Item 7.
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 on Form 10-K. This Annual Report on Form 10-K contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. You should review our Special Note Regarding Forward-Looking Statements presented at the beginning of this Annual Report on Form 10-K. 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 on Form 10-K. 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 on Form 10-K. We undertake no obligation to update forward-looking statements which reflect events or circumstances occurring after the date of this Annual Report on Form 10-K, unless required by applicable securities laws.
Overview
This management’s discussion and analysis (“MD&A”) is presented in order to provide the reader with an overview of the financial results and changes to our financial position as of March 31, 2026 and for the year then ended. This MD&A explains the material variations in our operations, financial position and cash flows for the years ended March 31, 2026 and 2025.
Market data, and certain industry data and forecasts included in this MD&A were obtained from internal surveys and market research conducted by third parties hired by us, publicly available information, reports of governmental agencies and industry publications, and independent third-party surveys. We have relied upon industry publications as our primary sources for third-party industry data and forecasts. Industry surveys, publications and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of that information are not guaranteed. We have not independently verified any of the data from third-party sources or the underlying economic assumptions they have made. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based upon management or contracted third parties’ knowledge of our industry, have not been independently verified. Our estimates involve risks and uncertainties, including assumptions that may prove not to be accurate, and these estimates and certain industry data are subject to change based on various factors, including those discussed in this Annual Report on Form 10-K.
This MD&A should be read in conjunction with our consolidated financial statements for the years ended March 31, 2026 and 2025 included elsewhere in this Annual Report on Form 10-K.
Our annual financial statements, which include the accounts of our wholly owned subsidiary, have been prepared in accordance with U.S. GAAP and the rules and regulations of the SEC related to reports filed in Form 10-K. All intercompany transactions and balances are eliminated on consolidation.
All amounts appearing in the 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.
Our assets as
of March 31, 2026 include cash and cash equivalents of $16,977 and intangible
assets and goodwill of $49,266. Our current liabilities were $2,146 as of March
31, 2026 and were comprised primarily of amounts due to or accrued for
creditors.
In February 2025, we completed a
private placement of Company securities with certain institutional and
accredited investors. Net proceeds were $13,705. Refer to Note 7, Stockholders’
Equity -2025 Private Placement, in the accompanying
consolidated financial statements elsewhere in this document for additional
information. We believe our existing cash and cash equivalents will be
sufficient to sustain planned operations through at least 12 months from the
issuance date of the consolidated financial statements included with this
Annual Report on Form 10-K.
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Results of Operations
Comparison of the years ended March 31, 2026 and 2025
The following table summarizes our results of operations for the years ended March 31, 2026 and 2025:
Year ended
$ $ $
(in thousands)
Operating expenses
Change in fair value of derivative warrant liabilities 900 3,218 (2,318 )
Interest and other income, net 685 711 (26 )
Foreign exchange loss (1 ) (17 ) (16 )
Net Loss
The net loss
of $7,793 or $0.47 loss per share for the year ended March 31, 2026, decreased
by $1,775 from the net loss of $9,568 or $0.79 loss per share for the year
ended March 31, 2025. The decrease in net loss was primarily due to a $2,318
decrease in change in fair value of derivative warrant liabilities, a $7,106
decrease in research and development expenses, and a $1,499 decrease in income
tax benefit, partially offset by a $1,504 increase in general and
administrative expenses.
Research and development expenses
Research and development
expenses consist primarily of:
●
fees paid to external service providers such as CROs and CMOs related to clinical trials, including contractual obligations for clinical development, clinical sites, manufacturing and scale-up, and formulation of clinical drug supplies; and
●
salaries and related expenses for research and development personnel, including expenses related to stock options.
We
record research and development expenses as incurred.
Our research and development during the years ended March 31, 2026 and 2025 were focused primarily on our clinical development program for our GTx-104 drug candidate.
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The following table summarizes our research and development expenses:
Research and development expenses
Year ended
$ $ $
(in thousands)
Total third-party research and development expenses1 938 8,486 (7,548 )
1Total third-party research and development expenses are calculated before salaries and benefits, depreciation, write-off of equipment and stock-based compensation.
Total research and development expenses for the year
ended March 31, 2026 were $2,405, compared to $9,511 for the year ended March
31, 2025. This decrease of $7,106 was primarily due to the decrease in research
activities for GTx-104 of $7,542 driven by the close-out of the GTx-104 pivotal
Phase 3 safety clinical trial during the first calendar quarter of 2026 offset
by a $436 increase in external consulting and data management costs incurred in
support of the NDA of GTx-104 which was submitted to the FDA in June 2025.
Salaries and benefits of $1,249 for the year ended March 31, 2026 increased by $440 compared to $809 for the year ended March 31, 2025. The increase was primarily due to salary and bonus increases of $350 as well as increased benefits costs of $55.
Stock-based compensation of $218 for the year ended March 31, 2026, increased by $2 compared to $216 for the year ended March 31, 2025.
General and administrative expenses
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, legal, and support functions, including professional fees for auditing, tax, legal, consulting, rent and utilities and insurance.
General and administrative expenses
Year ended
$ $ $
(in thousands)
Depreciation and loss on disposal 7 7 —
1 General and administrative sub-total expenses are calculated before stock-based compensation and depreciation.
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General and
administrative expenses were $8,672 for the year ended March 31, 2026, an
increase of $1,504 from $7,168 for the year ended March 31, 2025. The increase
was primarily driven by$799 in
non-recurring legal and due diligence costs incurred in connection with
strategic initiatives evaluated during the period, as well as increased professional
fees and other general and administrative costs of $890 primarily related to
pre-commercial planning for GTx-104, offset in part by a decrease in salaries
and benefits of $251 primarily a result of decreased headcount. Stock-based
compensation of $580 for the year ended March 31, 2026, decreased by $66
compared to $514 for the year ended March 31, 2025. The increase was primarily
due to more stock option awards granted during the year ended March 31, 2026.
Change in fair value of derivative warrant liabilities
The decrease in the fair value of derivative warrant
liabilities for the year ended March 31, 2026 of $2,318 was mainly attributable
to the settlement of the warrant liability as the 2023 Common Warrants (defined
below) expired on October 21, 2025, which was the 60th day after the
date of the acceptance by the FDA of the NDA for our product candidate GTx-104.
Interest income
Interest and other income, net was $685 for the year ended March 31, 2026, compared to $711 for the year ended March 31, 2025. The $26 decrease in our interest and other income was due to a decrease in interest rates.
Income tax benefit
Income tax
benefit was $1,700 for the year ended March 31, 2026, compared to $3,199 for
the year ended March 31, 2025, reflecting a decrease of $1,499. The decrease
primarily resulted from updated drug commercialization timelines, which reduced
the projected future tax liability and generated a corresponding income tax
benefit of the same amount.
Liquidity and Capital Resources
Cash flows and financial condition for the years ended March 31, 2026 and March 31, 2025
Summary
As of March 31, 2026, cash and cash equivalents were $16,977, a net decrease of $5,156 compared to cash and cash equivalents of $22,133 at March 31, 2025.
In February 2025, we completed a private placement of our securities with certain institutional and accredited investors. Net proceeds to us were $13,705. Refer to Note 7, Stockholders’ Equity -2025 Private Placement in the accompanying consolidated financial statements elsewhere in this document for additional information. We believe our existing cash and cash equivalents will be sufficient to sustain planned operations through at least 12 months from the issuance date of the consolidated financial statements included with this Annual Report on Form 10-K.
We will require additional capital to fund our daily operating needs beyond that time. We do not expect to generate revenue from product sales unless and until we successfully complete drug development and obtain regulatory approval, which is subject to significant uncertainty. To date, we have financed our operations primarily through public offerings and private placements of our common equity, warrants and convertible debt and the proceeds from research tax credits. Until such time that we can generate significant revenue from drug product sales, if ever, we will require additional financing, which is expected to be sourced from a combination of public or private equity or debt financing or other non-dilutive sources, including fees, milestone payments and royalties from collaborations with third parties. Arrangements with collaborators or others may require us to relinquish certain rights related to our technologies or drug product candidates. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategy. We plan to raise additional capital in order to maintain adequate liquidity. Negative results from studies or trials, if any, or depressed prices of our Common Stock could impact our ability to raise additional financing. Raising additional equity capital is subject to market conditions that are not within our control.
Net cash used in operating activities
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Net cash used
in operating activities for the year ended March 31, 2026 was $8,869, compared
to $14,904 for the year ended March 31, 2025, a decrease of $6,035. The
decrease in net cash used in operating activities was primarily due to a $7,106
decrease in research and development activities due to the completion of our
GTx-104 pivotal Phase 3 STRIVE-ON trial in the first fiscal quarter of 2026,
partially offset by a $1,504 increase in general and administrative expenses
for legal, consulting and other professional fees.
Net cash provided by investing activities
Net cash used in investing activities
for the year ended March 31, 2025, was $0 due to our purchase of short-term
investments of $15 and maturity of short-term investments of $15. There were no
investing activities for the year ended March 31, 2026.
Net cash provided by financing activities
Net cash
provided by financing activities for the year ended March 31, 2026 was $3,713,
compared to $14,032 for the year ended March 31, 2025, a decrease of $10,319.
The net cash provided by financing activities for the year ended March 31,
2026, was attributable to the $4,040 net proceeds received from the exercise of
the 2023 Common Warrants offset by payment of stock issuance costs $327 from
the 2023 Private Placement (defined below) which occurred in September 2023.
Net cash provided by financing activities of $14,032 for the year ended March
31, 2025, was primarily attributable to the $14,999 gross proceeds received
from the 2025 Private Placement (defined below) which occurred in February
2025, offset by stock issuance costs of $967.
2025 Private Placement
In February 2025, we agreed to offer
and sell in a private placement (the “2025 Private Placement”) an aggregate of
3,252,132 shares of Common Stock, at a purchase price of $3.395 per share of
Common Stock (the “2025 Private Placement Shares”), and pre-funded warrants to
purchase up to 1,166,160 shares of Common Stock, at a purchase price equal to
the purchase price per 2025 Private Placement Share less $0.0001 (the “2025
Pre-Funded Warrants”). Each 2025 Pre-Funded Warrant is exercisable for one
share of Common Stock at an exercise price of $0.0001 per share, is exercisable
immediately and will expire once exercised in full. For each 2025 Private
Placement Share and 2025 Pre-Funded Warrant issued, we agreed to issue to each
purchaser an accompanying warrant to purchase shares of Common Stock (or 2025
Pre-Funded Warrants in lieu thereof), exercisable for an aggregate of 4,418,292
shares of Common Stock (or 2025 Pre-Funded Warrants in lieu thereof) (the “2025
Common Warrants”). Each 2025 Common Warrant is exercisable for one share of
Common Stock at an exercise price of $3.395 per share, is immediately
exercisable and will expire on the earlier of (i) the 60th day after the date
the FDA approves the NDA for GTx-104 and (ii) September 25, 2028. The 2025
Private Placement closed on February 11, 2025. The net proceeds to us from the
2025 Private Placement were $13,705, after deducting fees and expenses.
2023 Private Placement
In September 2023, we entered into a
securities purchase agreement (the “Purchase Agreement”) with certain
institutional and accredited investors in connection with a private placement
offering of our securities (the “2023 Private Placement”). Pursuant to the
Purchase Agreement, we sold 1,951,371 Common Shares, at a purchase price of
$1.848 per Common Share and pre-funded warrants (the “2023 Pre-Funded
Warrants”) to purchase up to 2,106,853 Common Shares at a purchase price equal
to the purchase price per Common Share less $0.0001. Each 2023 Pre-Funded
Warrant is exercisable for one Common Share at an exercise price of $0.0001 per
Common Share, is immediately exercisable, and will expire once exercised in
full. Pursuant to the Purchase Agreement, we also issued to such institutional
and accredited investors common warrants (the “2023 Common Warrants”) to
purchase Common Shares, exercisable for an aggregate of 2,536,391 Common
Shares. Under the terms of the Purchase Agreement, for each Common Share and
each 2023 Pre-Funded Warrant issued in the 2023 Private Placement, an
accompanying five-eighths (0.625) of a Common Warrant was issued to the
purchaser thereof. Each whole Common Warrant was exercisable for one Common
Share at an exercise price of $3.003 per Common Share, was immediately
exercisable, and would expire on the earlier of (i) the 60th day after the date
of the acceptance by the FDA of an NDA for our product candidate GTx-104 and
(ii) five years from the date of issuance. The 2023 Private Placement closed on
September 25, 2023. The net proceeds to us from the 2023 Private Placement were
$7,338, after deducting fees and expenses. In October 2025, we received $4,040
in net proceeds from exercises of 1,345,464 2023 Common Warrants that were
issued in the 2023 Private Placement. for 1,345,464 shares of Common Stock. The
remaining 1,190,927 2023 Common Warrants issued in the 2023 Private Placement
expired on October 21, 2025, in accordance with their terms as the 60th day
after the FDA’s acceptance for review of our NDA for GTx-104 had passed.
Contractual Obligations and Commitments
Our contractual obligations and commitments primarily include trade payables, CMO and CRO agreements.
Research and development contracts and contract research organizations agreements
We utilize CMOs, for the development and production of clinical materials and CROs to perform services related to our clinical trials. Pursuant to the agreements with CMOs and CROs, we have either the right to terminate the agreements without penalties or under certain penalty conditions. As of March 31, 2026, we had $95 of commitments to CMOs and $28 of commitments to CROs for the next twelve months.
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Contingencies
We evaluate contingencies on an ongoing basis and establish loss provisions for matters in which losses are probable, and the amount of the loss can be reasonably estimated.
Use of Estimates and Measurement of Uncertainty
The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.
Estimates are based on management’s best knowledge of current events and actions that management may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Estimates and assumptions include the measurement of stock-based compensation, derivative warrant liabilities, accruals for research and development contracts and contract organization agreements, and valuation of intangibles and goodwill. Estimates and assumptions are also involved in 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.
While our significant accounting policies are described in the notes to our financial statements, we believe that the following critical accounting policies are most important for understanding and evaluating our reported financial results, as these policies relate to the more significant areas involving management’s judgments and estimates.
Critical Accounting Policies
Research and development costs
Research
and developments expenditures are expensed as incurred. These costs consist of
employees’ salaries and benefits related to research and development
activities, contractors and consultants that conduct our clinical trials,
laboratory material and small equipment, clinical trial materials, stock-based
compensation expense, and other non-clinical costs and regulatory fees. We
accrue research and development expenses based on work performed, which relies
on estimates of total costs incurred based on patient enrollment and completion
of patient studies, invoices received and contracted costs. Advance
payments for goods and services that will be used in future research and
development are recognized in prepaids or other assets and are expensed when
the services are performed, or the goods are used.
Valuation of Intangible Assets and Goodwill
In a business combination, the fair value of in-process research and development ("IPR&D") assets 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 definite-lived intangible assets or discontinued. If discontinued, the intangible assets will be written off. R&D costs incurred after the acquisition are expensed as incurred.
Our IPR&D and goodwill was $49,300
as of March 31, 2026, which represents 74% of total assets. 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.
The nature of the assumptions in the intangible assets’ impairment tests are considered critical due to a high level of subjectivity and judgment necessary to account for highly uncertain matters, and the impact of the assumptions on our financial condition and our operating performance could be material.
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. Events that could result in an impairment, or trigger an interim impairment assessment, include the decision to discontinue the development of a drug, the receipt of additional clinical or nonclinical data regarding our drug candidates or a potentially competitive drug candidates, changes in the clinical development program for a drug candidate, or new information regarding potential sales for the drug candidates and increases in our weighted average cost of capital.
Individual IPR&D projects and goodwill are tested for impairment on an annual basis in the fourth quarter, and in between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of each technology or our reporting unit below its carrying value. No impairment of the identified intangible assets was recognized for the years ended March 31, 2026 and 2025.
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Financial Instruments
Credit Risk
Financial instruments that potentially subject us to a concentration of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents are all invested in accordance with our investment policy with the primary objective being the preservation of capital and the maintenance of liquidity, which risk is managed by dealing only with highly rated U.S. and Canadian institutions. We maintain our cash and cash equivalents at accredited financial institutions in amounts that exceed federally insured limits. We do not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
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 of March 31, 2026, 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.
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.
We expect to incur significant expenses and continued operating losses for the foreseeable future. We expect our expenses will increase substantially in connection with our ongoing activities, particularly as we advance clinical development for our drug candidates in our pipeline; continue to engage contract manufacturing organizations to manufacture our clinical study materials and to ultimately develop large-scale manufacturing capabilities in preparation for commercial launch; seek regulatory approval for our drug candidates; and add personnel to support our drug product development and future drug product launch and commercialization.
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We believe our
existing cash and cash equivalents will be sufficient to sustain planned
operations through at least 12 months from the issuance date of the
consolidated financial statements included with this Annual Report on Form
10-K. We require additional capital to
fund our daily operating needs beyond that time. We plan to raise additional
capital prior to that time in order to maintain adequate liquidity. The
deficiencies identified in the CRL, negative results from studies, if any, and
depressed prices of our common stock could impact our ability to raise
additional financing. Raising additional equity capital is subject to market
conditions not within our control. If we do not raise additional funds in this
time period, we may not be able to realize our assets and discharge our
liabilities in the normal course of business.
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization and depletion) in commonly presented expense captions (such as cost of sales, SG&A and research and development).
ASU
2024-03 applies to all public business entities and is effective for annual
reporting periods beginning after December 15, 2026 and interim reporting
periods within annual reporting periods beginning after December 15, 2027. The
requirements will be applied prospectively with the option for retrospective
application. Early adoption is permitted. We are currently evaluating the
effect of adopting this new guidance on our consolidated financial statements
and disclosures.
We haveconsidered 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.
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Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide this information.
Item 8.
Financial Statements and Supplementary Data
See our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
As of the end of the period covered by
this Annual Report on Form 10-K, our management, with the participation of our
chief executive officer (“CEO”) and principal financial officer (“PFO”), has
performed an evaluation of the effectiveness of our disclosure controls and
procedures within the meaning of Rules 13a-15 (e) and 15d-15(e) of the Exchange
Act. Based upon this evaluation, our CEO and PFO concluded that, as of March
31, 2026, our existing disclosure controls and procedures were effective. It
should be noted that while the CEO and PFO believe that our disclosure controls
and procedures provide a reasonable level of assurance that they are effective,
they do not expect the disclosure controls and procedures to be capable of
preventing all errors and fraud. A control system, no matter how well conceived
or operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met.
Management’s Report on Internal Controls over Financial Reporting
Our management, with the participation of our CEO and PFO, is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of our consolidated financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management conducted an assessment of the design and operation effectiveness of our internal control over financial reporting as of March 31, 2026. In making this assessment, we used the criteria established within the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management has concluded that, as of March 31, 2026, our internal control over financial reporting was effective.
Changes in Internal Control over Financial Reporting
No changes were made to our internal controls over financial reporting that occurred during the fiscal quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
We are a non-accelerated filer under the Exchange Act and not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. Therefore, this Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding our management’s assessment of internal control over financial reporting.
Item 9B.
Other Information
(a) On June 17, 2026, following continued
evaluation of strategic priorities and focus on GTx-104, our Board of Directors
determined that we will not resume internal development funding for GTx-102 or
GTx-101 under our current operating plan. Accordingly, we determined that the remaining carrying values of the GTx-102 IPR&D asset
and the GTx-101 IPR&D asset are no longer recoverable on an
internal-development basis.
As of March 31, 2026, the remaining capitalized carrying
value of GTx-102 IPR&D was $9.2 million and the remaining capitalized
carrying value of GTx-101 IPR&D was $4.3 million. We expect to recognize an
impairment charge for the full remaining carrying values of the GTx-102
IPR&D asset and the GTx-101 IPR&D asset in the first quarter of fiscal
year 2027. The Company does not expect the impairment charges to result in
future cash expenditures.
(b) During the fiscal quarter ended
March 31, 2026, none of our directors or officers adopted or terminated a Rule
10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement, as each
term is defined in Item 408(a) of Regulation S-K.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
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PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Code of Conduct and Ethics
The Board has adopted a written Code of Conduct and Ethics (the “Code of Conduct”) within the meaning of Item 406(b) of Regulation S-K. This Code of Conduct applies to our directors, officers and employees. A current copy of the Code of Conduct is posted on the Governance Documents section of the Investors page of our website, which is located at www.gracetx.com. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any substantive amendment to, or waiver from, a provision of the Code of Conduct by posting such information on the website address and location specified above.
The additional information required by this Item will be set forth under the sections entitled “Information Regarding the Board of Directors and Corporate Governance” and “Executive Officers” in our 2026 Proxy Statement to be filed with the SEC within 120 days of March 31, 2026 and is incorporated by reference into this Annual Report on Form 10-K.
Item 11.
Executive Compensation
The information required by this Item will be set forth under the sections entitled “Executive Compensation” and “Director Compensation” in our 2026 Proxy Statement to be filed with the SEC within 120 days of March 31, 2026 and is incorporated by reference into this Annual Report on Form 10-K.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item will be set forth under the sections entitled “Securities Authorized for Issuance under Equity Compensation Plans” and “Security Ownership of Certain Beneficial Owners and Management” in our 2026 Proxy Statement to be filed with the SEC within 120 days of March 31, 2026 and is incorporated by reference into this Annual Report on Form 10-K.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will be set forth under the sections entitled “Transactions with Related Persons and Indemnification” and “Information Regarding the Board of Directors and Corporate Governance” in our 2026 Proxy Statement to be filed with the SEC within 120 days of March 31, 2026 and is incorporated by reference into this Annual Report on Form 10-K.
Item 14.
Principal Accountant Fees and Services
The information required by this Item will be set forth under the section entitled “Ratification of Appointment of Independent Registered Public Accounting Firm” in our 2026 Proxy Statement to be filed with the SEC within 120 days of March 31, 2026 and is incorporated by reference into this Annual Report on Form 10-K.
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PART IV
Item 15.
Exhibits and Financial Statement Schedules
(a)(1) Financial Statements—The consolidated financial statements included in Item 8 are filed as part of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedules—All schedules have been omitted because they are not applicable or required, or the information required to be set forth therein is included in the consolidated financial statements or notes thereto included in Item 8 of this Annual Report on Form 10-K.
(a)(3) Exhibits—The exhibits required by Item 601 of Regulation S-K are listed in paragraph (b) below.
(b) Exhibits—The exhibits listed on the Exhibit Index below are filed herewith or are incorporated by reference to exhibits previously filed with the SEC.
EXHIBITS INDEX
Exhibit No. Description
4.1* Form of Common Stock Certificate
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21.1* List of Subsidiary
23.1* Consent of KPMG LLP, an Independent Registered Public Accounting Firm
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101.INS* Inline XBRL Instance Document
101.SCH* Inline XBRL Taxonomy Extension Schema Document
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document
* Filed or furnished
herewith.
+ Management contract,
compensatory plan or arrangement.
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Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GRACE THERAPEUTICS, INC.
By: /s/ Prashant Kohli
Name: Prashant Kohli
Title: Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Prashant Kohli Chief Executive Officer and Director June 18, 2026
Prashant Kohli (Principal Executive Officer)
/s/ Robert DelAversano Principal Financial Officer June 18, 2026
/s/ Brian Davis Director June 18, 2026
Brian Davis
/s/ Vimal Kavuru Director June 18, 2026
Vimal Kavuru
/s/ Edward Neugeboren Director June 18, 2026
Edward Neugeboren
/s/ George Kottayil Director June 18, 2026
George Kottayil
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GRACE THERAPEUTICS, INC.
Consolidated Financial Statements
For the years ended March 31, 2026 and 2025
Consolidated Balance Sheets F-3
Consolidated Statements of Loss and Comprehensive Loss F-4
Consolidated Statements of Stockholders’ Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to the Consolidated Financial Statements F-7
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Grace Therapeutics, Inc.:
Opinion on theConsolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Grace Therapeutics, Inc. and subsidiary (the Company) as of March 31, 2026 and 2025, the related consolidated statements of loss and comprehensive loss, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, 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 March 31, 2026 and 2025, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-1
Going concern analysis
As discussed in Note 1 to the consolidated financial statements, the Company has incurred operating losses and negative cash flows from operations in each period since its inception. As of March 31, 2026, the Company had an accumulated deficit of $228.5 million. To date, the Company has financed its operations primarily through public offerings and private placements of its common equity, warrants and convertible debt and the proceeds from research tax credits. Until such time that the Company can generate significant revenue from drug product sales, if ever, it will require additional financing, which is expected to be sourced from a combination of public or private equity or debt financing or other non-dilutive sources. In April 2026, the Company received a Complete Response Letter (CRL) from the U.S. Food and Drug Administration (FDA) regarding its New Drug Application (NDA) for GTx-104 requiring remediation of specified deficiencies and resubmission of the NDA for regulatory approval. The Company believes its existing cash and cash equivalents will be sufficient to sustain planned operations, through at least one year from the issuance of the consolidated financial statements. The Company plans to raise additional capital in order to maintain adequate liquidity. Adequate additional financing may not be available to the Company on acceptable terms, or at all. The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and its ability to pursue its business strategy.
We identified the assessment of liquidity and the Company’s ability to continue as a going concern as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate the Company’s forecasted cash flows used in its liquidity analysis due to uncertainty in certain assumptions used to estimate the cash flows. Specifically, auditor judgment was required to evaluate management’s estimated expenses associated with its plans to remediate the FDA’s specified deficiencies and resubmit the NDA for regulatory approval.
The following are the primary procedures we performed to address this critical audit matter. We performed sensitivity analyses on estimated expenses by evaluating the impact of changes in forecasted cash flows on the Company’s going concern assessment. We compared the Company’s historical forecasted cash flows to actual results to assess the Company’s ability to accurately forecast. We evaluated management’s estimated expenses associated with its plans to remediate the FDA’s specified deficiencies and resubmit the NDA for regulatory approval by (1) conducting interviews with management to gain an understanding of the Company’s overall strategy and regulatory plans related to its remediation of deficiencies, (2) evaluating the consistency of information used in management’s analysis with management’s plans for expense and working capital management activities presented to the Board of Directors and other public information disseminated by the Company, and (3) comparing the information used in management’s analysis with evidence obtained in other areas of the audit to evaluate whether it supported or contradicted the conclusions reached by management.
/s/ KPMG LLP
We have served as the Company’s auditor since 2023.
Philadelphia, Pennsylvania
June 18, 2026
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GRACE THERAPEUTICS, INC.
(Formerly ACASTI PHARMA INC.)
Consolidated Balance Sheets
(Expressed in thousands except share data) $ $
Assets
Current assets:
Equipment, net 8 15
Liabilities and stockholders’ equity
Current liabilities:
Derivative warrant liabilities — 1,141
Commitments and contingencies (Note 12)
Stockholders’ equity:
Accumulated other comprehensive loss (6,038 ) (6,038 )
Total liabilities and stockholders’ equity 66,654 71,993
The accompanying notes are an integral part of these consolidated financial statements
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GRACE THERAPEUTICS, INC.
(Formerly ACASTI PHARMA INC.)
Consolidated Statements of Loss and Comprehensive Loss
(Expressed in thousands, except share and per share data) $ $
Operating expenses
Research and development expenses 2,405 9,511
General and administrative expenses 8,672 7,168
Foreign exchange loss (1 ) (17 )
Change in fair value of derivative warrant liabilities 900 3,218
Interest and other income, net 685 711
Loss before income tax benefit (9,493 ) (12,767 )
Net loss and total comprehensive loss (7,793 ) (9,568 )
Basic and diluted loss per share (0.47 ) (0.79 )
The accompanying notes are an integral part of these consolidated financial statements
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GRACE THERAPEUTICS, INC.
(Formerly ACASTI PHARMA INC.)
Consolidated Statements of Stockholders’ Equity
Common stock
$ $ $ $ $
Stock-based compensation — — 798 — — 798
Issuance of common stock upon exercise of pre-funded warrants 960,456 — — — — —
Common stock
$ $ $ $ $
Stock-based compensation — — 730 — — 730
Issuance of common stock upon exercise of common warrants 326,113 — — — — —
The accompanying notes are an integral part of these consolidated financial statements
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GRACE THERAPEUTICS, INC.
(Formerly ACASTI PHARMA INC.)
Consolidated Statements of Cash Flows
(Expressed in thousands) $ $
Cash flows from operating activities:
Adjustments:
Depreciation expense 7 7
Loss on disposal — 2
Stock-based compensation 798 730
Change in fair value of derivative warrant liabilities (900 ) (3,218 )
Deferred income tax benefit (1,700 ) (3,199 )
Changes in operating assets and liabilities:
Prepaid expenses 70 (170 )
Trade and other payables 543 (84 )
Net cash used in operating activities (8,869 ) (14,904 )
Cash flows from investing activities:
Maturity of short-term investments — 15
Purchase of short-term investments — (15 )
Net cash provided by investing activities — —
Cash flows from financing activities:
Stock issuance costs (327 ) (967 )
Proceeds from issuance of common stock from common warrant exercise 4,040 —
Net cash provided by financing activities 3,713 14,032
Net decrease in cash and cash equivalents (5,156 ) (872 )
Cash and cash equivalents, beginning of year 22,133 23,005
Cash and cash equivalents, end of year 16,977 22,133
Cash and cash equivalents are comprised of:
Supplemental schedule of non-cash financing activities are comprised of:
Issuance costs in accounts payable — 327
Settlement of derivative warrant liability 241 —
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GRACE THERAPEUTICS, INC.
(Formerly ACASTI PHARMA, INC.)
Notes to the Consolidated Financial Statements
(Expressed in thousands except share and per share data)
1. Nature of Operations
General
Grace Therapeutics, Inc. (formerly known as Acasti Pharma Inc.) (“Acasti Delaware” or “the Company”), is a Delaware corporation that, as further described below, previously existed under the laws of the Province of Québec, Canada (“Acasti Québec”), before changing its jurisdiction on October 1, 2024 to the Province of British Columbia, Canada (“Acasti British Columbia”). On October 7, 2024, Acasti British Columbia changed its jurisdiction to the State of Delaware. Effective October 28, 2024, the Company changed its corporate name to Grace Therapeutics, Inc.
Continuance and Domestication
On October 1, 2024, Acasti Québec changed its jurisdiction of incorporation from the Province of Québec in Canada to the Province of British Columbia in Canada pursuant to a “continuance” effected in accordance with Chapter XII of the Business Corporations Act (Québec) (the “Continuance”). Subsequently on October 7, 2024 (the “Effective Date”), Acasti British Columbia changed its jurisdiction of incorporation from the Province of British Columbia in Canada to the State of Delaware in the United States of America pursuant to a “continuance” effected in accordance with Section 308 of the Business Corporations Act (British Columbia) and a “domestication” (the “Domestication”) under Section 388 of the General Corporation Law of the State of Delaware. Both the Continuance and the Domestication were approved by the Company’s shareholders at the Company’s Annual and Special Meeting of Shareholders held on September 30, 2024.
Prior to the Continuance and Domestication, the Company’s Class A common shares, without par value per share (“Common Shares”), were listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “ACST.” Upon the effectiveness of the Continuance, each outstanding Class A common share of Acasti Québec at the time of the Continuance remained issued and outstanding as a common share, without par value per share, of Acasti British Columbia. Upon effectiveness of the Domestication, each outstanding common share of Acasti British Columbia at the time of the Domestication automatically became one outstanding share of common stock, par value $0.0001 per share, of Acasti Delaware (“Common Stock”). The Common Stock continues to be listed for trading on Nasdaq and in connection with its corporate name change to Grace Therapeutics, Inc., commenced trading under the symbol “GRCE” on October 28, 2024.
The Continuance and Domestication has been accounted for as an exchange of equity interest among entities under common control resulting in a change in reporting entity, and has been retroactively reflected in the accompanying consolidated financial statements and notes thereto. All assets and liabilities of Acasti British Columbia were deemed assumed by the Company at the Effective Date, resulting in the retention of the historical basis of accounting as if they had always been combined for accounting and financial reporting purposes. Any excess resulting from the automatic conversion of each outstanding Common Share of Acasti British Columbia into one outstanding share of Common Stock of Acasti Delaware, is presented as Additional Paid-in Capital in the equity section of the accompanying consolidated financial statements and notes thereto. All per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the effect of the change in par value.
Liquidity and Financial Condition
The Company has incurred operating losses and negative cash flows from operations in each period since its inception. The Company expects to incur significant expenses and continued operating losses for the foreseeable future.
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In May 2023, the Company implemented a
strategic realignment plan to enhance shareholder value that resulted in the
Company engaging a new management team, streamlining its research and
development activities, and greatly reducing its workforce. Following the
realignment, the Company is a smaller, more focused organization, based in the
United States, and concentrated on its development of its lead product
candidate GTx-104. In June 2026, the Company decided
to not resume internal development funding for GTx-102 or GTx-101 under its
current operating plan.
In February 2025, the Company
completed a private placement of Company securities with certain institutional
and accredited investors. Net proceeds to the Company were $13,705. Refer to
Note 7, Stockholders’ Equity - 2025 Private Placement, for
additional information.
As a result of
the Complete Response Letter (“CRL”) received in April 2026 from the U.S. Food
and Drug Administration (“FDA”) regarding its New Drug Application (“NDA”) for
GTx-104, management has decided to pause and strategically delay
commercialization and marketing expenditures for GTx-104 until the regulatory
requirements are resolved. The Company plans to use its current cash, which was
$16,977 as of March 31, 2026, towards resolving the items cited in the FDA’s CRL, working capital and other general
corporate purposes. The Company believes its existing cash and cash equivalents
will be sufficient to sustain planned operations through at least 12 months
from the issuance date of these consolidated financial statements included in
the Company’s Annual Report on Form 10-K.
The Company will require additional capital to fund its daily operating needs. The Company does not expect to generate revenue from product sales unless and until it successfully completes drug development and obtains regulatory approval, which is subject to significant uncertainty. To date, the Company has financed its operations primarily through public offerings and private placements of its common equity, warrants and convertible debt and the proceeds from research tax credits. Until such time that the Company can generate significant revenue from drug product sales, if ever, it will require additional financing, which is expected to be sourced from a combination of public or private equity or debt financing or other non-dilutive sources, which may include fees, milestone payments and royalties from collaborations with third parties. Arrangements with collaborators or others may require the Company to relinquish certain rights related to its technologies or drug product candidates. Adequate additional financing may not be available to the Company on acceptable terms, or at all. The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and its ability to pursue its business strategy. The Company plans to raise additional capital in order to maintain adequate liquidity. Negative results from studies or trials, if any, the timing and ability to receive FDA approval for marketing our drug candidates or depressed prices of the Company’s stock could impact the Company’s ability to raise additional financing. Raising additional equity capital is subject to market conditions that are not within the Company’s control. If the Company is unable to raise additional funds, the Company may not be able to realize its assets and discharge its liabilities in the normal course of business.
The Company remains subject to risks similar to other development stage companies in the biopharmaceutical industry, including compliance with government regulations, protection of proprietary technology, dependence on third-party contractors and consultants and potential product liability, among others.
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2. Summary of significant accounting policies
Basis of presentation
These consolidated financial statements of Grace Therapeutics, Inc., which include the accounts of its subsidiary, have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). All intercompany transactions and balances are eliminated on consolidation.
Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.
Estimates are based on management’s best knowledge of current events and actions that management may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Estimates and assumptions include the measurement of stock-based compensation, derivative warrant liabilities, accruals for research and development contracts and contract organization agreements, and valuation of intangibles and goodwill. Estimates and assumptions are also involved in determining the extent to which research and development expenses qualify for research and development tax credits. The Company recognizes tax credits once it has reasonable assurance that they will be realized.
Cash equivalents
Cash equivalents is comprised of highly liquid investments purchased with original maturities of 90 days or less. Cash equivalents consist of United States Treasury bills.
Equipment
Equipment is measured at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that are directly attributable to the acquisition of the asset, including all costs incurred in bringing the asset to its present location and condition. Gains and losses on disposal of equipment are determined by comparing the proceeds from disposal with the carrying amount of the equipment.
Depreciation is recognized on a declining basis over the estimated useful lives of equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Items of equipment are depreciated from the date that they are available for use or, in respect of assets not yet in service, from the date they are ready for their intended use.
Intangible assets - acquired in-process research and development
In a business combination, the fair
value of in-process research and development (“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 definite-lived intangible
assets and amortized over the remaining useful life or discontinued. If
discontinued, the intangible asset will be written off. The Company expects to
recognize an impairment charge for the full remaining carrying value of the
GTx-102 and GTx-101 IPR&D asset of $9,196 and $4,337, respectively, in the
first quarter of fiscal year 2027. See Note 13 for further information. Research
and development (“R&D”) costs incurred after the acquisition are expensed
as incurred.
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Impairment of long-lived assets
The Company reviews the recoverability of its finite long-lived assets whenever events or changes in circumstances indicate that it is carrying amount may not be recoverable. The carrying amount is first compared with the undiscounted cash flows. If the carrying amount is higher than the sum of undiscounted cash flows, then the Company determines the fair value of the underlying asset group. Any impairment loss to be recognized is measured as the difference by which the carrying amount of the asset group exceeds the estimated fair value of the asset group.
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.
The Company tests its 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 the Company concludes 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.
The Company tests 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 the Company concludes it is more likely than not that the fair value is less than it's carrying amount, a quantitative impairment test is performed. The Company's annual impairment test is performed in the fourth quarter of the fiscal year.
Research and development costs
Research and developments expenditures are expensed as incurred. These costs consist of employees’ salaries and benefits related to research and development activities, contractors and consultants that conduct the Company’s clinical trials, laboratory material and small equipment, clinical trial materials, stock-based compensation expense, and other non-clinical costs and regulatory fees. Advance payments for goods and services that will be used in future research and development are recognized in prepaids or other assets and are expensed when the services are performed, or the goods are used.
Stock-based compensation
The Company has in place a stock option plan for directors, officers, employees, and consultants of the Company, with grants under the stock option plan approved by the Company’s Board of Directors. The plan provides for the granting of options to purchase Common Stock and the exercise price of each option equals the closing trading price of Common Stock on the day prior to the grant. The Company accounts for stock-based compensation arrangements in accordance with provisions of Accounting Standards Codification (“ASC”) 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all share-based payments including stock options. ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The Company measures the cost of such awards based on the fair value of the award at grant date and recognizes stock-based compensation expense in the consolidated statements of operations and comprehensive loss on a tranche by tranche basis. The fair value of options is estimated for each tranche of an award that vests on a graded basis. The fair value of options is estimated using the Black-Scholes option pricing model, which uses various inputs including fair value of the Common Stock at the grant date, expected term, historical volatility, risk-free interest rate and expected dividend yields of the Common Stock. The Company applies an estimated forfeiture rate derived from historical employee termination behavior in determining compensation expense. If the actual forfeitures differ from those estimated by management, adjustment to compensation expense may be required in future periods.
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Government grants
Government grants are recorded as a reduction of the related expenses or costs of the asset acquired. Government grants are recognized when there is reasonable assurance that the Company has met the requirements of the approved grant program and there is reasonable assurance that the grant will be received.
Income taxes
Income taxes comprise of current and deferred taxes. The provision for income taxes is computed using the asset and liability method.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts (tax base) of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are measured at the tax rate expected to apply when the underlying asset or liability is realized (settled) based on the rates that are enacted at the reporting date. Deferred tax assets and liabilities are offset if the Company has the right to set off the amount owed by with the amount owed by the other party, the Company intends to set off and the offset right is enforceable at law. A deferred tax asset is recognized for unused tax losses, and tax credits, reduced by a valuation allowance. A valuation allowance is recorded to reduce the carrying amount of deferred income tax assets when it is more likely than not that these assets will not be realized. Tax benefits related to tax positions not deemed to meet the “more-likely-than-not” threshold are not permitted to be recognized in the consolidated financial statements.
Additionally, the Company accrues interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. The unrecognized tax benefits, including accrued interest and penalties, if any, are included in income taxes payable in the accompanying Consolidated Balance Sheets.