Aeterna Zentaris : Condensed Interim Consolidated Financial Statements As at JUNE 30, 2022 and for the three AND SIX month periodS ended JUNE 30, 2022 and 2021 (In thousands of US dollars) - Form 6-K/A

Condensed Interim Consolidated Financial Statements

As at JUNE 30, 2022 and for the three AND SIX month periodS ended JUNE 30, 2022 and 2021

(In thousands of US dollars)

(Unaudited)

Condensed Interim Consolidated Statements of Financial Position	2
Condensed Interim Consolidated Statements of Changes in Shareholders' Equity	3
Condensed Interim Consolidated Statements of Comprehensive Loss	4
Condensed Interim Consolidated Statements of Cash Flows	5
Notes to Condensed Interim Consolidated Financial Statements	6

(1)

Condensed Interim Consolidated Statements of Financial Position

(In thousands of US dollars)

(Unaudited)

		June 30, 2022			December 31, 2021
		$			$
ASSETS
Current assets
Cash and cash equivalents			58,157				65,300
Trade and other receivables (note 4)			907				1,314
Inventory			261				73
Income taxes receivable			1,389				2,361
Prepaid expenses and other current assets (note 5)			2,459				1,772
Total current assets			63,173				70,820
Restricted cash equivalents			314				335
Right of use assets			114				150
Property, plant and equipment			42				42
Other non-current assets			122				-
Identifiable intangible assets			573				625
Goodwill			7,487				8,130
Total Assets			71,825				80,102
LIABILITIES
Current liabilities
Payables and accrued liabilities (note 6)			2,635				2,672
Current portion of provisions			27				34
Income taxes payable			105				115
Current portion of deferred revenues (note 3)			3,534				4,815
Current portion of lease liabilities			106				130
Total current liabilities			6,407				7,766
Deferred revenues (note 3)			2,617				1,493
Deferred gain			90				98
Lease liabilities			16				31
Employee future benefits (note 7)			8,188				17,485
Provisions			213				243
Total liabilities			17,531				27,116
SHAREHOLDERS' EQUITY
Share capital (note 8)			293,410				293,410
Warrants (note 8)			5,085				5,085
Other capital (note 8)			89,848				89,788
Deficit			(333,450	)			(334,619	)
Accumulated other comprehensive loss ("AOCI")			(599	)			(678	)
Total shareholders' equity			54,294				52,986
Total liabilities and shareholders' equity			71,825				80,102

Commitments (note 12)

Subsequent events (note 13)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Approved by the Board of Directors

/s/ Carolyn Egbert		/s/ Dennis Turpin
Carolyn Egbert Chair of the Board		Dennis Turpin Director

(2)

Condensed Interim Consolidated Statements of Changes in Shareholders' Equity

For the SIX months ended JUNE 30, 2022 and 2021

(In thousands of US dollars, except share data, unaudited)

		Common shares (number of)			Share capital			Warrants			Other capital			Deficit			Accumulated other comprehensive income (loss)			Total
					$			$			$			$			$			$
Balance - January 1, 2022			4,855,876				293,410				5,085				89,788				(334,619	)			(678	)			52,986
Net loss			-				-				-				-				(6,856	)			-				(6,856	)
Other comprehensive loss:
Foreign currency translation adjustments			-				-				-				-				-				79				79
Actuarial gain on defined benefit plans and Remeasurement of the net defined benefit liability (note 7)			-				-				-				-				8,025				-				8,025
Comprehensive income			-				-				-				-				1,169				79				1,248
Share-based compensation costs			-				-				-				60				-				-				60
Balance - June 30, 2022			4,855,876				293,410				5,085				89,848				(333,450	)			(599	)			54,294

		Common shares (number of)			Share capital			Warrants			Other capital			Deficit			Accumulated other comprehensive income (loss)			Total
					$			$			$			$			$			$
Balance - January 1, 2021			2,507,145				235,008				12,402				89,505				(322,659	)			(1,045	)			13,211
Net loss (as restated note1)			-				-				-				-				(3,542	)			-				(3,542	)
Other comprehensive loss:
Foreign currency translation adjustments			-				-				-				-				-				421				421
Actuarial gain on defined benefit plans			-				-				-				-				(86	)			-				(86	)
Comprehensive loss			-				-				-				-				(3,628	)			421				(3,207	)
Issuance of common shares, net of transaction costs			943,448				29,082				1,897				-				-				-				30,979
Exercise of warrants			1,400,447				29,769				(9,728	)			-				-				-				20,041
Transfer of warrant issuance costs upon 2021 exercise of warrants (note 8)			-				(532	)			532				-				-				-				-
Exercise of deferred share units (note 8)			840				20				-				(28	)			-				-				(8	)
Share-based compensation costs			-				-				-				273				-				-				273
Balance - June 30, 2021			4,851,880				293,347				5,103				89,750				(326,287	)			(624	)			61,289

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

(3)

Condensed Interim Consolidated Statements of Comprehensive Loss

For the three AND SIX months ended JUNE 30, 2022 and 2021

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

(Unaudited)

		Three months ended			Six months ended
		June 30			June 30
		2022			2021			2022			2021
					(As restated- Note 1)						(As restated- Note 1))
			$				$				$				$
Revenues (note 3)
License fees			(206	)			492				226				1,016
Development Services			(77	)			1,030				889				2,125
Product sales			-				-				57				-
Royalties			24				19				43				27
Supply chain			37				43				80				84
Total revenues			(222	)			1,584				1,295				3,252
Operating expenses
Cost of sales			13				12				92				41
Research and development expenses			2,398				1,768				4,788				3,226
General and administrative expenses			1,781				1,645				3,339				2,909
Selling expenses			302				318				605				564
Total operating expenses			4,494				3,743				8,824				6,740
Loss from operations			(4,716	)			(2,159	)			(7,529	)			(3,488	)
Gain (loss) due to changes in foreign currency exchange rates			502				82				676				(166	)
Other finance costs			(2	)			(7	)			(3	)			(17	)
Net finance income (costs)			500				75				673				(183	)
Loss before income taxes			(4,216	)			(2,084	)			(6,856	)			(3,671	)
Income tax recovery			-				-				-				129
Net loss			(4,216	)			(2,084	)			(6,856	)			(3,542	)
Other comprehensive loss:
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation adjustments			42				(126	)			79				421
Items that will not be reclassified to profit or loss:
Actuarial gain (loss) on defined benefit plans (note 7)			5,276				(968	)			8,025				(86	)
Comprehensive income (loss)			1,102				(3,178	)			1,248				(3,207	)
Net loss per share [basic and diluted]			(0.87	)			(0.43	)			(1.41	)			(0.82	)
Weighted average number of shares outstanding (note 11):
Basic			4,855,876				4,848,129				4,855,876				4,335,821
Diluted			4,855,876				4,848,129				4,855,876				4,335,821

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

(4)

Condensed Interim Consolidated Statements of Cash Flows

For the three AND SIX months ended JUNE 30, 2022 and 2021

(In thousands of US dollars)

(Unaudited)

		Three months ended			Six months ended
		June 30,			June 30,
		2022			2021			2022			2021
					(As restated- Note 1)						(As restated- Note 1)
		$			$			$			$
Cash flows from operating activities
Net loss for the period			(4,216	)			(2,084	)			(6,856	)			(3,542	)
Items not affecting cash and cash equivalents:
Provision			7				1				5				20
Depreciation and amortization			35				36				71				72
Share-based compensation costs			33				260				60				273
Employee future benefits (note 7)			98				50				197				99
Amortization of deferred revenues			124				(492	)			(704	)			(1,016	)
Foreign exchange on items denominated in foreign currencies			(513	)			(54	)			(687	)			212
Gain on disposal of property, plant and equipment			-				(1	)			-				(1	)
Other non-cash items			495				(114	)			509				(85	)
Interest accretion on lease liabilities			-				1				-				3
Payment (refund) of income taxes			(51	)			(517	)			830				(1,641	)
Other asset			-				(82	)			-				(82	)
Changes in operating assets and liabilities (note 9)			(862	)			(639	)			264				1,008
Net cash used in operating activities			(4,850	)			(3,635	)			(6,311	)			(4,680	)
Cash flows from financing activities
Issuance of common shares (note 8)			-				-				-				34,200
Transaction costs (note 8)			-				-				-				(3,221	)
Proceeds from exercise of warrants (note 8)			-				55				-				20,041
Payments on lease liabilities			(34	)			(31	)			(68	)			(63	)
Net cash provided by (used in) financing activities			(34	)			24				(68	)			50,957
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment			-				1				-				1
Purchase of intangible assets			-				-				-				(490	)
Purchase of property and equipment			(42	)			(3	)			(48	)			(20	)
Net cash "used in" provided by investing activities			(42	)			(2	)			(48	)			(509	)
Effect of exchange rate changes on cash and cash equivalents			(513	)			110				(716	)			(171	)
Net change in cash and cash equivalents			(5,439	)			(3,503	)			(7,143	)			45,597
Cash and cash equivalents - Beginning of period			63,596				73,371				65,300				24,271
Cash and cash equivalents - End of period			58,157				69,868				58,157				69,868

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

(5)

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT JUNE 30, 2022 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(amounts in thousands of US dollars, except share and per share data and as otherwise noted)
(Unaudited)

1. Business overview

Summary of business

Aeterna Zentaris (the "Company" or "Aeterna") is a specialty biopharmaceutical company commercializing and developing therapeutics and diagnostic tests. The Company's lead product, Macrilen™ (macimorelin), is the first and only U.S. Food and Drug Administration ("FDA") and European Medicines Agency-approved oral test indicated for the diagnosis of patients with adult growth hormone deficiency ("AGHD"). Macrilen™ is currently marketed in the US through a license agreement (the "Novo Amendment") between the Company and Novo Nordisk Health Care AG ("Novo") and in the United Kingdom and Europe through a license agreement with Consilient Healthcare Inc ("Consilient" or "CH") under the trade name of Ghryvelin®. The Company is also dedicated to the development of therapeutic assets and has recently taken steps to establish a pre-clinical pipeline to potentially address unmet medical needs across a number of indications with a focus on rare or orphan indications and with the potential for pediatric use.

These unaudited condensed interim consolidated financial statements were approved by the Board of Directors (the "Board") on August 3, 2022.

Basis of presentation

These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS") applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company's annual consolidated financial statements as at and for the year ended December 31, 2021. The accounting policies in these condensed interim consolidated financial statements are consistent with those presented in the Company's annual consolidated financial statements, with the exception of the Company's policy with respect to the government assistance which is as follows:

Government assistance

Amounts received or receivable resulting from government assistance programs, including grants and refundable investment tax credits for research and development, are accounted for in accordance with IAS 20 - Accounting for government grants and disclosure of government assistance and are recognized where there is reasonable assurance that the amount of government assistance will be received, and all attached conditions will be complied with. When the amount relates to an expense item such as research and development costs, it is recognized as income on a systematic basis as a reduction to the costs that it is intended to compensate. When the grant relates to an asset, it reduces the carrying amount of the asset and is then recognized as income over the useful life of the depreciable asset by way of a reduced depreciation charge.

(6)

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT JUNE 30, 2022 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(amounts in thousands of US dollars, except share and per share data and as otherwise noted)
(Unaudited)

COVID-19 & Russia and Ukraine conflict

The rise in COVID-19 variants has caused delays in site initiation and patient enrollment in our DETECT-trial and may be impacting sales activities for Macrilen™ in the US. Further, the continuation of the COVID-19 pandemic and the Russia/Ukraine conflict may also cause some patients to be unwilling to enroll in our trials or be unable to comply with clinical trial protocols if such events impede patient movement or interrupt healthcare services, both of which would delay our ability to conduct clinical trials or release clinical trial results on a timely basis and could delay our ability to obtain regulatory approval and commercialize our product candidates. For the period ended June 30, 2022, the Company assessed the impact of the uncertainties around the COVID-19 pandemic and the Russia/Ukraine conflict on its judgments, estimates, accounting policies and amounts recognized in these unaudited condensed interim consolidated financial statements and determined that no adjustments were required to the carrying value of assets and liabilities. Management determined that the recruitment for the DETECT-trial may now continue until later into 2023 compared to the end of the 2022 year as anticipated at the end of the previous fiscal year. As such, amounts related to deferred revenue have been reclassified from current to long-term to reflect the revised timeline. We are currently assessing with Novo the impact on timelines and study cost. Preliminary indications are that the delays associated with COVID-19 and the Russia/Ukraine conflict will result in additional costs to the program. As such, this resulted in reversal of revenue in both the license fees and development services for the quarter and in negative revenues of $0.2million and $0.1million for the three-months ended June 30, 2022..

The Company will continue to monitor the impact of the development of the COVID-19 pandemic and Russia/Ukraine conflict in further reporting periods. Actual results could differ from these estimates, and such differences may be material.

Restatement of comparative period figures

At the end of the prior fiscal year 2021, the Company restated its previously reported condensed consolidated interim financial statements for the three-month period ended March 31, 2021 and the three-month and six-month periods ended June 30, 2021 and three-month and nine-month periods ended September 30, 2021 with respect to the recognition of revenue for the Novo Amendment, signed in November 2020. During the fourth quarter of 2021, management reassessed the classification of the development activities associated with the DETECT-trial and concluded that subsequent to the Novo Amendment, the parties no longer shared joint control of these activities and, as such, these development activities no longer met the definition of a joint operation, as defined in IFRS 11 -Joint Arrangements. Therefore, pursuant to the guidance in IFRS 15 -Revenue from Contracts with Customers, the Company reclassified the charges to Novo, from research and development expenses to development services revenue, in the related periods. In addition, the license fees related to the pediatric indication were adjusted to reflect the revised pattern of recognition as the performance obligation for the development services has now been combined with the pediatric license. In addition, the accounting for prepaid expenses and other assets and deferred revenues related the DETECT-trial expenses incurred was restated.

(7)

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT JUNE 30, 2022 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(amounts in thousands of US dollars, except share and per share data and as otherwise noted)
(Unaudited)

The condensed interim consolidated financial statements were not adjusted and refiled at the time of discovery of the error, rather the comparatives are being corrected now with the filing of the interim financials for the period ended June 30, 2022. The impacts of the June 30, 2021 restatements are as follows (amounts in thousands, except for basic and diluted loss per share):

		Previously			Effect of
		reported			restatement			Amended
			$				$				$
Consolidated interim statement of loss and comprehensive loss for the three-month period ended June 30, 2021
License fees			537				(45	)			492
Development service revenues			-				1,030				1,030
Research and development expenses			738				1,030				1,768
Net loss			(2,039	)			(45	)			(2,084	)
Total comprehensive loss			(3,133	)			(45	)			(3,178	)
Basic and diluted loss per share			(0.42	)			(0.01	)			(0.43	)
Consolidated interim statement of loss and comprehensive loss for the six-month period ended June 30, 2021
License fees			1,074				(58	)			1,016
Development service revenues			-				2,125				2,125
Research and development expenses			1,101				2,125				3,226
Net loss			(3,484	)			(58	)			(3,542	)
Total comprehensive loss			(3,149	)			(58	)			(3,207	)
Basic and diluted loss per share			(0.72	)			(0.01	)			(0.82	)
Consolidated interim statement of financial position as of June 30, 2021
Prepaid expenses and other current assets			3,308				1,067				4,375
Current portion of deferred revenues			2,125				1,111				3,236
Deficit			(326,229	)			(58	)			(326,287	)

2. Critical accounting estimates and judgements

The preparation of condensed interim consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of the Company's assets, liabilities, revenues, expenses and related disclosures. Judgments, estimates and assumptions are based on historical experience, expectations, current trends and other factors that management believes to be relevant at the time at which the Company's condensed interim consolidated financial statements are prepared.

Management reviews, on a regular basis, the Company's accounting policies, assumptions, estimates and judgments in order to ensure that the condensed interim consolidated financial statements are presented fairly and in accordance with IFRS applicable to interim financial statements. Critical accounting estimates and assumptions, as well as critical judgments used in applying accounting policies in the preparation of the Company's condensed interim consolidated financial statements, were the same as those applied to the Company's annual consolidated financial statements as at and for the year ended December 31, 2021 and December 31, 2020 and for the years ended December 31, 2021, and 2020.

(8)

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT JUNE 30, 2022 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(amounts in thousands of US dollars, except share and per share data and as otherwise noted)
(Unaudited)

3. License and supply arrangements

On November 16, 2020, the Company, through AEZS Germany, entered into Novo Amendment of its existing License Agreement with Novo related to the development and commercialization of macimorelin. The Company earns license fees, product sales, royalties and supply chain revenue, in addition to development service revenue from conducting the Study P02, from Novo.

In June 2020, the Company entered into an exclusive distribution and quality agreement with MegaPharm Ltd. ("MegaPharm") for the commercialization in Israel and in the Palestinian Authority of macimorelin to be used in the diagnosis of patients with adult growth hormone deficiency and in clinical development for the diagnosis of pediatric growth hormone deficiency (the "MegaPharm Agreement"). As of June 30, 2022, there have been no products supplied under this agreement. On December 7, 2020, the Company entered into an exclusive licensing agreement with "CH" for the commercialization of macimorelin in the European Economic Area and the United Kingdom (the "CH License Agreement"). The Company earns licenses fees and product sale revenue from CH.

The Company and NK Meditech Limited ("NK") entered into a licensing agreement, effective November 30, 2021 and pursuant to which the Company granted to NK the exclusive right to commercialize (including marketing, selling and offering to sell) macimorelin in the Republic of Korea (the "ROK") and as applicable, in the Democratic People's Republic of Korea ("DPRK") to the extent NK is allowed to use the aforementioned licensed rights in the latter ("NK License Agreement"). As of June 30, 2022, there have been no products supplied under this agreement.

The following table provides a summary of deferred revenue balances:

		June 30, 2022
		Current			Non-Current			Total
		$			$			$
Novo Amendment			3,523				1,050			4,573
CH License Agreement			11				1,440				1,451
NK License Agreement			-				127				127
Total			3,534				2,617				6,151

		December 31, 2021
		Current			Non-Current			Total
			$				$				$
Novo Amendment			4,791				23				4,814
CH License Agreement			24				1,334				1,358
NK License Agreement			-				136				136
Total			4,815				1,493				6,308

(9)

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT JUNE 30, 2022 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(amounts in thousands of US dollars, except share and per share data and as otherwise noted)
(Unaudited)

4. Trade and other receivables

		June 30, 2022			December 31, 2021
		$			$
Trade accounts receivable (net of expected credit losses of $55(December 31, 2021 - ($55)			490				877
Value-added tax			182				372
Grant receivable			179				-
Other			56				65
		907				1,314

In March 2022, the Company was awarded a monetary subsidy with respect to two pre-clinical programs-namely, the Company's development of an oral vaccine against infections with SARS-CoV-2 and the development of a product candidate for the treatment of neuromyelitis optica. The subsidy was awarded pursuant to the provisions of the German Act on Tax Incentives for Research and Development, which provides direct reimbursement of certain qualifying R&D expenditures to eligible entities. The CoV-2 grant is related to R&D expenditures incurred in 2021 and during the first half year of 2022. The Neuromyelitis Optica grant is related to expenditures incurred in 2021 and during the first half of 2022.

5. Prepaid expenses and other current assets

		June 30, 2022			December 31, 2021
			$				$
Prepaid insurance			1,259				421
Prepaid research and development			1,111				1,329
Other			89				22
		2,459				1,772

6. Payables and accrued liabilities

		June 30, 2022			December 31, 2021
			$				$
Trade accounts payable			938				934
Salaries, employment taxes and benefits			120				531
Accrued research and development costs			995				596
Other accrued liabilities			582				611
		2,635				2,672

(10)

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT JUNE 30, 2022 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(amounts in thousands of US dollars, except share and per share data and as otherwise noted)
(Unaudited)

7. Employee future benefits

The change in the Company's accrued benefit obligations is summarized as follows:

		Six months ended June 30, 2022			Year ended December 31, 2021
		Pension benefit plans			Other benefit plans			Total			Total
		$			$			$			$
Change in plan liabilities
Balances - Beginning of the period			29,313				99				29,412				15,435
Current service cost			33				5				38				65
Interest cost			149				-				149				88
Employee Contributions			7				-				7				-
Actuarial gain arising from changes in financial assumptions			(9,802	)			-				(9,802	)			(1,130	)
Past service cost associated with multi-employer plan			-				-				-				16,137
Actuarial loss arising from change in current assumptions on funding of future pension increases			-				-				-				556
Benefits paid			(344	)			(1	)			(345	)			(511	)
Impact of foreign exchange rate changes			(2,098	)			(8	)			(2,106	)			(1,228	)
Balances - End of the period			17,258				95				17,353				29,412
Change in plan assets
Balances - Beginning of the period			11,927				-				11,927				-
Presentation of plan assets as of December 31, 2021			-				-				-				11,963
Remeasurement of plan assets			(1,777	)			-				(1,777	)			-
Employer contributions			32				-				32				-
Employee contributions			7				-				7				-
Benefits paid			(122	)			-				(122	)			-
Impact of foreign exchange rate changes			(902	)			-				(902	)			(36	)
Balances - End of the period			9,165								9,165				11,927
Net liability of the unfunded plans			7,574				95				7,669				12,749
Net liability of the funded plans			519				-				519				4,736
Net amount recognized as Employee future benefits			8,093				95				8,188				17,485
Amounts recognized:
In net loss			181				6				187				(153	)
In other comprehensive loss			(9,221	)			(8	)			(9,229	)			2,408

The calculation of the pension benefit obligation is sensitive to the discount rate assumption. Discount rates were 1.1%at December 31, 2021 and 3.25%at June 30, 2022 causing all of the gain noted above.

(11)

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT JUNE 30, 2022 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(amounts in thousands of US dollars, except share and per share data and as otherwise noted)
(Unaudited)

8. Share capital, warrants and other capital

The Company has an unlimited number of authorized common shares (being voting and participating shares) with no par value, as well as an unlimited number of preferred, first and second ranking shares, issuable in series, with rights and privileges specific to each class, with no par value.

2021

On February 19, 2021, the Company completed an underwritten public offering of 820,390common shares at $36.25per common share, resulting in aggregate gross proceeds of $29,739, before deducting underwriting discounts, commissions and offering expenses of $2,837(the "February 2021 Financing). The Company also granted the underwriter and placement agent (the "Underwriter"), a 30-day over-allotment option to purchase up to 123,058additional common shares at a price of $36.25per common share (the "Underwriter Option"). Additionally, the Company issued warrants underlying 57,427common shares to the Underwriter, with each warrant bearing an exercise price of $45.3125(the "February 2021 Placement Agent Warrants"). The February 2021 Placement Agent Warrants expire on February 17, 2026.

On February 22, 2021, the underwriter exercised the Underwriter Option in full and received 123,058common shares in exchange for gross proceeds to the Company of $4,461. Upon exercise of the Underwriter Option, the Underwriter also an additional 8,614February 2021 Placement Agent Warrants.

Aggregate gross proceeds received in connection with the February 2021 Financing totaled $34,200, less cash transaction costs of $3,221and non-cash transaction costs, which represent the issue-date fair value of the February 2021 Placement Agent Warrants, of $1,897.

The table presented below shows the inputs and assumptions applied to the Black-Scholes option pricing model in order to determine the fair value of these Placement agent warrants:

		Number of equivalent shares			Market value per share price			Weighted average exercise price			Risk-free annual interest rate			Expected volatility			Expected life (years)			Expected dividend yield
					($)			($)			(i)			(ii)			(iii)			(iv)
February 2021 Placement agent warrants - public offering			57,427				37.00				45.31				0.58734	%			119.18	%			4.99				0.00	%
February 2021 Placement agent warrants - Underwriter Option			8,614				37.00				45.31				0.58544	%			119.57	%			4.98				0.00	%

	(i)	Based on United States Treasury Government Bond interest rates with a term that is consistent with the expected life of the warrants.
	(ii)	Based on the historical volatility of the Company's stock price over the most recent period consistent with the expected life of the warrants.
	(iii)	Based upon time to expiry from the issuance date.
	(iv)	The Company has not paid dividends and it does not intend to pay dividends in the foreseeable future.

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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT JUNE 30, 2022 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(amounts in thousands of US dollars, except share and per share data and as otherwise noted)
(Unaudited)

During the six-month period ended June 30, 2021, warrants were exercised as follows::

		Warrants exercised (number of underlying common shares)			Exercise Price			Aggregate proceeds to the Company
September 2019 Investor warrants			80,000			$	41.25			$	3,300
February 2020 Investor warrants			69,565				30.00				2,087
July 2020 Investor warrants			841,822				11.25				9,471
July 2020 Placement Agent warrants			74,667				14.0625				1,050
August 2020 Investor warrants			303,595				11.75				3,567
August 2020 Placement Agent warrants			34,798				17.6015625				612
			1,404,447							$	20,087

Other capital

		Six months ended June 30, 2022
		Stock options			Weighted average exercise price			DSUs
		(Number)			($)			(Number)
Balance - January 1, 2022			43,455				22.00				16,920
Granted			2,000				9.00				-
Expired			-				-				-
Exercised			-				-				-
Balance - June 30, 2022			45,455				21.25				16,920

		Year ended December 31, 2021
		Stock options			Weighted average exercise price			DSUs
		(Number)			($)			(Number)
Balance - January 1, 2021			20,256				36.00				6,920
Granted			23,200				10.50				11,200
Expired			(1	)			14,756.25				-
Exercised			-				-				(1,200	)
Balance - December 31, 2021			43,455				22.00				16,920

(13)

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT JUNE 30, 2022 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(amounts in thousands of US dollars, except share and per share data and as otherwise noted)
(Unaudited)

Fair value input assumptions for US dollar stock option grants

The table below shows the assumptions, or weighted average parameters, applied to the Black-Scholes option pricing model in order to determine share-based compensation costs over the life of the awards.

				Six Months Ended			Year Ended
				June 30,			December 31
				2022			2021
Expected dividend yield		(a)			0.00	%			0.00	%
Expected volatility		(b)			115.80	%			115.80	%
Risk-free annual interest rate		(c)			1.23	%			1.23	%
Expected life (years)		(d)			5.71				5.71
Weighted average share price				$	0.42			$	0.42
Weighted average exercise price				$	0.42			$	0.42
Weighted average grant date fair value				$	0.35			$	0.35

	(a)	The Company has not paid dividends and it does not intend to pay dividends in the foreseeable future.
	(b)	Based on the historical volatility of the Company's stock price over the most recent period consistent with the expected life of the stock options, as well as on future expectations.
	(c)	Based on United States Treasury Government Bond interest rates with a term that is consistent with the expected life of the stock options.
	(d)	Based upon historical data related to the exercise of stock options, on post-vesting employment terminations and on future expectations related to exercise behavior.

9. Supplemental disclosure of cash flow information

		Three months ended			Six months ended
		June 30,			June 30,
		2022			2021			2022			2021
		$			$			$			$
Changes in operating assets and liabilities:
Trade and other receivables			(255	)			(547	)			220				103
Inventory			-				1				(206	)			(39	)
Prepaid expenses and other current assets			(1,471	)			408				(759	)			315
Payables and accrued liabilities			(40	)			(430	)			119				(315	)
Taxes payable			-				-				-				(129	)
Deferred revenues			1,001				3				1,008				1,230
Employee future benefits			(97	)			(74	)			(118	)			(157	)
		(862	)			(639	)			264				1,008

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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT JUNE 30, 2022 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(amounts in thousands of US dollars, except share and per share data and as otherwise noted)
(Unaudited)

10. Segment information

The Company operates in a single operating segment, being the biopharmaceutical segment.

11. Net loss per share

The following table sets forth pertinent data relating to the computation of basic and diluted net loss per share attributable to common shareholders.

		Three months ended			Six months ended
		June 30,			June 30,
		2022			2021			2022			2021
		$			$			$			$
Net loss			(4,216	)			(2,084	)			(6,856	)			(3,542	)
Basic weighted average number of shares outstanding			4,855,876				4,848,129				4,855,876				4,335,821
Net loss income per share (basic)			(0.87	)			(0.43	)			(1.41	)			(0.82	)
Dilutive effect of stock options and DSUs			-				-				-				-
Dilutive effect of warrants			-				-				-				-
Diluted weighted average number of shares outstanding			4,855,876				4,848,129				4,855,876				4,335,821
Net loss per share (diluted)			(0.87	)			(0.43	)			(1.41	)			(0.82	)
Items excluded from the calculation of diluted net loss per share because the exercise price was greater than the average market price of the common shares or due to their anti-dilutive effect
Stock options and DSUs			62,375				37,176				62,375				37,176
Warrants			457,649				461,649				457,649				461,649

Net loss per share is calculated by dividing net loss by the weighted average number of shares outstanding during the relevant period. Diluted weighted average number of shares reflects the dilutive effect of equity instruments, such as any "in the money" stock options, DSUs and warrants. In periods with reported net losses, all stock options and warrants are deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal, and thus "in the money" stock options and warrants have not been included in the computation of net loss per share because to do so would be anti-dilutive.

12. Commitments

		Service and manufacturing			R&D contracts			TOTAL
		$			$			$
Less than 1 year			5,015				2,090				7,105
1 - 3 years			938				776				1,714
4 - 5 years			47				-				47
More than 5 years			-				-				-
Total			6,000				2,866				8,866

The Company executed various agreements including in-licensing and similar arrangements with development partners. Such agreements may require the Company to make payments on achievement of stages of development, launch or revenue milestones, although the Company generally has the right to terminate these agreements at no penalty.

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NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT JUNE 30, 2022 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(amounts in thousands of US dollars, except share and per share data and as otherwise noted)
(Unaudited)

Based on the closing exchange rates at June 30, 2022, the Company expects to pay $9,050including $6,804 (€6.5million), and $1,396 (£1.2million) and $850 USD, in R&D milestone payments and up to $39,302, including $28,785 (€27.6million); $1,517 (£1.3million) and $9,000USD, in revenue related milestone payments.The table below contains all potential R&D and revenue-related milestone payments that the Company may be required to make under such agreements:

		Future potential R&D milestone payments			Future potential revenue milestone payments			TOTAL
		$			$			$
Less than 1 year			26				-				26
1 - 3 years			204				-				204
4 - 5 years			1,990				-				1,990
More than 5 years			6,830				39,302				46,132
Total			9,050				39,302				48,352

The future payments that are disclosed represent contract payments and are not discounted and are not risk-adjusted. The development of any pharmaceutical product candidates is a complex and risky process that may fail at any stage in the development process due to a number of factors. The timing of the payments is based on the Company's current best estimate of achievement of the relevant milestone.

13. Subsequent Events

Reverse Stock Split

On July 15, 2022, the Company's shareholders and board of directors approved an amendment to the Company's articles of amendment to effect a 1-for-25 reverse stock split of the Company's common shares, DSU and Warrants. The Company's outstanding stock options were also adjusted to reflect the 1-for-25 reverse stock split of the Company's common shares. Accordingly, all common shares, DSU and Warrants, stock options and per share amounts in these consolidated financial statements have been retroactively adjusted for all periods presented to give effect to the reverse stock split. Outstanding stock options were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased. The reverse stock split was effected in the markets on July 21,2022.

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