What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-29 compared with 2022-03-24 · 149 added, 101 removed, 496 unchanged (34% of the section changed)

11 unchanged sentences

We have audited the accompanying consolidated balance sheets of Milestone Pharmaceuticals Inc.

and its subsidiary (together, the “Company”) as of December 31, 2021 and 2020, and the related consolidated Statements of Loss, and shareholders’ equity for each of the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiary (together, the Company) as of December 31, 2022 and 2021, and the related consolidated statements of loss, shareholders’ equity and of cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

6 unchanged sentences

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

27 unchanged sentences

Total liabilities

Commitments and contingencies (Note 13)

Shareholders’ Equity

2 unchanged sentences

Additional paid-in capital

Cumulative translation adjustment

Accumulated deficit

5 unchanged sentences

(in thousands of US dollars, except share and per share data)

Year ended December 31,

Operating expenses

3 unchanged sentences

Interest income, net

Loss before income taxes

Income tax benefit

Net loss and comprehensive loss

Weighted average number of shares and pre-funded warrants outstanding, basic and diluted

9 unchanged sentences

Exercise of stock options

Private Placement

Share-based compensation

Pre-funded warrants - Private Placement

Public Offering

Issuance of common shares, net of issuance costs

Balance as of December 31, 2021

2 unchanged sentences

Exercise of stock options

Private Placement

Exercise of prefunded warrants, net of issuance costs

( 3,809,523 )

Share-based compensation

Issuance of common shares, net of issuance costs

Balance as of December 31, 2022

7 unchanged sentences

Depreciation of property and equipment

Accretion/Amortization of investment discount/premium

Share-based compensation expense

Loss on disposals of property and equipment

Changes in operating assets and liabilities:

6 unchanged sentences

Cash provided by (used in) investing activities

Acquisition of property and equipment

Acquisition of short-term investments

3 unchanged sentences

Proceeds from exercise of options

Net proceeds from issuance of common shares in a public offering, net of issuance cost

Net proceeds from issuance of pre-funded warrants in a public offering, net of issuance cost

Proceeds from issuance of pre-funded warrants, net of issuance cost

Proceeds from exercise of warrants

Issuance of common shares, net of issuance costs

Net Proceeds from issuance of pre-funded warrants in a private placement (note 6)

Cash provided by financing activities

24 unchanged sentences

● Estimate of the grant date fair value share options granted to employees, consultants and direct, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

The ongoing COVID-19 pandemic has had an impact on the Company’s business, operations and clinical development timelines.

The pandemic has resulted in many state, local and foreign governments implementing, and making adjustments to, various orders and restrictions in order to control the spread of the disease, which have impacted patient recruitment, enrollment and follow-up visits at clinical sites The Company will continue to evaluate the COVID-19 pandemic impact on the development timelines of its clinical programs.

Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment.

4 unchanged sentences

The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions while focusing on the development and commercialization of innovative cardiovascular medicines.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

d) Revenue Recognition

18 unchanged sentences

Licensing arrangements are analyzed to determine whether the promised goods or services, which often include licenses, research and development services and governance committee services, are distinct or whether they must be accounted for as part of a combined performance obligation.

If the license is considered not to be distinct, the license would then be combined with other promised goods

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

or services as a combined performance obligation.

If the license is considered not to be distinct, the license would then be combined with other promised goods or services as a combined performance obligation.

If the Company is involved in a governance committee, it assesses whether its involvement constitutes a separate performance obligation.

8 unchanged sentences

Milestone will include variable consideration, without constraint, in the transaction price to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.

11 unchanged sentences

Cash and cash equivalents consist of cash and highly liquid investments that are readily convertible into cash with original maturities of three months or less at acquisition date.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

f) Short-Term Investments

2 unchanged sentences

g) Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and investment securities classified as held to maturity.

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and investment securities classified as held to maturity.

The Company maintains deposits in financial institutions.

1 unchanged sentence

Additionally, the Company has adopted an investment policy that includes guidelines relative to credit quality, diversification of maturities and liquidity.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

h) Currency Risk

21 unchanged sentences

Prospectively, the Company will adjust the right-of-use assets for straight-line rent expense or any incentives received and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

The Company has elected not to recognize leases with an original term of one year or less on the balance sheet.

8 unchanged sentences

Share issuance costs applicable to the issuance of equity instruments are recorded as a reduction of the financing equity proceeds.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

m) Research and Development and Investment Tax Credits

17 unchanged sentences

The functional currency of the Company is the US dollar.

Accordingly, transactions denominated in currencies other than the functional currency are measured and recorded in the functional currency at the exchange rate in effect on the date of

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

the transactions.

Accordingly, transactions denominated in currencies other than the functional currency are measured and recorded in the functional currency at the exchange rate in effect on the date of the transactions.

At each consolidated balance sheet date, monetary assets and liabilities denominated in currencies other than the functional currency are remeasured using the exchange rate in effect at that date.

8 unchanged sentences

The Black-Scholes option pricing model used by the Company to calculate option values was developed to estimate fair value.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

The Company approved an employee share purchase plan in April 2019, which became effective on May 8, 2019 and is described in note 8.

4 unchanged sentences

r) Significant Risks and Uncertainties

The ongoing COVID-19 pandemic has had an impact on our business, operations and clinical development timelines.

The pandemic has resulted in many state, local and foreign governments implementing various orders and restrictions in order to control the spread of the disease which has impacted patient recruitment, enrollment and follow-up visits at clinical sites In light of the ongoing pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its business.

The Company anticipates that the COVID-19 pandemic will continue to have an impact on the development timelines for its clinical programs.

The extent to which the COVID-19 pandemic continues to impact its business, its clinical development and regulatory efforts, its corporate development objectives and the value of and market for its common shares will depend on future developments that remain highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, business closure requirements in the U.S., Europe and other countries, the timing and unpredictability of achieving widespread vaccination rates, the effectiveness of any vaccines against new variants, and the timing of the return of the global economy to pre-pandemic levels.

The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry, including, without limitation, risks and uncertainties associated with:

The Company is subject to challenges and risks specific to its business and its ability to execute on its strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry, including, without limitation, risks and uncertainties associated with:

obtaining regulatory approval of its product candidate;

4 unchanged sentences

and complying with applicable regulatory requirements.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

Further, the Company may be impacted by general economic, political, and market conditions, including deteriorating market conditions due to investor concerns regarding inflation and Russian hostilities in Ukraine and overall fluctuations in the financial markets in the U.S.

1 unchanged sentence

The Company has incurred operating losses and experienced negative operating cash flows since its inception and anticipates to continue to incur losses for at least the next several years.

As of December 31, 2021, the Company had cash and cash equivalents of $ 114.1 million and an accumulated deficit of $ 206.3 million.

The Company believes that its cash and cash equivalents as of December 31, 2021 are sufficient for the Company to fund planned operations for at least one year from the issuance date of these consolidated financial statements.

As of December 31, 2022, the Company had cash and cash equivalents and short-term investments of $ 64.5 million and an accumulated deficit of $ 266.3 million.

The Company believes that its cash and cash equivalents as of December 31, 2022, in addition to the financing agreement (see Note 16) signed on March 27, 2023, which provides $ 50 million of cash, are sufficient for the Company to fund planned operations for at least one year from the issuance date of these consolidated financial statements.

The Company has historically financed its operations primarily through the sale of equity securities and, to a lesser extent from cash received pursuant to its license agreement.

4 unchanged sentences

Failure to generate sufficient cash flows from operations, raise additional capital and reduce discretionary spending should additional capital not become available could have a material adverse effect on the Company’s ability to achieve its business objectives.

To date, the Company has not generated revenue from product sales.

During the year ended December 31, 2021, the Company recognized revenue of $ 15 million, in the form of a non-refundable upfront cash payment in connection with the License Agreement.

On May 15, 2021, the Company entered into the License Agreement with Ji Xing, which is an entity affiliated with RTW Investments, LP, (RTW) a beneficial owner of approximately 14 % of the Company’s common shares.

To date, the Company generated revenue of $ 5.0 million and $ 15.0 million for the year ended December 31, 2022 and December 31, 2021, respectively.

This revenue is from the license agreement with Ji Xing and is comprised of upfront and milestone payments.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

Strategic Partnerships

On May 15, 2021, the Company entered into the License Agreement with Ji Xing, which is an entity affiliated with RTW Investments, LP, or RTW, a beneficial owner of approximately 13 % of the Company’s common shares, as of December 31, 2022.

Under the License Agreement, the Company granted Ji Xing exclusive development and commercialization rights to any pharmaceutical product that uses a device to deliver the Company’s proprietary calcium channel blocker known as etripamil by nasal spray for all prophylactic and therapeutic uses in humans in the following territories:

1 unchanged sentence

Ji Xing will be responsible for development and regulatory activities in the Territory, and the Company will remain responsible for certain manufacturing activities in the Territory, subject to the supply agreement subsequently entered into by the Company and Ji Xing as contemplated by the License Agreement (the Supply Agreement).

The Company received a non-refundable upfront cash payment of $ 15 million (see note 3) and the right to future payments of up to $ 107.5 million in total development and sales milestone payments.

The Company received a non-refundable upfront cash payment of $ 15 million and the right to future payments of up to $ 107.5 million in total development and sales milestone payments.

In addition, the Company is entitled to receive tiered royalty payments ranging from a percentage in the low double digits to the high double digits of Net Sales (as defined in the License Agreement) of all products sold in the Territory.

Strategic Partnerships

Pursuant to the License Agreement, the Company granted Ji Xing exclusive development and commercialization rights to any pharmaceutical product that uses a device to deliver the Company’s proprietary calcium channel blocker known as etripamil by nasal spray for all prophylactic and therapeutic uses in humans in the Territory.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

The Company received a non-refundable upfront cash payment consisting of $ 15 million, and the right to receive up to $ 107.5 million in future milestone payments and royalties on any sales of etripamil in the Territory.

The Company received $ 5 million in milestone payments during the year ended December 31, 2022.

These milestone payments were reached as a result of the successful completion of our Phase 3 clinical trial in the U.S.

for the treatment of PSVT and the initiation of a Phase 3 clinical trial for etripamil in mainland China.

Management evaluated all of the promised goods or services within the contract and determined that such goods and services were separate performance obligations.

9 unchanged sentences

The Company will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved, or other changes in circumstances occur, adjust its estimate of the transaction price if necessary.

For the year ended December 31, 2021, the Company has recognized the non-refundable upfront payment as collaboration revenue, for the reasons described in the preceding paragraph.

For the year ended December 31, 2022, the Company has recognized the $ 5 million of the $ 107.5 million in future milestone payments as revenue, for the reasons described in the preceding paragraph.

Concurrent with the License Agreement, Ji Xing acquired $ 5 million of pre-funded warrants (see note 8).

2 unchanged sentences

See note 8 for additional details.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

For any future subsequent purchases of product pursuant to the Supply Agreement, each order will be accounted for as a separate purchase and the order price will be allocated to the products based on the standalone selling price of the products.

3 unchanged sentences

The technology transfer was completed on June 22, 2021, and the $ 15 million was recognized at that point in time as revenue in the related statement of comprehensive loss.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

4 Short-term Investments

The Company had no short-term investments as at December 31, 2021.

For the year ended December 31, 2020, the short-term investments were comprised of term deposits issued in US currency, earning interest between 0.30 % and 0.86 %, maturing between January 29, 2021 and August 16, 2021.

For the year ended December 31, 2022, the short-term investments of $ 56.9 million were comprised of term deposits issued in US currency, earning interest between 3.14 % and 5.18 %, maturing between January 3, 2023 and May 2, 2023.

These short-term investments were in scope of ASC 320, Investments-Debt Securities.

The short-term investments maturity is greater than 90 days but less than one year, and they were classified as held to maturity, recorded as current assets and were accounted for at amortized cost.

On June 3, 2019, the Company entered into a new lease arrangement for a three-year term for its office located in Charlotte, NC.

The Company recognized the operating lease right-of-use asset and operating lease liabilities at the lease commencement date on September 10, 2019.

Interest income earned on short-term investments is reported in interest income, net.

The Company had no short-term investments for the year ended December 31, 2021.

On May 20, 2022, the Company entered into a new lease arrangement for a 62-month term for new office space located in Charlotte, NC.

The Company recognized the operating lease right-of-use asset and operating lease liabilities at the lease commencement date on August 1, 2022.

The interest rate implicit in lease contracts is not readily determinable and the Company does not have a public credit rating and carries no debt.

1 unchanged sentence

The Company’s examined credit ratings for similar companies, assumed equivalency between the Canadian and U.S.

markets for collateralized debt and used rates over the 36-month period.

markets for collateralized debt and used rates near the 62-month period.

This resulted in an incremental borrowing rate of 7.55 %.

Lease expenses are recognized on a straight-line basis over the lease term, which is accomplished by increasing the amortization of the right-of-use asset as interest expense on the lease liability declines over the lease term.

The company was not reasonably certain of renewing the lease following the initial term and recognized the right-of-use asset and operating lease liabilities over the 36-month period ending September 30, 2022.

On July 1, 2020, the Company entered into an arrangement for the lease renewal for its headquarters located in Ville Saint-Laurent, Quebec.

6 unchanged sentences

The Company is not reasonably certain of renewing the lease following the current renewal option and recognized the right-of-use asset and operating lease liabilities to November 30, 2025.

On June 3, 2019, the Company entered into a lease arrangement for a three-year term for its office located in Charlotte, NC.

The Company recognized the operating lease right-of-use asset and operating lease liabilities at the lease commencement date on September 10, 2019.

The interest rate implicit in lease contracts is not readily determinable and the Company does not have a public credit rating and carries no debt.

As such, several factors were considered in the determination of the Company’s incremental borrowing rate used in determining the present value of lease payments.

The Company’s examined credit ratings for similar companies, assumed equivalency between the Canadian and U.S.

markets for collateralized debt and used rates over the three-year period.

This resulted in an incremental borrowing rate of 8 %.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

recognized the right-of-use asset and operating lease liabilities over the three-year period ending September 30, 2022.

This lease was terminated as of September 30, 2022.

The Company's two operating office leases right-of-use assets as at December 31 were as follows:

Opening balance

Right-of-use adjustment renewal on July 1, 2020

New operating lease right-of-use asset

Amortization of right-of-use asset

1 unchanged sentence

Operating lease expenses of $ 490 and $ 314 are included in general and administrative operating expenses in the consolidated statement loss and comprehensive loss, and within operating activities in the statement of cash flows for the year ended December 31, 2022 and 2021, respectively and are comprised of two operating lease right-of-use assets and one operating lease of less than 12 months.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

The following table summarizes the future minimum lease payments of right-of-use assets operating lease as at December 31, 2022:

2 unchanged sentences

January 1, 2025 to December 31, 2025

January 1, 2025 to November 30, 2025

January 1, 2026 to December 31, 2026

January 1, 2027 to September 30, 2027

Less interest

6 unchanged sentences

Property and equipment, net

During the year ended December 31, 2021 and December 31, 2020, the Company did not record any write off.

For the year ended December 31, 2021 and 2020, amortization expense was $ 93 and $ 97 , respectively and was included in research and development expense.

During the year ended December 31, 2022, the Company recorded a disposal of $ 348 , which resulted in a loss of $ 141 .

No disposal was recorded for the year ended December 31, 2021.

For the year ended December 31, 2022 and 2021, depreciation expense was $ 89 and $ 93 , respectively and was included in research and development expense.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

7 Accounts payable and accrued liabilities

Accounts payable and accrued liabilities comprised the following as of December 31:

December 31, 2022

December 31, 2021

Trade accounts payable

6 unchanged sentences

As of December 31, 2022, there were 1,121,076 common shares available for issuance under the Employee Stock Purchase Plans and no common shares have been issued under such plan.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

In August 2022, the Company issued and sold 361,236 common shares under the Open Market Sale AgreementSM, or the Sales Agreement, with Jefferies LLC with respect to an at-the-market offering program, or the ATM Program, for proceeds of $ 2.6 million (net of issuance costs of $ 0.1 million).

Shelf Registration

5 unchanged sentences

The pre-funded warrants are classified and accounted for as equity.

On July 23, 2020, the Company entered into a securities purchase agreement to sell and issue in a private placement pre-funded warrants of 6,655,131 of the Company’s common shares, at a purchase price of $ 3.7465 per pre-funded warrant for aggregate net proceeds of $ 24.8 million (the Private Placement).

The Private Placement closed on July 24, 2020.

Each pre-funded warrant is exercisable for one of the Company’s common shares at an exercise price of $ 0.01 per share, has no expiration date, and is immediately exercisable, subject to certain beneficial ownership limitations.

The pre-funded warrants are classified and accounted for as equity.

Open Market Sale Agreement

4 unchanged sentences

The net proceeds to the Company from the Offering were $ 48.2 million.

The pre-funded warrants are classified and accounted for as equity.

In October 2022, 3,809,523 common shares of the pre-funded warrants were exercised at $ 0.01 per share.

The remaining pre-funded warrants are classified and accounted for as equity.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

Additional Paid-in Capital

3 unchanged sentences

Closing balance

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

9 Share Based Compensation

1 unchanged sentence

25 % vest and are exercisable on the one year anniversary of the grant date and one thirty-sixth (1/36 th ) of the remaining options vest and are exercisable each month thereafter, such that options are vested in full on four-year anniversary of the grant date.

On November 10th, 2021, the Company established an 2021 Inducement Plan under Nasdaq Marketplace Rules through the granting of awards.

On November 10, 2021, the Company established an 2021 Inducement Plan under Nasdaq Marketplace Rules through the granting of awards.

This 2021 Inducement Plan is intended to help the Company provide an inducement material for certain individuals to enter into employment with the Company, incentives for such persons to exert maximum efforts for the success of the Company and provide a means by which employees may benefit from increases in value of the common shares.

There were no options granted under the 2021 Inducement Plan for the year ended December 31 2021.

On January 1, 2021, the number of the Company’s common shares reserved for issuance under the 2019 Plan increased by 1,193,119 common shares.

There were 523,000 granted and 20,000 options cancelled for the year ended December 31, 2022.

As of December 31, 2022, there were 1,000,000 shares available for issuance under the 2021 Inducement Plan, of which 497,000 shares were available for future grants.

On January 1, 2022 and on July 5, 2022, the number of the Company’s common shares reserved for issuance under the 2019 Plan increased by 1,195,902 and 1,000,000 common shares, respectively.

In addition, 125,323 options have been forfeited under the 2011 Plan after adoption of the 2019 Plan and became available for issuance under the 2019 Plan.

As of December 31, 2022, there were 6,811,506 shares available for issuance under the 2019 Plan, of which 1,433,105 shares were available for future grants.

The total outstanding and exercisable options from the 2011 Plan and 2019 Plan as of December 31 were as follows:

On July 15, 2022, the Company offered an Employee Share Purchase Plan, or ESPP, in which participation is available to substantially all of our employees in the United States and Canada who meet certain service eligibility requirements.

As of December 31, 2022, the Company has 1,121,076 common shares available under the ESPP with no common shares issued under this plan.

Milestone Pharmaceuticals Inc.

Notes to Consolidated Financial Statements

(in thousands of US dollars, except share and per share data)

The total outstanding and exercisable options from the 2011 Plan, 2019 Plan and Inducement Plan as of December 31 were as follows:

Inducement Plan

Outstanding at beginning of year - 2011 Plan

1 unchanged sentence

Granted - 2019 Plan

Granted - Inducement Plan

Exercised - 2019 Plan

Exercised - 2011 Plan

Forfeited - Inducement Plan

Forfeited - 2019 Plan

Forfeited - 2011 Plan

Cancelled - 2011 Plan

Cancelled - 2019 Plan

Expired - 2011 Plan

3 unchanged sentences

Exercisable at end of period - Weighted average exercise price

Inducement Plan

Outstanding at beginning of year - 2011 Plan

Outstanding at beginning of year - 2019 Plan

Granted - 2019 Plan

Exercised - 2019 Plan

Exercised - 2011 Plan

Forfeited - 2019 Plan

Forfeited - 2011 Plan

Expired - 2011 Plan

Outstanding at end of period

Outstanding at end of period - Weighted average exercise price

Exercisable at end of period

Exercisable at end of period - Weighted average exercise price

The weighted average remaining contractual life was 7.47 and 7.81 years for outstanding options as of December 31, 2022 and 2021, respectively.

The weighted average remaining contractual life was 6.37 and 6.80 years for vested options, as of December 31, 2022 and 2021, respectively.

There was $ 15.7 million and $ 15.3 million total unrecognized compensation cost related to non-vested share options as of December 31, 2022 and 2021, respectively.

The share options are expected to be recognized over a remaining weighted average vesting period of 2.36 years and 2.42 years as of December 31, 2022 and 2021, respectively.

Milestone Pharmaceuticals Inc.

1 unchanged sentence

(in thousands of US dollars, except share and per share data)

There was $ 15,324 and $ 13,012 total unrecognized compensation cost related to non-vested share options as of December 31, 2021 and 2020, respectively.

The share options are expected to be recognized over a remaining weighted average vesting period of 2.42 years and 2.67 years as of December 31, 2021 and 2020, respectively.

The non-vested options as of December 31 were as follows:

Inducement Plan

Non-vested share options at beginning of year - 2011 Plan

1 unchanged sentence

Granted - 2019 Plan

Granted - Inducement Plan

Vested, outstanding 2011 Plan

Vested, outstanding 2019 Plan

( 1,376,791 )

Forfeited - 2011 Plan

Expired - 2019

Forfeited - Inducement Plan

Forfeited - 2019 Plan

1 unchanged sentence

Non-vested share options at end of period - Weighted average fair value

Inducement Plan

Non-vested share options at beginning of year - 2011 Plan

Non-vested share options at beginning of year - 2019 Plan

Granted - 2019 Plan

Vested, outstanding 2011 Plan

Forfeited - 2011 Plan

Forfeited - 2019 Plan

Vested, outstanding 2019 Plan

Non-vested share options at end of period

Non-vested share options at end of period - Weighted average fair value

Options granted are valued using the Black-Scholes option pricing model.

10 unchanged sentences

$ 8.51 -$ 15.50

The intrinsic value of all outstanding options as of December 31, 2021 was $ 11.7 million, based on the fair value of our common shares of $ 6.55 per share at December 31, 2021, of which $ 9.8 million related to vested options and $ 1.9 million related to unvested options.

$ 15.51 -$ 20.50

$ 20.51 -$ 22.45

Milestone Pharmaceuticals Inc.

1 unchanged sentence

(in thousands of US dollars, except share and per share data)

The intrinsic value of all outstanding options as of December 31, 2022 was $ 3.8 million, based on the fair value of our common shares of $ 3.96 per share at December 31, 2022.

The fair value of share-based payment transaction is measured using Black-Scholes valuation model.

32 unchanged sentences

Share issue costs

Accretion of investments

Tax benefits of current period losses and other tax assets

2 unchanged sentences

The Company has incurred Canadian federal and provincial net operating losses (NOLs) from inception.

As of December 31, 2021, the Company has NOL carry-forwards of approximately $ 149,012 and $ 146,652 , respectively, for Canadian federal and Québec purposes, available to reduce future taxable income, which expire beginning in 2027 through 2041.

The Company also has scientific research and experimental development expenditures of approximately $ 18,051 and $ 22,185 , respectively, for Canadian federal and Québec income tax purposes, which have not been deducted.

As of December 31, 2022, the Company has NOL carry-forwards of approximately $ 184.3 million and $ 181.4 million, respectively, for Canadian federal and Québec purposes, available to reduce future taxable income, which expire beginning in 2026 through 2042.

The Company also has scientific research and experimental development expenditures of approximately $ 21.9 million and $ 26.5 million, respectively, for Canadian federal and Québec income tax purposes, which have not been deducted.

These expenditures are available to reduce future taxable income and have an unlimited carry-forward period.

2 unchanged sentences

tax purposes.

As of December 31, 2021, the Company has carry-forwards of approximately $ 26,347 related to U.S.

As of December 31, 2022, the Company has carry-forwards of approximately $ 38.1 million related to U.S.

NOLs that may be carried forward indefinitely and are available to reduce future taxable income.

48 unchanged sentences

Valuations based on unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.

The Company’s fair value hierarchy for all its financial assets (by major security type measured at fair value on a recurring basis) for the year ended December 31, 2021 is nil , as there was no financial instruments measured at fair value on a recurring basis as of that date.

For the year ended December 31, 2020, the Company held a Guaranteed investment certificate at Level 1 with a fair value of $ 70 million.

For the years ending December 31, 2022 and December 31, 2021, the Company’s fair value hierarchy for all its financial assets was $ 0 , as there were no financial instruments measured at fair value on a recurring basis as of that date.

16 Subsequent Events

On March 22, 2023, we entered into an exchange agreement, or the Exchange Agreement, with entities affiliated with RTW, or the Exchanging Stockholders, pursuant to which the Company exchanged an aggregate of 1,059,000 shares of the Company’s common shares owned by the Exchanging Stockholders for pre-funded warrants, or the Exchange Warrants, to purchase an aggregate of 1,059,000 common shares, with an exercise price of $ 0.001 per share and no expiration date.

The Exchange Warrants are exercisable immediately.

A holder of the Exchange Warrants (together with its affiliates and other attribution parties) may not exercise any portion of an Exchange Warrant to the extent that immediately prior to or after giving effect to such exercise the holder would beneficially own more than 9.99 % of the Company’s outstanding common shares immediately after exercise, which percentage may be increased or decreased to any other percentage specified not in excess of 9.99 % at the holder's election upon 61 days ’ notice to the Company subject to the terms of the Exchange Warrants.

On March 27, 2023, the Company entered into certain strategic financing agreements (the “Strategic Financing Agreements”) with affiliates of RTW, an existing shareholder, and certain of its affiliates, which will provide up to $ 125 million in funding to support the development and potential commercial launch of etripamil.

Pursuant to the Strategic Financing Agreements, the Company will receive $ 50 million in exchange for Senior Secured Convertible Notes carrying a 6.0 % coupon and having a six-year maturity.

Additionally, upon satisfactory FDA approval of etripamil to treat PSVT in adults with expected contradictions, and subject to other customary closing conditions, we will sell our right to receive certain payments on the net sales of products containing etripamil and any forms or formulations of etripamil in the United States of America in exchange for $ 75 million.

Under the Strategic Financing Agreements, RTW will be entitled to receive tiered future payments, based on annual aggregate net sales, as follows:

7 % up to $ 500 million;

4 % greater than $ 500 million and up to $ 800 million;

and 1 % above $ 800 million.

RTW is eligible to receive an additional 2.5 % for annual aggregate net sales up to $ 500 million if etripamil does not meet certain annual sales thresholds.

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 8. Financial Statements and Supplementary Data