derivative Warrant Liabilities

A total of 1,369,937 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 March 31, 2022, the derivative warrant liability for the remaining 824,218 warrants totalled $10, which represents the fair value of these warrants as at March 31, 2022.

The weighted average fair value of the warrants issued in the May 2018 public offering in Canada was determined to be CAD $3.10 per warrant at inception and approximately CAD $0.02 (US $0.01) per warrant as at March 31, 2022.

On December 27, 2017, 1,225,366 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 March 31, 2022, the derivative warrant liability for the remaining 884,120warrants totalled nil, which represents the fair value of these warrants as at March 31, 2022.

The weighted average fair value of the December 2017 warrants issued was determined to be CAD $4.77 per warrant at inception and approximately nil per warrant as at March 31, 2022.

The variance in the fair value of both existing derivative warrant liabilities as at March 31, 2022, is mostly due to the fluctuations in our share price and the dilution factor.

During the year ended March 31, 2022, no warrants were exercised.

Contractual Obligations and Commitments

As at March 31, 2022, our contractual liabilities totalled $3,461 of which $3,260 was due within 1 year, and $10 related to derivative warrant liabilities that are expected to be settled in common shares.

A summary of our contractual obligations at March 31, 2022, is as follows:

Contractual Obligations and commitments

Trade and other payables

Operating lease obligations

RKO supply agreement

Research and Development Contracts and Contract Research Organizations Agreements

We utilize contract manufacturing organizations, for the development and production of clinical materials and contract research organizations to perform services related to our clinical trials.

Pursuant to the agreements with these contract manufacturing organizations and contract research organizations, we have either the right to terminate the agreements without penalties or under certain penalty conditions.

As such, the amount of commitments is excluded from the above table.

On March 14, 2022, we renewed the lease agreement effective April 1, 2022 for our research and development and quality control laboratory facility located in Sherbrooke, Québec, resulting in a commitment of $556 over a 24 months base lease term and 48 months additional lease renewal term.

This is not reflected in table above as it is effective April 1, 2022.

On February 25, 2022, we renewed the lease agreement effective March 1, 2022, for our research and development and quality control laboratory facility located in North Brunswick, New Jersey, resulting in an obligation of $303 over a 36 months lease term.

As at March 31, 2022, the remaining balance of the obligation amounted to $326.

RKO Supply Agreement

On October 25, 2019, we signed a supply agreement with Aker Biomarine Antartic.

(“Aker”) to purchase raw krill oil product for a committed volume of commercial starting material for CaPre for a total fixed value of $3.1 million.

As at March 31, 2022, the remaining balance of the commitment with Aker amounts to $2.8 million.

As of March 31, 2022 the remaining balance of the krill oil product has not been made available for delivery by the supplier under the terms of the supply agreement, therefore no liability has been recorded.

Acasti no longer has any planned use for the raw krill oil product for its own operating purposes and therefore we would seek to sell the product upon receipt.

There is uncertainty whether we can recover value from the raw krill oil product and we expect we may incur a loss on this contract in the near term.

Off-Balance Sheet Arrangements

As of the date of this annual 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 our financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, and expenses.

Actual results may differ from these estimates.

Estimates are based on management’s best knowledge of current events and actions that management may undertake in the future.

Estimates and underlying assumptions are reviewed on an ongoing basis.

Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Estimates and assumptions include the measurement of derivative warrant liabilities, stock-based compensation, assets held for sale, acquisition of Grace valuation of intangibles and the RKO supply agreement.

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

Valuation of Intangible Assets

If discontinued, the intangible assets will be written off.

R&D costs incurred after the acquisition are expensed as incurred.

The estimated fair values of identifiable intangible assets were determined using the multi-period excess earnings method, which is a valuation methodology that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life.

The projected discounted cash flow models used to estimate the fair value of assets of our IPR&D reflect significant assumptions and are level 3 unobservable data regarding the estimates a market participant would make in order to evaluate a drug development asset, including the following:

Probability of clinical success of research and development and obtaining regulatory approval;

Forecasted net sales from up-front and milestone payments, royalties and product sales;

A discount rate reflecting our weighted average cost of capital and specific risk inherent in the underlying assets.

Based on our valuation assumptions described above, as at the date of acquisition, varying the discount rate would result in the following range in value attributable to each IPR&D intangible asset, related to Grace’s therapeutic pipeline, assuming that all other variables remain constant.

Discount assumption

19.2% (discount rate used in valuation)

The valuation of our acquired IPR&D has significant measurement uncertainty given the lack of historical data on which to base assumptions.

We engaged a third party valuation firm to assist us with the valuation of the IPR&D.

Assumptions are difficult to make accurately and were mainly derived from life science studies, industry data, and peer company information that our management believes represent appropriate comparable data.

Goodwill and indefinite-lived assets are not amortized but are subject to an impairment review annually and more frequently when indicators of impairment exist.

An impairment of goodwill could occur if the carrying amount of a reporting unit exceeds the fair value of that reporting unit.

An impairment of indefinite-lived intangible assets would occur if the fair value of the intangible asset is less than the carrying value.

We test goodwill for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value is less than its carrying amount.

If we conclude it is more likely than not that fair value of the reporting unit is less than its carrying amount, a quantitative impairment test is performed.

We test indefinite-lived intangible assets for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value is less than its carrying amount.

If we conclude it is more likely than not that the fair value is less than its carrying amount, a quantitative impairment test is performed.

There were no triggering events from the date of acquisition of Grace to the end of the year.

Our annual impairment test will be performed in the third quarter of the fiscal year.

Measurement of Assets Held for Sale and RKO Supply Agreement

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.

In addition, there is judgement and potential for loss regarding the recognition and measurement of our RKO supply agreement with Aker to purchase raw krill oil product for a committed volume of commercial starting material for CaPre for a total fixed value of $3.1 million, which is described in more detail in note 20(a) of our financial statements found elsewhere in this annual report.

Financial Instruments

Credit risk is the risk of a loss if a customer or counterparty to a financial asset fails to meet its contractual obligations.

We have credit risk relating to cash, cash equivalents and marketable securities, which we manage by dealing only with highly rated Canadian 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, for which no financial hedging is in place.

There is a financial risk related to the fluctuation in the value of the U.S.

dollar 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.

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 at the following dates:

Denominated in

Cash and cash equivalents

Trade and other payables

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

CAD$ per Euro

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:

Increase (decrease) in net loss

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 March 31, 2022 and March 31, 2021 was as follows:

Cash and cash equivalents

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

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

Quantitative and Qualitative Disclosure About Market Risk

Information relating to quantitative and qualitative disclosures about market risks is detailed in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

Financial Statements and Supplementary Data

See our consolidated financial statements beginning on page F-1 of this annual report on Form 10-K.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity