Alten
Annual Report 2022

Plain-text annual report

ANTIBE THERAPEUTICS INC. CONSOLIDATED FINANCIAL STATEMENTS March 31, 2022 and 2021 INDEPENDENT AUDITOR’S REPORT To the shareholders of Antibe Therapeutics Inc. Opinion We have audited the consolidated financial statements of Antibe Therapeutics Inc. and its subsidiaries (the “Company”), which comprise the consolidated statements of financial position as at March 31, 2022 and March 31, 2021, and the consolidated statements of loss and comprehensive loss, the consolidated statements of changes in shareholders’ equity and the consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at March 31, 2022 and March 31, 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRSs”). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 2(d) in the consolidated financial statements, which indicates that the Company had an accumulated deficit of $111.0 million as at March 31, 2022 and incurred a comprehensive loss of $25.1 million and had negative cash flows from operations of $16.9 million for the year then ended. These events or conditions, along with other matters as set forth in Note 2(d), indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated financial statements of the current period. In addition to the matter described in the Material Uncertainty Related to Going Concern section of our report, we have determined the matters described below to be the key audit matters to be communicated in our report. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements. Key audit matters Completeness of the Accrual for Research and Clinical Trial Expenses As disclosed in the consolidated financial statements, the Company has recorded research and development expenses of $14.4 million for the year ended March 31, 2022 and accounts payable and accrued liabilities of $2.8 million as at March 31, 2022, which includes an accrual for estimated research and clinical trial expenses incurred. The Company has contracts with contract research organizations that conduct and manage research and clinical studies on its behalf. The financial terms of these agreements are subject to amendments, vary from contract to contract and may result in uneven payment flows. As disclosed in note 3, the Company’s determination of accrued research and clinical trial costs at each reporting period requires significant judgment by management, as estimates are based on a number of factors, including management’s knowledge of the research and development programs and associated timelines, invoicing to date from third party vendors, and the terms and conditions in the contractual arrangements including amendments or ancillary agreements. The completeness of research and clinical trial accruals is subject to risk of estimation uncertainty related to services having been received where invoices are not received from third party vendors in a timely manner prior to the time the consolidated financial statements are issued. Auditing the completeness of the Company’s accrual for research and clinical trial expenses is a key audit matter as it requires significant auditor judgment, subjectivity and effort in performing appropriate procedures to evaluate the information management utilizes in these estimates. the completeness and accuracy of Valuation of intangible assets not yet subject to amortization As disclosed in note 5 to the consolidated financial statements, the Company acquired intangible assets consisting of intellectual property as part of its acquisition of the underlying assets of Antibe Holdings Inc. The fair value of the intellectual property acquired amounted to $26.1 million and was determined based on the relief from royalty method. Management also capitalized $0.3 million of costs directly relating to the acquisition. The total intellectual property intangible asset value is $26.4 million as at March 31, 2022. The intellectual property acquired is not yet subject to amortization, and in accordance with the Company’s accounting policies, is tested for impairment at least annually, or sooner if there is an indication of impairment. The cash flows from the intellectual property acquired are monitored within the Antibe cash- generating unit (CGU). As disclosed in note 9, when performing the annual impairment test as at March 31, 2022, the Company determined the recoverable amount How our audit addressed the key audit matters The completeness of the accrual was evaluated through, among other audit procedures, inspection of the contracts and the amendments to the contracts from third party providers. We further inquired as to the progress of the clinical trials and other research and development projects with the Company’s research and development personnel that oversee the clinical trials. We compared management’s listing of trial sites to government databases and compared this data to management’s schedules. We assessed management’s look-back analysis comparing the estimated accrual balances of March 31, 2021 to the actual amounts that were ultimately invoiced. We also evaluated subsequent invoices received from the trial administrators and cash disbursements made to the trial administrators, to the extent such invoices were received, or payments were made prior to the date that the consolidated financial statements were issued. To assess the valuation of the intellectual property intangible asset, our audit procedures included, among others, assessing methodologies used and the significant assumptions and underlying data used by the Company in its analysis as of the date of acquisition and as at March 31, 2022. With the assistance of our valuation specialists, we evaluated the Company’s models, valuation methodologies, and certain significant assumptions, of as commercialization and the discount rate. probability such the We compared the estimated trial costs to board approved budgets. We compared future revenue and margin projections and the probability of commercialization to current industry, market and economic trends. We performed sensitivity analysis on the significant assumptions to evaluate changes in the recoverable amount the that would result from changes assumptions. in of the Antibe CGU using a value-in-use approach and prepared a discounted cash flow model. Auditing management’s assessment of the valuation of the Antibe CGU was complex, given the degree of judgment and subjectivity in evaluating management’s estimates and assumptions. Significant assumptions included projections for the future costs of clinical trials, revenue and margin projections, probability of the discount rate. These commercialization, and assumptions are affected by expectations about future market and economic conditions including the success of clinical trials, obtaining regulatory approvals, future product pricing, future productions costs, and the future demand for these pharmaceutical products. Other Information Management is responsible for the other information. The other information comprises the information included in Management’s Discussion and Analysis. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, and in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is Paula J. Smith. Chartered Professional Accountants Licensed Public Accountants Toronto, Canada June 29, 2022 ANTIBE THERAPEUTICS INC. Consolidated Statements of Financial Position As at March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars) ASSETS Current Cash and cash equivalents Term deposits [note 7] Trade and other receivables [note 8] Inventory Prepaid expenses [note 14] Assets held for sale [note 6] Total current assets Non-current assets Property and equipment, net Loan receivable Deposits Deferred contract costs [note 24] Intangible assets, net [note 9] Total non-current assets 2022 $ 2021 $ 34,807 20,000 1,157 - 768 4,632 61,364 - 159 - 1,283 26,352 27,794 71,973 25 2,603 2,157 2,345 - 79,103 309 157 20 1,283 869 2,638 TOTAL ASSETS 89,158 81,741 LIABILITIES Current Accounts payable and accrued liabilities Current portion lease obligation Liabilities directly associated with assets held for sale [note 6] Total current liabilities Non-current liabilities Deferred revenue [note 24] Lease liability Total non-current liabilities TOTAL LIABILITIES SHAREHOLDERS’ EQUITY Share capital [note 12(b)] Common share purchase warrants [note 12(e)] Contributed surplus Deficit TOTAL SHAREHOLDERS’ EQUITY 2,816 - 1,878 4,694 3,608 133 - 3,741 27,631 - 27,631 27,631 105 27,736 32,325 31,477 139,547 10,264 18,038 (111,016) 56,833 111,574 10,353 14,293 (85,956) 50,264 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 89,158 81,741 Commitments and contingencies [note 25] Subsequent events [note 26] (Signed) Daniel Legault Daniel Legault, Director (Signed) Robert Hoffman Robert Hoffman, Director See accompanying notes to the consolidated financial statements 2 ANTIBE THERAPEUTICS INC. Consolidated Statements of Loss and Comprehensive Loss For the Years Ended March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts) EXPENSES Research and development [note 14] Stock-based compensation [note 15] General and administrative [note 16] Selling and marketing [note 17] Impairment of amounts due from Antibe Holdings Inc Total expenses 2022 $ 14,358 5,521 5,442 208 - 25,529 2021 $ 13,427 3,989 6,000 115 452 23,983 LOSS FROM CONTINUING OPERATIONS (25,529) (23,983) Finance and related costs (income) [note 18] Finance income LOSS BEFORE INCOME TAXES PROVISION FOR INCOME TAXES Current [note 19] Total provision for income taxes 3 (282) (25,250) (84) (46) (23,853) - - - - NET LOSS FROM CONTINUING OPERATIONS (25,250) (23,853) DISCONTINUED OPERATIONS Income (loss) from discontinued operations [notes 4 and 6] NET LOSS 190 (2,448) (25,060) (26,301) OTHER COMPREHENSIVE GAIN Exchange differences on translation of foreign operations - 18 COMPREHENSIVE LOSS (25,060) (26,283) Basic and diluted loss per share [note 13] (0.50) (0.70) Basic and diluted weighted average number of shares outstanding [note 13] 50,774,440 37,251,785 See accompanying notes to the consolidated financial statements 3 ANTIBE THERAPEUTICS INC. Consolidated Statements of Changes in Shareholders’ Equity For the Years Ended March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share amounts) Number of Common Shares Share capital Common Share purchase warrants Contributed surplus Accumulated other comprehensive income Deficit Total shareholders’ equity $ $ $ Balance, March 31, 2020 29,368,177 49,666 2,626 11,142 Shares and warrants issued 13,915,000 58,478 10,637 - Share issuance costs - (5,942) (1,034) 1,589 Shares issued for exercised warrants Shares issued for exercised options Shares issued for redeemed restricted share units 1,553,076 5,663 (1,876) - 564,600 2,465 321,752 1,244 - - (1,183) (1,244) Stock-based compensation - - - 3,989 Net loss from continuing operations for the year Loss from discontinued operations Exchange differences on translation of foreign operations Balance, March 31, 2021 - - - - - - - - - - - - 45,722,605 111,574 10,353 14,293 Balance, March 31, 2021 45,722,605 111,574 10,353 14,293 Shares issued for exercised warrants Shares issued for redeemed restricted share units Shares issued on amalgamation with Antibe Holdings Inc. [notes 5 and 12] 42,640 217 (89) - 460,939 1,776 - (1,776) 5,873,092 25,980 - - $ 18 - - - - - - - - (18) - - - - - $ $ (59,673) 3,779 - - - - - - 69,115 (5,387) 3,787 1,282 - 3,989 (23,853) (23,853) (2,448) (2,448) 18 - (85,956) 50,264 (85,956) 50,264 - - - 128 - 25,980 5,521 Stock-based compensation - - - 5,521 - - Net loss from continuing operations for the year Income from discontinued operations Balance, March 31, 2022 - - - - - - - - 52,099,276 139,547 10,264 18,038 - - - (25,250) (25,250) 190 190 (111,016) 56,833 See accompanying notes to the consolidated financial statements 4 ANTIBE THERAPEUTICS INC. Consolidated Statements of Cash Flows For the Years Ended March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars) CASH FLOWS USED IN OPERATING ACTIVITIES Net loss from continuing operations for the year Income (loss) from discontinued operations [notes 4 and 6] Items not affecting cash: Stock-based compensation [notes 12 and 15] Accretion interest Depreciation of property and equipment Amortization of intangible assets Interest on capitalized lease payments Loss on disposal of BMT [note 4] Impairment of amount due from Antibe Holdings Inc. Changes in non-cash balances: Trade and other receivables Inventory Prepaid expenses Deferred contract costs Accounts payable and accrued liabilities Income taxes payable Deferred revenue Net change in non-cash balances 2022 $ 2021 $ (25,250) 190 (23,853) (2,448) 5,521 - 34 65 18 - - (19,422) 3,989 35 189 289 16 1,357 452 (19,974) 287 (99) 1,517 - 927 (130) - 2,502 (1,198) 530 (2,186) (1,047) (1,461) - 25,231 19,869 Cash flows used in operating activities (16,920) (105) CASH FLOWS USED IN INVESTING ACTIVITIES Purchase of term deposits [note 7] Transaction costs on acquisition of assets, net of cash acquired [note 5] Advances to BMT [note 4] Purchase of equipment Cash flows used in investing activities (19,975) (236) - (9) (20,220) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES Advances to Antibe Holdings Inc. Lease payments Increase in loan receivable Repayment of credit facility [note 10] Issuances: Gross proceeds from shares and warrant issuance [note 12] Proceeds from exercised warrants [note 12] Proceeds from exercised options [note 12] Share issuance costs [note 12] Cash flows provided by (used in) financing activities - (152) (2) - - 128 - - (26) Net increase (decrease) in cash during the year Cash and cash equivalents, beginning of the year Cash and cash equivalents, end of the year (37,166) 71,973 34,807 - - (264) - (264) (69) (161) (157) (2,250) 69,115 3,787 1,282 (5,387) 66,160 65,791 6,182 71,973 See accompanying notes to the consolidated financial statements 5 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 1. DESCRIPTION OF BUSINESS Antibe Therapeutics Inc. (the “Company” or “Antibe”) was incorporated under the Business Corporations Act (Ontario) on May 5, 2009. On June 18, 2013, the Company completed its initial public offering and was listed on the TSX Venture Exchange. On September 15, 2014, the Company began trading in the United States on the OTCQX Exchange. On October 1, 2017, the Company changed trading platforms to the OTCQB Exchange. On November 12, 2020, the Company completed its graduation to the Toronto Stock Exchange (“TSX”) and the Company’s common shares (the “Common Shares”) began trading on the TSX under the symbol “ATE.” In connection with the Company’s graduation to the TSX, concurrently, the Common Shares were voluntarily delisted from the TSX Venture Exchange. On February 16, 2021, the Company resumed trading on the OTCQX market under the symbol “ATBPF.” The Company originates, develops and out-licenses new pharmaceuticals. Antibe’s lead compound, otenaproxesul (previously known as OTENAPROXESUL), combines a moiety that releases hydrogen sulfide with naproxen, an approved, marketed and off-patent, non-steroidal, anti-inflammatory drug. The Company’s main objectives are to develop otenaproxesul by satisfying the requirements of the relevant drug regulatory authorities while also satisfying the commercial licensing objectives of prospective global partners. The Company has also established a development plan for its lead compound through to the end of Phase III human clinical studies for regulatory discussion purposes. Additionally, the Company continues to investigate other research projects as well as additional development opportunities. The Company is also, through its wholly owned subsidiary, Citagenix Inc. (“Citagenix”), a seller of tissue regenerative products servicing the orthopaedic and dental marketplaces. Citagenix’s portfolio consists of branded biologics and medical devices that promote bone regeneration. Citagenix operates in Canada through its direct sales force, and in the United States and internationally via a network of distributors (see note 26, Subsequent Events). The address of the Company’s registered head office and principal place of business is 15 Prince Arthur Avenue, Toronto, Ontario, Canada, M5R 1B2. The Company was founded with an exclusive intellectual property license from Antibe Holdings Inc. (“Holdings”), a related party, to develop and commercialize the Company’s pipeline drugs. The license obligated the Company to pay royalties to Holdings on future revenues derived from this intellectual property. On May 7, 2021, the Board of Directors of Antibe and Holdings agreed to combine the companies in an amalgamation transaction. Under the terms of the agreement, the Company acquired full ownership of Holdings’ patent portfolio, eliminating the royalty liability on future revenues (note 5). As of the date of the amalgamation on June 3, 2021, 11.4% of the Company’s Common Shares were held by the former shareholders of Holdings. These consolidated financial statements were authorized for issuance by the Board of Directors on June 29, 2022. 2. BASIS OF PRESENTATION (a) Statement of compliance – These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board. These consolidated financial statements have been prepared using the accounting policies in note 3. 6 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 2. BASIS OF PRESENTATION (continued) (b) Consolidation – These consolidated financial statements reflect the accounts of the Company and its wholly owned subsidiary, Citagenix. The Company operates as two operating segments: Antibe (research and development of new pharmaceuticals) and Citagenix (a seller of tissue regenerative products servicing the orthopaedic and dental marketplaces). The assets and liabilities of Citagenix are recorded as held for sale on the March 31, 2022 consolidated statements of financial position (note 6). The results of the operations of Citagenix and BMT Medizintechnik GmbH (“BMT”) are recorded within income (loss) from discontinued operations in the statements of loss and comprehensive loss (notes 4 and 6). On December 3, 2020, the Company sold its wholly owned subsidiary, BMT. Citagenix was acquired on October 15, 2015. It was incorporated under the Business Corporations Act (Quebec) on December 8, 1997, and operates in Canada and the US. All intercompany balances and transactions have been eliminated on consolidation. For the purposes of effecting a three-cornered amalgamation with Holdings, a company incorporated in the Province of Alberta, the Company established a wholly owned subsidiary, 2831094 Ontario Inc. On June 2, 2021, Holdings and 2831094 Ontario Inc. amalgamated into the resulting entity, Antibe Amalco Inc. (“Amalco”). On June 3, 2021, Amalco was vertically amalgamated into the Company (note 5). (c) Share consolidation – On December 1, 2020, the Company completed a share consolidation of the Company’s issued and outstanding Common Shares on the basis of one (1) new common share for every ten (10) Common Shares issued and outstanding. All Common Shares, options, restricted share units (“RSUs”), warrants and per share amounts have been restated to give retrospective effect to the share consolidation. (d) Going concern – The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As at March 31, 2022, the Company had working capital of $56,670, incurred a comprehensive loss for the year then ended of $25,060, had negative cash flows from operations of $16,920 and an accumulated deficit of $111,016. Until such time as the Company’s pharmaceutical products are patented and approved for sale, the Company’s liquidity requirements are dependent on its ability to raise additional capital by selling additional equity, from licensing agreements of its lead compound, from proceeds from the exercise of stock options and common share warrants or by obtaining credit facilities. The Company’s future capital requirements will depend on many factors, including, but not limited to, the market acceptance of its products and services. No assurance can be given that any such additional funding will be available or that, if available, it can be obtained on terms favourable to the Company. All of the factors above indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern, which assumes the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the ordinary course of business. Management’s plans to address these issues involve actively seeking capital investment and generating revenue and profit from the commercialization of its products. The Company’s ability to continue as a going concern is subject to management’s ability to successfully implement this plan. Failure to implement this plan could have a material adverse effect on the Company’s financial condition and financial performance. 7 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 2. BASIS OF PRESENTATION (continued) If the going concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying value of assets and liabilities, the reported revenue and expenses, and the classifications used in the consolidated statements of financial position. The consolidated financial statements do not include adjustments that would be necessary if the going concern assumption were not appropriate. (e) Business uncertainty – In December 2019, COVID-19 emerged in Wuhan, China. Since then, it has spread to most other countries and infections have been reported around the world. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. In response to the outbreak, governmental authorities in Canada and internationally have introduced various recommendations and measures to try to limit the pandemic, including travel restrictions, border closures, non-essential business closures, quarantines, self-isolation, sheltering-in-place and social distancing. The COVID-19 outbreak and the response of governmental authorities to try to limit it are having a significant impact on the private sector and individuals, including unprecedented business, employment and economic disruptions. The COVID-19 pandemic has impacted the Company’s business to some extent. The Company’s Phase 2 trial in calendar 2020 took an additional six weeks to complete due to factors such as the COVID-19 related closure of medical clinics, doctors becoming ill from COVID-19, and staff working from home, all of which slowed the collation of the trial data. COVID-19 could further impact the Company’s expected timelines, operations and the operations of its third-party suppliers, manufacturers, and Contract Research Organizations as a result of quarantines, facility closures, travel and logistics restrictions and other limitations in connection with the outbreak. The most significant risk posed by the COVID-19 pandemic is that it could also significantly impact the progress and completion of the clinical trials. Whatever further impact, if any, the COVID-19 pandemic may have on the Company is unpredictable. The continued spread of COVID-19 nationally and globally could also lead to a deterioration of general economic conditions including a possible national or global recession. While the Company believes the current conditions related to the COVID-19 pandemic to be improving, the situation is dynamic and the impact of COVID-19 on its future results of operations and financial condition cannot be reasonably estimated at this time. The Company continues to evaluate the situation and monitor any impacts or potential impacts to its business. In the normal course of business, the Company could be the subject of litigation or other potential claims; any matters related to potential legal proceedings are disclosed in the Company’s Annual Information Form. While management assesses the merits of each lawsuit and defends itself accordingly, the Company may be required to incur significant expenses or devote significant resources to defending itself against litigation. (f) Use of estimates – The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, as at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting period. Actual results may vary from the current estimates. These estimates are reviewed periodically and, as adjustments become necessary, they are reported in income in the year in which such adjustments become known. Significant estimates in these consolidated financial statements include the determination of the valuation of intangible assets, completeness of the accrual for research and clinical trial expenses, and accruals and inputs related to the calculation of stock-based compensation. 8 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 2. BASIS OF PRESENTATION (continued) (g) Comparative figures – BMT and Citagenix operations were reclassified into discontinued operations in the consolidated statements of loss and comprehensive loss, in accordance with IFRS 5, Non-current Assets held for Sale and Discontinued Operations (notes 4 and 6). 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGMENTS and ASSUMPTIONS Cash and cash equivalents – Cash includes cash and liquid investments with a term to maturity of 90 days or less when acquired. Inventory – Inventory consists of ready for sale goods. Inventory is valued at the lower of cost and net realizable value. Cost is determined based on the average cost. Net realizable value is the estimated selling price less the estimated costs necessary to make the sale. The Company monitors inventory to determine when inventory values are not recoverable and when a write-down is necessary. Property and equipment – Property and equipment are stated at cost or deemed cost less accumulated depreciation and accumulated impairment losses. Property and equipment are amortized over their estimated useful life at the following rates and methods: Furniture and fixtures Computer equipment Leasehold improvements Vehicles 20% per annum 3 years 10 years 5 years declining balance method straight-line method straight-line method straight-line method The Company prorates depreciation for acquisitions made during the year. The depreciation method, useful life and residual values are assessed annually. When an item of property and equipment comprises significant components with different useful lives, the components are accounted for as separate items of property or equipment. Expenditures incurred to replace a component of an item of property or equipment that is accounted for separately are capitalized. Gains and losses on disposal of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognized within other income (loss) in the consolidated statements of loss and comprehensive loss. Intangible assets – Intangible assets with finite lives are stated at cost less accumulated amortization. Amortization is based on the estimated useful life of the asset and is calculated as follows: Trademarks and brands License and customer lists Patents 10 years 10 years 17 years straight-line method straight-line method straight-line method 9 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGMENTS and ASSUMPTIONS (continued) Impairment of non-financial assets – The Company’s property and equipment and intangible assets with finite lives are reviewed for indications of impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If indication of impairment exists, the asset’s recoverable amount is estimated. An impairment loss is recognized when the carrying amount of an asset, or its cash-generating unit (“CGU”), exceeds its recoverable amount. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Impairment losses are recognized in profit and loss for the year. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGUs and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. The recoverable amount is the greater of the CGU’s fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the CGU to which the asset belongs. An impairment loss is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Intangible assets that are not yet available for use are not amortized but are tested for impairment at least annually or sooner if there is an indication of impairment. Related party transactions – Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Leases – IFRS 16, Leases, sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model, with certain exemptions. The standard includes two recognition exemptions for lessees – leases of “low-value” assets and short-term leases with a lease term of 12 months or less. At the commencement date of a lease, a lessee will recognize a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees are also required to remeasure the lease liability upon the occurrence of certain events such as a change in lease term. 10 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGMENTS and ASSUMPTIONS (continued) The Company recognizes a right-of-use asset based on the amount equal to the lease liability, adjusted for any related prepaid and accrued lease payments previously recognized. The lease liability is recognized based on the present value of remaining lease payments, discounted using the incremental borrowing rate at the date of initial application of the standard or inception of the lease. The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Income taxes – Income taxes are accounted for using the liability method. Deferred income tax assets and liabilities are recognized based on the temporary differences between the assets and liabilities for accounting purposes and the amounts used for tax purposes and the benefit of unutilized tax losses for which it is probable they will be realized and carried forward to future years to reduce income taxes. Deferred income tax assets and liabilities are not recognized if the temporary differences arise from goodwill or from initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred income tax assets and liabilities are measured using tax rates enacted by tax laws or substantively enacted for the years in which deferred income tax assets are likely to be realized or deferred income tax liabilities settled. The effect of a change in tax rates on deferred income tax assets and liabilities is included in loss and comprehensive loss in the period when the change is substantially enacted. Deferred share issuance costs – These are costs related directly to the proposed issuance of shares by the Company pursuant to private placements and public share offerings. Upon completion of the share issuance, these costs are charged against share capital. Such costs are recognized as an expense in the event that it is determined that such transaction will not be completed. Government grants and investment tax credits – Amounts received or receivable resulting from government assistance programs are recognized when 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, it is recognized into income as reduction to the costs that it is intended to compensate. When the amount 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. Investment tax credits (“ITCs”) receivable are amounts refundable from the Canadian federal and provincial governments under the Scientific Research & Experimental Development (“SR&ED”) incentive program. The amounts claimed under the program represent the amounts submitted by management based on research and development costs paid during the year and included a number of estimates and assumptions made by management in determining the eligible expenditures. ITCs are recorded when there is reasonable assurance that the Company will realize the ITCs. Recorded ITCs are subject to review and approval by tax authorities and, therefore, could be different from the amounts recorded. Research and development expense – Research costs are expensed as incurred. Development costs are expensed in the year incurred unless they meet certain criteria for capitalization. No development costs have been capitalized to date. 11 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGMENTS and ASSUMPTIONS (continued) Revenue recognition – Product sales Revenue from product sales is recognized when control of the goods is transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. In certain circumstances, returns or exchange of products are allowed under the Company’s policy or the Company may provide discounts or allowances, which gives rise to variable consideration. The variable consideration is estimated using the expected value method as this best predicts the amount of variable consideration to which the Company is entitled. License revenue The Company may enter into license agreements for the development and/or commercialization of products in certain territories. IFRS 15, Revenue from Contracts with Customers, includes specific guidance for accounting for license of intellectual property, which requires revenue to be recorded either over time or at a point in time, depending on whether the customer has the “right to access” or the “right to use” the intellectual property. For licenses that provide the customer with the right to access the intellectual property, revenue is recognized throughout the license period. For licenses that provide the customer with the right to use the intellectual property, revenue is deferred and amortized to the consolidated statements of loss and comprehensive loss at a point in time where the customer can first use and benefit from the license. Costs to obtain a contract – Incremental costs incurred to obtain a contract are capitalized as a contract asset on the consolidated statements of financial position. These costs are deferred and amortized to the consolidated statements of loss and comprehensive loss at a point in time where the customer can first use and benefit from the license. The contract assets are tested for impairment annually, or if there are indicators of impairment. Financing component – Agreements entered into with licensing partners often include an upfront fee upon execution of the agreement. If considered significant in the context of the arrangement, these upfront fees are accounted for as a financing component. Stock-based compensation – The Company accounts for options and warrants using the fair value-based method of accounting for stock-based compensation. Fair values are determined using the Black-Scholes-Merton option-pricing model (“BSM”). Management exercises judgment in determining the underlying share price volatility, expected life of the option, expected forfeitures and other parameters of the calculations. Compensation costs are recognized over the vesting period as an increase to stock-based compensation expense and contributed surplus. If, and when, stock options and warrants are ultimately exercised, the applicable amounts of contributed surplus and common share purchase warrants are transferred to share capital. The Company accounts for restricted share units (“RSUs”) using the fair market value on the date of the grant. Compensation costs are recognized over the vesting period as an increase to stock-based compensation expense and contributed surplus. When RSUs are redeemed, the applicable amount of contributed surplus is transferred to share capital. Broker warrants – Warrants issued in a public or private placement to brokers are accounted for under IFRS 2, Share-based Payments, and are classified as equity. 12 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGMENTS and ASSUMPTIONS (continued) Loss per share – Basic loss per share is calculated on the basis of loss attributable to the holders of Common Shares divided by the weighted average number of Common Shares outstanding during the year. Diluted per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to Common Shares. The treasury stock method assumes that proceeds received from the exercise of in-the-money stock options and common share purchase warrants are used to repurchase Common Shares at the prevailing market rate. Diluted loss per share is equal to basic loss per share when the effect of otherwise dilutive securities is anti-dilutive. Provisions – The Company recognizes a provision when it has a present obligation (legal or constructive) as a result of a past event, it is probable it will be required to settle the obligation, and it can make a reliable estimate of its amount. The amount it recognizes as a provision is its best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the surrounding risks and uncertainties. Where it measures a provision using the cash flows estimated to settle the present obligation, the carrying amount is the present value of those cash flows, calculated using a pre-tax discount rate reflecting the risks specific to the liability. The Company adjusts the liability at the end of each reporting period for the unwinding of the discount rate and for changes to the discount rate or to the amount or timing of the estimated cash flows underlying the obligation. Measurement of financial instruments – Classification and measurement Except for certain trade receivables, under IFRS 9, Financial Instruments (“IFRS 9”), the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (“FVTPL”), transaction costs. Under IFRS 9, financial liabilities are subsequently measured at FVTPL, amortized cost, or fair value through other comprehensive income (“FVOCI”). The classification is based on two criteria: the Company’s business model for managing the assets; and whether the instruments’ contractual cash flows represent “solely payments of principal and interest” on the principal amount outstanding. The financial instruments of the Company are classified as follows: Financial assets Cash and cash equivalents Term deposits Trade and other receivables Due from Antibe Holdings Inc Deposits Financial liabilities Bank indebtedness Accounts payable and accrued liabilities Loan payable IFRS 9 Amortized cost Amortized cost Amortized cost Amortized cost Amortized cost Amortized cost Amortized cost Amortized cost 13 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGMENTS and ASSUMPTIONS (continued) Financial instruments Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. The purchase and sale of financial assets are recognized using trade date accounting. Financial liabilities are derecognized when the obligation is discharged, cancelled or expires. Financial assets and liabilities are offset and the net amount reported when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. There are three measurement categories in which the Company classifies its financial assets: • Amortized cost: Financial instruments that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortized cost. Interest income from these financial instruments is recorded in net income (loss) using the effective interest rate method. • FVOCI: Debt instruments that are held for collection of contractual cash flows and for selling the financial instruments, where the financial instruments’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through other comprehensive income (loss) (“OCI”), except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses that are recognized in net income (loss). When the financial instrument is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to net income (loss) and recognized in other gains (losses). Interest income from these financial instruments is included in interest using the effective interest rate method. Foreign exchange gains (losses) are presented in other gains (losses) and impairment expenses in other expenses. • FVTPL: Financial instruments that do not meet the criteria for amortized cost or FVOCI are measured at FVTPL. A gain or loss on a financial instrument that is subsequently measured at FVTPL and is not part of a hedging relationship is recognized in net income (loss) and presented net in comprehensive income (loss) within other gains (losses) in the period in which it arises. Financial liabilities are either classified as amortized cost or FVTPL. For financial liabilities held at amortized cost, when the Company revises its estimates of the amount and timing of payments, it will adjust the gross carrying amount of the amortized cost of a financial liability to reflect actual and revised estimated contractual cash flows. The Company recalculates the gross carrying amount of the amortized cost of the financial liability as the present value of the estimated future contractual cash flows that are discounted at the financial instrument's original effective interest rate. The adjustment is recognized in net income (loss). 14 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGMENTS and ASSUMPTIONS (continued) Impairment of financial assets At each reporting date, the Company assesses on a forward-looking basis the expected credit losses (“ECLs”) associated with its financial instruments carried at amortized cost and whether there is objective evidence that a financial asset is impaired. Trade and other receivables are subject to lifetime ECLs, which are measured as the difference in the present value of the contractual cash flows that are due under the contract, and the cash flows that are expected to be received. The Company applies the simplified approach at each reporting date on its trade and other receivables and considers current and forward-looking macro-economic factors that may affect historical default rates when estimating ECL. Financial assets, together with the associated allowance, are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or decreased by adjusting the carrying value of the loan or receivable. If a past write-off is later recovered, the recovery is recognized in the consolidated statements of loss and comprehensive loss. Significant estimates, judgments and assumptions Completeness of the accrual for research and clinical trial expenses The Company’s determination of accrued research and clinical trial costs at each reporting period requires significant judgment, as estimates are based on a number of factors, including management’s knowledge of the research and development programs and associated timelines, invoicing to date from third party vendors, and the terms and conditions in the contractual arrangements including amendments or ancillary agreements. The completeness of research and clinical trial accruals is subject to risk of estimation uncertainty related to services having been received where invoices are not received from third party vendors in a timely manner prior to the time the consolidated financial statements are issued. Valuation of intangible assets not yet subject to amortization The Company acquired intangible assets consisting of intellectual property as part of its acquisition of the underlying assets of Holdings. The fair value of the intellectual property acquired was determined based on the relief from royalty method. The intellectual property acquired is not yet subject to amortization, and in accordance with the Company’s accounting policies, is tested for impairment at least annually, or sooner if there is an indication of impairment. The cash flows from the intellectual property acquired are monitored within the Antibe CGU. When performing the annual impairment test as at March 31, 2022, the Company determined the recoverable amount of the Antibe CGU using a value-in-use approach and prepared a discounted cash flow model. Significant assumptions used within the discounted cash flow model are disclosed within note 9. Vesting period for performance-based restricted share units The Company issues certain RSUs which vest depending on specified operational performance conditions. The RSUs are to be settled with the Company’s shares. Details of the RSU grants are disclosed within note 12. When calculating the share-based compensation expense for the period, the Company estimates the likelihood and timing of achieving the performance conditions. 15 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGMENTS and ASSUMPTIONS (continued) New and amended standards and interpretations A number of amendments to standards have been issued but are not yet effective for the financial year ended March 31, 2022, and accordingly, have not been applied in preparing these consolidated financial statements. The Company reviewed these amendments and concluded that there would be no impact on adoption given their nature and applicability. 4. SALE OF BMT On December 3, 2020, the Company completed the sale of 100% of the shares of its wholly owned subsidiary, BMT, for cash consideration of €1 (one euro). The results of BMT are presented in the consolidated statements of loss and comprehensive loss within loss from discontinued operations for the year ended March 31, 2021. The results of BMT for the year ended March 31, 2021 are presented below: Revenue Cost of goods sold Gross profit Expenses Loss on sale of BMT Loss from discontinued operations 2021 $ 228 136 92 302 1,357 (1,567) The loss on the sale of BMT, $1,358, is the result of the derecognition of BMT’s assets and liabilities for consideration of 1 Euro. The major classes of assets and liabilities on the day of sale are presented below. Accounts receivable Inventory Prepaid expenses Property, plant and equipment Government remittances receivable Trademarks Accounts payable and accrued liabilities Bank indebtedness Loss on sale of BMT 2021 $ 87 734 9 6 5 613 (83) (14) $1,357 As part of the sale agreement, Antibe wrote off a net intercompany loan receivable from BMT of $1,863. Cash flows from operations incurred by BMT for the year ended March 31, 2021, were negative $264 and are presented within the Company’s consolidated statements of cash flows. 16 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 4. SALE OF BMT (continues) Antibe has also provided a loan to the purchaser in the amount of $157 (€100 thousand) for working capital purposes. This loan matures on December 3, 2022 and bears interest at an annual rate of 5%, payable quarterly. 5. AMALGAMATION WITH RELATED PARTY On May 7, 2021, the Company announced that the Boards of Directors of Antibe and Holdings agreed to combine the companies in an amalgamation transaction pursuant to which shareholders of Holdings would receive Common Shares of the Company in exchange for their shares of Holdings. The companies were combined in a three-cornered amalgamation transaction pursuant to which Holdings amalgamated with a newly incorporated subsidiary of the Company. This related party transaction closed on June 3, 2021. On June 3, 2021, the Company issued an aggregate of 5,873,092 Common Shares for a total consideration of $25,980, to acquire all of the issued and outstanding shares of Holdings, following which Holdings ceased to exist. The amalgamation was accounted for as an acquisition of the underlying assets of Holdings. The fair value of the assets acquired include $26,051 in intangible assets related to intellectual property, $65 in cash, net of amounts owed to Antibe for advances made in the quarter prior to the amalgamation, $28 in other assets, $130 in income taxes payable and $34 in other current liabilities. The fair value of the intellectual property was determined based on the relief from royalty method. The Company has also capitalized $301 of costs directly related to the amalgamation to the intellectual property acquired. The intellectual property acquired is not yet subject to amortization as it is classified as not yet available for use in accordance with the Company’s accounting policies. At the time of acquisition, these new shares accounted for approximately 11.4% of the ownership of Antibe on a post-transaction basis. Shares issued to Company insiders, who collectively owned approximately 37.5% of the outstanding shares of Holdings, are subject to lock-up agreements, with half of them released 120 days after closing and the balance released 240 days after closing. 6. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS On May 2, 2022, the Company announced the signing of a binding agreement to sell its Citagenix subsidiary (see note 26, Subsequent Events). The $6.5 million transaction involves a guaranteed $3.5 million, divided into four equal payments over three years, the first of which will be received at closing. The remaining $3 million is subject to Citagenix achieving sales milestones over the three-year period following closing. The transaction will close no later than 180 days following the signing of this binding agreement. Under the terms of the agreement, Antibe will also receive a $250 deposit from the purchaser to be held in escrow and released at closing. As at March 31, 2022, the Company met the requirements to record Citagenix as Held for Sale and a Discontinued Operation, in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations. Citagenix is not a fit with the Company’s core business of developing new drugs as a clinical stage biotechnology company. The results of Citagenix for the years ended March 31, 2022 and 2021 are presented below: Revenue Cost of goods sold Gross profit Expenses Income (loss) from discontinued operations 2022 $ 13,511 8,145 5,366 5,176 190 2021 $ 9,714 6,164 3,550 4,431 (881) 17 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 6. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (continued) Revenue by geographic region for the year ended March 31, 2022 is as follows: Canada – 37% USA – 30% Europe – 3% ROW - 30% Within the March 31, 2022 consolidated statement of financial position, following the classification of Citagenix as a discontinued operation, assets held for sale were as follows: Accounts receivable, net of allowances Inventory Prepaid expenses Intangible assets Property and equipment Deposits Assets held for sale 2022 $ 1,176 2,259 64 804 305 24 4,632 The major classes of liabilities classified as held for sale presented within the March 31, 2022 consolidated statement of financial position are presented below: Accounts payable and accrued liabilities Lease liability Liabilities associated with assets held for sale 2022 $ 1,753 125 1,878 Cash flow provided by Citagenix operating activities for the year ended March 31, 2022 was $437 (2021– ($441). 7. TERM DEPOSITS On March 28, 2022, the Company invested $20,000 in four separate GICs having expiry dates of three, six, nine and twelve months. The principal amount invested in each GIC is $5,000 and the interest rates range from 1.4% to 2.35%. 18 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 8. TRADE AND OTHER RECEIVABLES 2022 $ Scientific Research and Experimental Development (“SR&ED”) tax credits receivable Interest receivable Trade receivables, net of allowances Harmonized Sales Tax receivable 774 3 - 344 1,121 Employee advances [note 11] 36 1,157 2021 $ 1,131 - 1,061 392 2,584 19 2,603 9. INTANGIBLE ASSETS Intangible assets consist of the following: Trademarks and brands $ Intellectual Property $ Customer lists $ Patents $ Cost As at March 31, 2020 Disposals As at March 31, 2021 As at April 1, 2021 Additions [note 5] As at March 31, 2022 Amortization As at March 31, 2020 Disposals Charge for the year As at March 31, 2021 As at April 1, 2021 Charge for the year 3,094 (1,217) 1,877 1,877 - 1,877 1,381 (604) 249 1,026 1,026 47 - - - - 26,352 26,352 - - - - - - As at March 31, 2022 1,073 - Transferred to assets held for sale [note 6] Carrying amount As at March 31, 2021 As at March 31, 2022 804 851 - - - 26,352 177 - 177 177 - 177 123 - 36 159 159 18 177 - 18 - 19 - 19 19 - 19 15 - 4 19 19 - 19 - - - Total $ 3,290 (1,217) 2,073 2,073 26,352 28,425 1,519 (604) 289 1,204 1,204 65 1,269 804 869 26,352 19 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 9. INTANGIBLE ASSETS (continued) The intellectual property is not yet subject to amortization and is tested for impairment at least annually, or sooner if there is an indication of impairment. The cash flows from the intellectual property acquired are monitored within the Antibe cash-generating unit (CGU). The Company performed its annual impairment test on March 31, 2022 and concluded that the recoverable amount of the Antibe CGU was not less than its carrying value. The Company determined the recoverable amount of the Antibe CGU using a value-in-use approach through a discounted cash flow analysis. Significant assumptions used in the discounted cash flow analysis included: projections for the future costs of clinical trials, revenue and margin projections, probability of commercialization, and the discount rate. These assumptions are affected by expectations about future market and economic conditions including the success of clinical trials, obtaining regulatory approvals, future product pricing, future production costs, and the future demand for these pharmaceutical products. 10. CREDIT FACILITY INDEBTEDNESS On June 29, 2018, Citagenix replaced its bank operating line facility with a $2.25 million secured revolving credit facility (the “Credit Facility”) provided by Bloom Burton Healthcare Lending Trust (“BBHLT”). Amounts outstanding under the Credit Facility bear interest at a rate of 7% compounded monthly, payable quarterly. On June 29, 2020, the maturity date of the BBHLT Credit Facility, the Company paid in full the principal amount of $2,250, plus outstanding interest of $40. 11. RELATED PARTY TRANSACTIONS Refer to note 5 for information regarding the amalgamation with Antibe Holdings Inc. Employee cash advances as at March 31, 2022, totalled $36. Currently, the Company has one officer receiving cash advances. 12. SHARE CAPITAL (a) Authorized – The Company has an unlimited number of authorized Common Shares without par value. (b) Common Shares – Balance, beginning of the year Amalgamation with Holdings Warrants exercised Options exercised Restricted share units redeemed Prospectus June 30, 2020 (“P2020”) Prospectus February 24, 2021 (“P2021”) Share issuance costs – P2020 Share issuance costs – P2021 Shelf prospectus costs 2022 2021 Shares 45,722,605 5,873,092 42,640 - 460,939 - - - - - Amount $ 111,574 25,980 217 - 1,776 - - - - - Shares 29,368,177 - 1,553,076 564,600 321,752 7,187,500 6,727,500 - - - Amount $ 49,666 - 5,663 2,465 1,244 26,041 32,437 (2,918) (2,988) (36) Balance, end of the year 52,099,276 139,547 45,722,605 111,574 20 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 12. SHARE CAPITAL (continued) On June 3, 2021, the Company completed a three-cornered amalgamation transaction with Holdings. In consideration, the Company issued an aggregate of 5,873,092 Common Shares (see note 5). The following provides additional information on the prospectus financing completed during the year ended March 31, 2021: Closing date Prospectus Number of units/ shares issued Number of warrants issued June 30, 2020 February 24, 2021 P2020 P2021 7,187,5001 6,727,5002 2,395,833 3,363,750 Price per unit $ 4.00 6.00 Gross proceeds3 $ 28,750 40,365 Warrant exercise price $ 6.00 7.50 Warrant expiry date June 30, 2022 February 24, 2024 1Each unit was composed of one Common Share and one-third of one Common Share purchase warrant. Each whole warrant entitles the holder to purchase one Common Share. 2Each unit was composed of one Common Share and one-half of one Common Share purchase warrant. Each whole warrant entitles the holder to purchase one common share. 3Gross proceeds have been allocated to share capital and warrants based on the residual method. Warrants were valued using the BSM. With respect to the prospectus financing completed during the year ended March 31, 2021, the Company issued the following warrants to brokers: Closing date Prospectus Number of broker warrants issued June 30, 2020 February 24, 2021 P2020 P2021 503,125 403,650 Total issuance costs $ 2,131 2,529 Non-cash cost from issuance of warrants to brokers $ 821 768 Broker warrant exercise price $ 4.00 6.00 Broker warrant expiry date June 30, 2022 February 24, 2023 All issuance costs were offset against share capital and common share purchase warrants in proportion to the allocation of proceeds. The following is a summary of all warrants exercised during the years ended March 31, 2022 and 2021: 2022 2021 Exercise price $ 1.50 2.50 3.00 3.50 4.00 6.00 Number of warrants exercised - - 42,640 - - - 42,640 Gross proceeds $ - - 128 - - - 128 Number of warrants exercised 915,650 12,800 23,208 277,650 301,336 22,432 1,553,076 Gross proceeds $ 1,373 32 70 972 1,205 135 3,787 21 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 12. SHARE CAPITAL (continued) Each of the warrants entitled the bearer to purchase one Common Share of the Company. (c) Stock options – In connection with the Company’s graduation to the TSX on November 12, 2020, and to fulfill the exchange’s compliance requirements, minor changes to the Company’s Stock Option Plan involving the calculation of fair market value have been put into effect. These changes received shareholder approval at the Company’s last annual general meeting. On January 11, 2021, the Company granted a consultant options in exchange for investor relations services. The options give the consultant the right to purchase a total of 66,000 common shares pursuant to the Company’s stock option plan. Each option has an exercise price of $4.00, vests quarterly starting on the date of the grant, and will expire January 11, 2024. The estimated fair value of the options, which approximates the value of the services to be received, and calculated using the BSM, is $136. On March 16, 2022, the TSX approved a request by the Company to amend the exercise price of 232,423 common share purchase options which were awarded pursuant to the Company’s Stock Option Plan. The following table provides details on the options which were amended: Grant date March 9, 2016 January 18, 2017 March 31, 2017 August 27, 2019 January 11, 2021 Previous exercise price $ 1.40 1.90 2.00 3.00 4.00 Number of options 2,300 10,000 119,123 35,000 66,000 New exercise price $ 0.68 0.68 0.68 0.68 0.68 None of the options are held by insiders of the Company and the new exercise price was at or above the market price (based on the five-day volume-weighted average price) immediately preceding February 11, 2022, the date when the Board of Directors granted approval for the stock option price amendment. The following is a summary of all options to purchase Common Shares that are outstanding as at March 31, 2022 and 2021, as well as details on exercise prices and expiry dates: 2022 2021 Options 1,269,035 20,000 - (14,600) 1,274,435 Weighted average price $ 2.95 0.91 - 1.96 Options 1,814,735 66,000 (564,600) (47,100) Weighted average price $ 2.71 4.00 2.27 3.24 2.93 1,269,035 2.95 Balance, beginning of the year Granted during the year Exercised during the year Forfeited during the year Balance, end of the year 22 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 12. SHARE CAPITAL (continued) Number of options 20,000 35,000 15,000 66,000 80,500 20,000 36,000 2,000 156,271 10,000 117,323 687,001 15,152 4,188 10,000 1,274,435 Exercise price $ 3.40 0.68 5.50 0.68 6.60 0.91 1.40 0.68 1.45 1.90 0.68 2.00 4.95 4.00 2.90 Expiry date April 26, 2022 August 27, 2022 October 21, 2023 January 11, 2024 March 4, 2024 November 15, 2024 July 13, 2025 March 9, 2026 March 9, 2026 January 18, 2027 March 31, 2027 March 31, 2027 April 11, 2028 May 8, 2028 March 11, 2029 The number of options exercisable as at March 31, 2022, is 1,264,435 and the weighted average exercise price of these options is $2.07. The total fair value of options not yet recognized as an expense is $5. The following assumptions were used in the BSM to determine the fair value of stock options granted in the years ended March 31, 2022 and 2021: Weighted average risk-free interest rate Weighted average expected volatility Expected dividend yield Weighted average expected life of options Weighted average share price Weighted average exercise price 2022 1.13% 98% - 3 years $0.88 $0.91 2021 0.24% 80% - 3 years $4.00 $4.00 (d) Restricted share unit plan – In connection with the Company’s graduation to the TSX on November 12, 2020, and to fulfill the exchange’s compliance requirements, minor changes to the Company’s RSU Plan involving the calculation of fair market value have been put into effect. These changes received shareholder approval at the Company’s last annual general meeting. On June 11, 2020, the Company granted 50,000 restricted share units (“RSUs”) in connection with the appointment of a new Chief Medical Officer. The RSUs are subject to time-based vesting; one-third of the RSUs granted will vest on each of the first, second and third anniversaries of the grant date. The fair value of the RSUs was $235, determined based on the share price on the grant date. 23 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 12. SHARE CAPITAL (continued) On July 23, 2020, and September 17, 2020, the Company granted 5,000 and 3,000 RSUs, respectively, to two consultants in exchange for public relations services. The RSUs vest quarterly starting on the date of the grant. The fair values of the July 23, 2020 RSUs and the September 17, 2020 RSUs were $20 and $11, respectively. On January 11, 2021, the Board of Directors awarded 2,092,000 RSUs to directors, officers, employees and consultants pursuant to the Company’s RSU plan. The vesting of 50% of the RSUs granted to key executives is subject to specific performance goals that reflect the successful execution of the Company’s business plan. All RSUs are subject to time-based vesting; one third of the RSUs granted will vest on each of the first, second and third anniversaries of the grant date. The total fair value of the RSUs was $8,369, determined based on the share price on the grant date. Included in the RSUs granted on January 11, 2021, are 731,000 performance RSUs granted to key senior executives of Antibe and Citagenix. Vesting of these RSUs is subject to the successful achievement of certain goals that are designed to reflect the successful execution of the Company’s business plan and strategy. The estimated fair value of these RSUs calculated using the share price on the grant date is $2,924. As at March 31, 2022, it was determined that the probability and timing of achieving the performance crite ria was greater than 50%, and as such, these performance RSUs were expensed and included in contributed surplus. On March 3, 2021, the Company granted a total of 80,000 RSUs to two employees in connection with their employment agreements, and two consultants in exchange for their services. The RSUs are subject to time-based vesting; one-third of the RSUs granted will vest on each of the first, second and third anniversaries of the grant date. The fair value of the RSUs was $412, determined based on the share price on the grant date. On May 1, 2021, and August 16, 2021, the Company granted 24,000 and 21,779 RSUs, respectively, to two consultants in exchange for consulting services. The RSUs vest quarterly beginning on the grant date. The fair values of the May 1, 2021 RSUs and the August 16, 2021 RSUs were $102 and $31, respectively. On May 1, 2021, the Company granted 10,000 RSUs in connection with the appointment of a new Director of Clinical Operations. The RSUs are subject to time-based vesting; one-third of the RSUs granted will vest on each of the first, second and third anniversaries of the grant date. The fair value of the RSUs was $43 determined based on the share price on the grant date. On November 15, 2021, the Company granted 380,000 RSUs to directors, officers, employees and consultants. The total fair value of these RSUs, determined using a five-day volume weighted average share price, is $346. All RSUs are subject to a service condition: one third (1/3) of the RSUs granted will vest on each of the first, second and third anniversaries of the grant date. In the case of RSUs granted to one consultant, all RSUs vested on the grant date. Included in the RSUs granted on November 15, 2021, are 140,000 performance RSUs granted to key senior executives. Vesting of these RSUs is subject to the successful achievement of certain goals that are designed to reflect the successful execution of the Company’s business plan and strategy. The estimated fair value of these performance RSUs, calculated as of the grant date, is $127. As at March 31, 2022, it was determined that the probability and timing of achieving the performance criteria was greater than 50%, and as such, these performance RSUs were expensed and included in contributed surplus. For the year ended March 31, 2022, $5,521 ($5,414 related to RSUs and $107 related to options) has been included within stock-based compensation in the statements of loss and comprehensive loss. 24 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 12. SHARE CAPITAL (continued) The following is a summary of all RSUs for Common Shares that are outstanding as at March 31, 2022 and 2021: 2022 RSUs Balance, beginning of the year Granted during the year Vested during the year Forfeited during the year Balance, end of the year 3,625,574 435,779 (1,566,907) (423,320) (56,001) 2,438,445 2021 RSUs 2,155,158 2,230,000 (625,000) (134,584) 3,625,574 The number of RSUs vested and redeemed during the year was 460,939 (2021 – 321,752. The number of RSUs vested and not redeemed during the year was 1,105,968 (2021 – 303,250). Based on the share price on the date of granting, the total fair value of RSUs not yet recognized as an expense is $4,080. (e) Common share purchase warrants – The following is a summary of all warrants to purchase Common Shares that are outstanding as at March 31, 2022 and 2021, as well as details on exercise prices and expiry dates: Balance, beginning of the year Issued during the year Exercised during the year Expired during the year Balance, end of the year 2022 2021 Warrants 7,906,117 - (42,640) (474,311) 7,389,166 Weighted average price $ 6.12 - 3.00 3.47 Warrants 2,838,785 6,666,358 (1,553,076) (45,950) Weighted average price $ 2.90 6.61 2.44 1.50 6.31 7,906,117 6.12 Number of warrants 489,726 2,373,401 758,639 403,650 3,363,750 7,389,166 Exercise price $ 4.00 6.00 4.00 6.00 7.50 Expiry date June 30, 2022 June 30, 2022 August 13, 2022 February 24, 2023 February 24, 2024 25 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 12. SHARE CAPITAL (continued) The following assumptions were used in the BSM to determine the fair value of warrants issued during the year ended March 31, 2021: Weighted average risk-free interest rate Weighted average expected volatility Expected dividend yield Weighted average expected life of warrants Weighted average share price Weighted average exercise price 2021 0.30% 75% 0.00% 2.5 years $4.87 $6.61 13. LOSS PER SHARE Basic loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of Common Shares outstanding during the period. All unexercised share options and warrants were excluded from calculating diluted loss per share as the effect of their issuance would be anti-dilutive. 14. RESEARCH AND DEVELOPMENT EXPENSES The nature of the research and development expenses for the years ended March 31, 2022 and 2021, is summarized as follows: Salaries and wages Professional and consulting fees Research and clinical trial costs SR&ED rebate Total research and development expenses 2022 $ 2,399 412 11,633 (86) 14,358 2021 $ 1,672 1,428 11,334 (1,007) 13,427 Non-refundable advance payments for goods and services that will be used or rendered in future research and development activities are recorded as a prepaid expense and recognized as an expense within “Research and clinical trial costs” in the period that the related goods are consumed, or services are performed. As at March 31, 2022, $569 (2021 – $2,115) was recorded as a prepaid expense. 15. STOCK-BASED COMPENSATION The function of the stock-based compensation expense for the years ended March 31, 2022 and 2021, is summarized as follows: General and administrative Research and development Total stock-based compensation 2022 $ 3,642 1,879 5,521 2021 $ 2,691 1,298 3,989 26 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 16. GENERAL AND ADMINISTRATIVE EXPENSES The nature of the general and administrative expenses for the years ended March 31, 2022 and 2021, is summarized as follows: Salaries and wages Professional and consulting fees Office expenses Other expenses Total general and administrative expenses 2022 $ 1,799 2,903 442 298 5,442 2021 $ 1,410 3,732 402 456 6,000 17. SELLING AND MARKETING EXPENSES The nature of the selling and marketing expenses for the years ended March 31, 2022 and 2021, is summarized as follows: Advertising and promotion Travel and entertainment Total selling and marketing expenses 2022 $ 140 68 208 2021 $ 62 53 115 18. FINANCE AND RELATED COSTS (INCOME) The components of the finance and related costs (income) for the years ended March 31, 2022 and 2021, are as follows: Interest and bank charges Foreign currency transactions Total finance and related costs 2022 $ 8 (5) 3 2021 $ 8 (92) (84) 27 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 19. INCOME TAXES The income tax provision recorded differs from the income tax obtained by applying the statutory income tax rate of 26.50% (2021 – 26.50%) to the loss before income taxes for the year, and is reconciled as follows: Loss before income taxes from continuing operations Expected income tax recovery at the combined basic federal and provincial tax rate: Decrease (increase) resulting from: Non-deductible expenses Tax losses on BMT Book write-down of receivable Others Amount related to unrecognized deferred tax assets Provision for (recovery of) income taxes 2022 $ (25,250) 2021 $ (23,853) (6,691) (6,321) 1,452 - - (101) 5,340 - 1,064 (379) 120 (398) 5,914 - The Company has incurred non-capital losses of $31,681 for tax purposes, which are available to reduce future taxable income. Such benefits will be recorded as an adjustment to the tax provision in the year realized. The losses expire as follows: In the year ending March 31, 2037 2038 2039 2040 2041 $ - 1,079 9,216 - 21,386 31,681 As at March 31, 2022, the Company has incurred capital losses of $11,587 which is applicable to future years and has no expiry date. The cumulative carry-forward pool of SR&ED expenditures as at March 31, 2022, applicable to future years, with no expiry date, is $22,426. 28 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 20. DEFERRED INCOME TAXES The recognized temporary differences and tax losses are attributable to the following: Amount related to tax loss Amount related to intangible assets on business combination Amount related to transaction costs Amount related to capital property Amount related to deferred contract costs Amounts related to other Net deferred income tax liabilities 2022 $ 123 - - 217 (340) - - 2021 $ 503 (226) 3 56 (340) 4 - Deferred tax expense of nil (2021 – $15) related to the foreign exchange translation gains was recognized in other comprehensive loss for the year. Deferred tax assets have not been recognized in respect of the following tempora ry differences: Amount related to tax loss carryforwards Amount related to eligible capital property Amount related to SR&ED expenditures Amount related to donations Amount related to ITC, net of tax Amount related to ORDTC, net of tax Amount related to share issuance costs Amount related to capital losses Amount related to deferred revenue 2022 $ 8,272 - 5,943 21 2,065 291 984 1,535 7,322 2021 $ 5,471 296 5,146 21 1,731 394 1,415 315 7,322 26,433 22,111 Deferred income tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Company will be able to use these benefits. 21. FINANCIAL INSTRUMENTS The carrying values of cash, term deposits, accounts receivable, bank indebtedness and accounts payable and accrued liabilities approximate fair values due to the relatively short-term maturities of these instruments. Financial instruments that are measured subsequent to initial recognition at fair value are grouped into a hierarchy based on the degree to which the fair value is observable. Level 1 fair value measurements are derived from unadjusted, quoted prices in active markets for identical assets or liabilities. Level 2 fair value measurements are derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability directly or indirectly. Level 3 fair value measurements are derived from valuation techniques that include inputs for the assets or liabilities that are not based on observable market data. 29 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 21. FINANCIAL INSTRUMENTS (continued) Financial instruments classified as Level 1 include cash and cash equivalents, term deposits and bank indebtedness. At the current time, the Company does not have financial instruments classified in Level 2 or Level 3. 22. CAPITAL RISK MANAGEMENT The Company’s primary objective with respect to its capital management is to ensure that it has sufficient cash resources to fund the research, development and patent of drugs. To secure the additional capital necessary to pursue these plans, the Company may attempt to raise additional funds through the issuance of equity. The Company includes the following in its definition of capital: share capital, common share purchase warrants, contributed surplus and accumulated deficit, which, for the year ended March 31, 2022 total $56,833 (March 31, 2021 – $50,264). The Company is not subject to externally imposed capital requirements. 23. FINANCIAL RISK MANAGEMENT The Company is exposed to a variety of financial risks by virtue of its activities: credit risk, liquidity risk, foreign currency risk and interest rate risk. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance. Risk management is carried out by the officers of the Company as discussed with the Board of Directors. The officers of the Company are charged with the responsibility of establishing controls and procedures to ensure that financial risks are mitigated in accordance with the expectation of the Board of Directors as follows: Credit risk The Company’s credit risk is primarily attributable to trade and other receivables and the excess of cash held in one financial institution over the deposit insurance by Canadian Deposit Insurance Corporation. The Company, in the normal course of operations, monitors the financial condition of its customers. The Company establishes an allowance for doubtful accounts that corresponds to the specific credit risk of its customers, historical trends and economic conditions. Liquidity risk Liquidity risk is the risk that the Company is not able to meet its financial obligations as they become due or can do so only at excessive cost. The Company manages its liquidity risk by forecasting cash flows and anticipated investing and financing activities. Officers of the Company are actively involved in the review and approval of planned expenditures, including actively seeking capital investment and generating revenue and profit from the commercialization of its products (note 2(d)). 30 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 23. FINANCIAL RISK MANAGEMENT (continued) As at March 31, 2022 the Company’s financial obligations, including applicable interest, are due as follows: Accounts payable and accrued liabilities Liabilities directly associated with assets held for sale Foreign currency risk Less than 1 year $ 2,816 1–2 years $ - After 2 years $ - 1,878 4,694 - - - - Total $ 2,816 1,878 4,694 The functional and reporting currency of the Company is the Canadian dollar. The Company undertakes transactions denominated in foreign currencies, including US dollars and euros, and, as such, is exposed to currency risk due to fluctuations in foreign exchange rates against the Canadian dollar. The Company does not use derivative instruments to reduce exposure to foreign currency risk. 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 interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. 24. DEFERRED REVENUE On February 24, 2017, Antibe entered into an exclusive long-term license and distribution agreement (“License Agreement 1”) with Laboratoires Acbel SA (“Acbel”) for otenaproxesul in Albania, Algeria, Bulgaria, Greece, Jordan, Romania and Serbia (the “Territory”). Acbel is an affiliated holding company of Galenica SA in Greece. Under the terms of License Agreement 1, Antibe was issued an upfront payment of €800 (CAD$1,142) and is entitled to receive a 5% royalty on net sales of otenaproxesul in the Territory. The upfront revenue is reflected in deferred revenue until the point that Acbel can benefit from the license. On September 4, 2018, Antibe entered into an exclusive licensing agreement (“License Agreement 2”) with Kwangdong Pharmaceutical Co., Ltd (“Kwangdong”) for the development and commercialization of otenaproxesul in the Republic of Korea (“Region”). Under the terms of License Agreement 2, Antibe was issued an upfront payment of US$1,000 (CAD$1,316), which is reflected in deferred revenue until the point that Kwangdong can benefit from the license. Under the terms of License Agreement 2, Antibe will be entitled to receive US$9 million in milestone payments. Fees paid to an agent used in obtaining License Agreement 2 have been recorded as deferred contract costs on the consolidated statements of financial position in the amount of $236 as at March 31, 2022 (2021 - $236). On February 9, 2021, Antibe entered into an exclusive licensing agreement (“License Agreement 3”) with Nuance Pharma (“Nuance”) for the development and commercialization of otenaproxesul in the Greater China region. The license provides Nuance with exclusive rights to commercialize otenaproxesul in China, Hong Kong, Macau, and Taiwan (the “Sector”). Under the terms of the agreement, Antibe was issued an upfront payment of US$20 million (CAD$25,231), which is reflected in deferred revenue until the point at which Nuance can benefit from the license. Additionally, Antibe will receive a double-digit royalty on net sales in the Sector and is entitled to receive US$80 million in development and sales milestones. Fees paid to an agent used in obtaining License Agreement 3 have been recorded as deferred contract costs on the consolidated statements of financial position in the amount of $1,047 as at March 31, 2022 (2021 - $1,047). 31 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 24. DEFERRED REVENUE (continued) The amount of the upfront payments for all licenses is included on the consolidated statements of financial position as deferred revenue and will be recorded through the consolidated statements of loss and comprehensive loss at the same point when the license revenue is recognized. 25. COMMITMENTS AND CONTINGENCIES (a) Royalty and milestone commitment – On December 22, 2009, the Company entered into a License Agreement with Holdings that provided for the exclusive right and license to research, develop and commercialize various patents. Pursuant to the agreement, the Company paid an upfront non-refundable license fee of $150 to obtain exclusive right to the patents. The agreement required the Company to pay royalties of 4% of all net sales upon the first commercial sale or, if the Company sublicensed the patents, the Company would pay a 15% royalty on royalty revenue earned. Additionally, the Company was required to make milestone payments to Holdings at various stages of development. On June 3, 2021, the Company completed an amalgamation with Holdings whereby the Company issued 5,873,092 Antibe Common Shares to Holdings’ shareholders and the Company obtained all the assets and liabilities of Holdings, effectively ending this License Agreement (note 5). (b) Royalty agreement – On November 16, 2015, the Company announced the signing of an exclusive long-term license and distribution agreement with Knight Therapeutics Inc. (“Knight”), a leading Canadian specialty pharmaceutical company, for the Company’s anti-inflammatory and pain drugs, otenaproxesul, ATB-352 and ATB-340, as well as the rights to other, future prescription drugs. Under the terms of the license agreement, the Company has granted Knight the exclusive commercial rights for the Company’s drug candidates and other future prescription drugs in Canada, Israel, Russia and sub-Saharan Africa. The Company is entitled to royalties on annual sales, along with the potential for $10 million in payments for sales-based milestones. The Company received no royalties from Knight in the year ended March 31, 2022. 26. SUBSEQUENT EVENTS (a) On May 2, 2022, the Company announced the signing of a binding agreement to sell its subsidiary, Citagenix. The $6.5 million transaction involves a guaranteed $3.5 million, divided into four equal payments over three years, the first of which will be received at closing. The remaining $3 million is subject to Citagenix achieving sales milestones over the three-year period following closing. The transaction will close no later than 180 days following the signing of the binding agreement. Under the terms of the agreement, Antibe will also receive a $250 deposit from the purchaser to be held in escrow and released at closing. (b) On June 15, 2022, the Company announced that it is extending the expiry date (the “Warrant Extension”) and amending the exercise price (the “Amended Exercise Price”) of 3,117,957 Common Share purchase warrants (“Warrants”) of the Company. The Warrants, pursuant to the Warrant Extension, will expire on December 31, 2023 and, pursuant to the Amended Exercise Price, be exercisable into a Common Share of the Company at $1.80 per Common Share, as depicted in the table below: 32 ANTIBE THERAPEUTICS INC. Notes to the Consolidated Financial Statements March 31, 2022 and 2021 (Expressed in thousands of Canadian dollars, except share and per share amounts and where noted) 26. SUBSEQUENT EVENTS (continued) Issue Date Number of Warrants Issued Exercise Price Amended Exercise Price Original Expiry Date Amended Expiry Date Effective Date June 30, 2020 2,373,401 $6.00 $1.80 June 30, 2022 December 31, 2023 June 30, 2022 August 13, 2019 744,556 $4.00 $1.80 August 13, 2022 December 31, 2023 June 30, 2022 None of the Warrants are held by insiders of the Company. The Toronto Stock Exchange has provided conditional approval for the Warrant Extension and Amended Exercise Price with an effective date for the amendments of June 30, 2022. 33 

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