SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains information that may be forward-looking information within the meaning of Canadian securities laws and forward-looking statements within the meaning of U.S. federal securities laws, both of which we refer to in this quarterly report as forward-looking information. Forward-looking information can be identified by the use of terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not statements about the present or historical facts. Forward-looking information in this quarterly report includes, among other things, information or statements about:

Although the forward-looking information in this quarterly report is based upon what we believe are reasonable assumptions, you should not place undue reliance on that forward-looking information since actual results may vary materially from it. Important assumptions made by us when making forward-looking statements include, among other things, assumptions by us that:

In addition, the forward-looking information in this quarterly report is subject to a number of known and unknown risks, uncertainties and other factors, including those described in our annual report on Form 10-K under the heading “Item 1A. Risk Factors”, many of which are beyond our control, that could cause our actual results and developments to differ materially from those that are disclosed in or implied by the forward-looking information, including, among others:

Risks related to the Merger:

Risks Related to Intellectual Property

Risks Relating to Our Common Shares

All of the forward-looking information in this quarterly report is qualified by this cautionary statement. There can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the consequences or effects on our business, financial condition, or results of operations that we anticipate. As a result, you should not place undue reliance on the forward-looking information. Except as required by applicable law, we do not undertake to update or amend any forward-looking information, whether as a result of new information, future events or otherwise. All forward-looking information is made as of the date of this quarterly report.

We express all amounts in this quarterly report in U.S. dollars, except where otherwise indicated. References to “$” and “US$” are to U.S. dollars and references to “C$” or “CAD$” are to Canadian dollars.

Except as otherwise indicated, references in this quarterly report to “Acasti,” “the Corporation,” “we,” “us” and “our” refer to Acasti Pharma Inc. and its consolidated subsidiaries.

PART I. FINANCIAL INFORMATION

Item 1: Financial Information

Unaudited Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Financial Statements of
(Unaudited)

ACASTI PHARMA INC.

Three-month periods ended June 30, 2021 and 2020

ACASTI PHARMA INC.

Condensed Consolidated Interim Balance sheet

(Unaudited)

See accompanying notes to unaudited Interim financial statements.

ACASTI PHARMA INC.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

(Unaudited)

Three-month periods ended June 30, 2021 and 2020

See accompanying notes to unaudited interim financial statements

ACASTI PHARMA INC.

Condensed Consolidated Interim Statements of Changes in Shareholder’s Equity

(Unaudited)

Three-month periods ended June 30, 2021 and 2020

ACASTI PHARMA INC.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

Three-month periods ended June 30, 2021 and 2020

See accompanying notes to unaudited interim financial statements.

ACASTI PHARMA INC.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

(Expressed in thousands of U.S. dollars except share data)

Three-month periods ended June 30,2021 and 2020

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation

This management’s discussion and analysis, or MD&A, is presented in order to provide the reader with an overview of the financial results and changes to our balance sheet as at June 30, 2021, and for the three-month periods then ended. This MD&A explains the material variations in our results of operations, balance sheet and cash flows for the three-month periods ended June 30, 2021, and June 30, 2020.

Market data, and certain industry data and forecasts included in this MD&A, were obtained from internal corporation surveys and market research and those conducted by third parties hired by us, publicly available information, reports of governmental agencies and industry publications, and independent third-party surveys. We have relied upon industry publications as our primary sources for third-party industry data and forecasts. Industry surveys, publications and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of that information is not guaranteed. We have not independently verified any of the data from third-party sources or the underlying economic assumptions they have made. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based upon our management’s or contracted third parties’ knowledge of our industry, have not been independently verified. Our estimates involve risks and uncertainties, including assumptions that may prove not to be accurate, and these estimates and certain industry data are subject to change based on various factors, including those discussed in this quarterly report and in our most recently filed annual report on Form 10-K.

This MD&A, approved by the Board of Directors on August 12, 2021, should be read in conjunction with our unaudited condensed consolidated interim financial statements for the three-month periods ended June 30, 2021, and 2020 included in this quarterly report. Our interim financial statements were prepared in accordance with generally accepted accounting principles issued by the Financial Accounting Standards Board in the United States, or GAAP.

All amounts appearing in this MD&A for the period-by-period discussions are in thousands of U.S. dollars, except share and per share amounts or unless otherwise indicated.

Business Overview

We are a biopharmaceutical innovator that has historically focused on the research, development, and commercialization of cardiometabolic prescription drugs using omega-3, or OM3 fatty acids derived from krill oil delivered both as free fatty acids and bound-to-phospholipid esters. OM3 fatty acids have extensive clinical evidence of safety and efficacy in lowering triglycerides in patients with hypertriglyceridemia, or HTG. Our lead product candidate was CaPre, an OM3 phospholipid therapeutic. As a result of missing the primary endpoint in each of our two TRILOGY phase 3 trials, we publicly disclosed that our board of directors had commenced a formal process to explore and evaluate a range of strategic alternatives to enhance shareholder value, and that it had engaged Oppenheimer & Co. as its financial advisor to assist in that process. Since that announcement, we continue to maintain an active pharmaceutical development business, including retaining key research and development, finance, and administrative personnel. We have completed a pooled analysis of the TRILOGY data and we have prepared a manuscript for publication, which has been submitted to a major journal. We continue to manage ongoing regulatory filing obligations with the Federal Drug Administration, or the FDA, and evaluate potential strategic partnerships for the continued clinical development of CaPre. We also continue to maintain and further develop valuable pharmaceutically relevant assets including additional patent filings and ongoing prosecutions, and maintenance of our commercial manufacturing equipment. Since September 2020, we increased our available cash by approximately $54.4 million through financing activities, which has served to strengthen our balance sheet while providing additional flexibility and leverage while we worked through our strategic evaluation process for the Company and advancement of a potential commercial partnership for CaPre. On May 7, 2021, we announced our intent to acquire Grace through an acquisition. Grace is a New Jersey-based life sciences company focused on novel and innovative drug delivery technologies designed to improve clinical outcomes in rare and orphan disease treatments. Grace’s scientific and product development efforts are focused in cardiovascular, central nervous system and gastrointestinal disorders.

Recent Developments

TRILOGY 1 & 2 Topline Results

Our two Phase 3 clinical trials, designated as TRILOGY 1 & 2 randomized a total of 242 and 278 patients respectively, and were designed to evaluate the efficacy, safety, and tolerability of CaPre in patients with severe hypertriglyceridemia. The top-line results were announced on January 13, 2020, and August 31, 2020, respectively, and neither TRILOGY 1 nor TRILOGY 2 met its primary endpoint for lowering triglycerides at 12 weeks due to an unexpectedly large placebo effect. CaPre was well tolerated in TRILOGY, with a safety profile similar to placebo, and consistent with our previously conducted Phase 2 and 3 studies. Given the outcome of the TRILOGY studies we will not file a New Drug Application (“NDA”) with the U.S. Food and Drug Administration (“FDA”) for patients with severe hypertriglyceridemia, and we do not plan to conduct additional clinical trials for CaPre. Instead, we plan to continue to advance discussions with third parties who are interested in pursuing clinical development and regulatory approval for CaPre.

Engaged Oppenheimer & Co. Inc. to Assist in Strategic Review

On September 29, 2020, we announced that we had commenced a formal process to explore and evaluate strategic alternatives to enhance shareholder value. Towards this end, we engaged Oppenheimer & Co., Inc. as our financial advisor to assist in the process. We have devoted significant time and resources to identifying and evaluating strategic alternatives, which led to the pending transaction with Grace announced on May 7, 2021. However, there can be no assurance that our proposed merger with Grace will close, or of the timing of any such outcome. We have also devoted significant time and resources to identify and evaluate potential strategic partnerships for CaPre; however, there can be no assurance that such activities will result in any agreements or transactions that will enhance shareholder value. We do not intend to make any further disclosures regarding the strategic process for CaPre unless and until a specific course of action is approved by our board of directors.

Definitive Agreement to Acquire Grace Therapeutics, Inc.

On May 7, 2021, we announced a definitive agreement to acquire Grace. Subject to shareholder approval, and the subsequent completion of the Proposed Transaction, we will acquire Grace’s pipeline of drug candidates addressing critical unmet medical needs for the treatment of rare and orphan diseases. The Proposed Transaction has been approved by the boards of directors of both companies and is supported by a majority of Grace stockholders through voting and lock-up agreements with Acasti. The transaction remains subject to approval of our shareholders, as well as applicable stock exchanges.

In connection with the Proposed Transaction, we will acquire Grace’s entire therapeutic pipeline consisting of three unique clinical stage and multiple pre-clinical stage assets supported by an intellectual property portfolio consisting of more than 40 granted and pending patents in various jurisdictions worldwide. Grace’s product candidates aim to improve clinical outcomes by applying proprietary formulation and drug delivery technologies to existing pharmaceutical compounds to achieve improvements over the current standard of care, or to provide treatment for diseases with no currently approved therapy. Grace’s three lead programs have all received Orphan Drug Designation from the FDA, which could provide up to seven years of marketing exclusivity in the United States upon the FDA’s approval of the NDA, provided that certain conditions are met.

Management and Operations

Subject to shareholder approval of the Proposed Transaction, the combined companies will be led by Jan D’Alvise as President and CEO and will continue to maintain our corporate headquarters in Laval, Quebec, Canada. It is expected that all Grace employees will transition to Acasti, and they will continue to maintain a research and development laboratory and commercial presence in North Brunswick, New Jersey. The new board of directors of the combined company will be composed of 4 representatives from Acasti and 3 representatives from Grace.

About the Proposed Transaction

Pending approval by our shareholders as well as applicable stock exchange approvals, Grace will merge with a new wholly owned subsidiary of Acasti. Grace stockholders will receive newly issued Acasti common shares pursuant to an equity exchange ratio formula set forth in the merger agreement. Under the terms of the definitive agreement, immediately following the consummation of the Proposed Transaction, Acasti’s shareholders on a pro forma basis would own not less than 55%, but as high as 58% of the combined company’s common shares, and Grace’s stockholders would own between 42% and 45% of the combined company’s common shares, in each case calculated on a fully-diluted basis, subject to upward adjustments in favor of Acasti shareholders based on each company’s capitalization and net cash balance as set forth in the merger agreement. For illustrative purposes, assuming no adjustments for each company’s capitalization and net cash balance and based on 208,375,549 Acasti common shares currently issued and outstanding, an aggregate of up to approximately 150,000,000 Acasti common would be issued to Grace stockholders as consideration for the Proposed Transaction.

In connection with the entering into the merger agreement, all significant stockholders of Grace have entered into voting and lock-up agreements with Acasti pursuant to which they have agreed, amongst other things to (i) vote their shares of Grace in favor of the Proposed Transaction, (ii) be subject to lock-up provisions for a period of 12 months (subject to certain exceptions), and (iii) support the election of board nominees specified in the voting and lock-up agreements through the 2023 annual general meeting of shareholders.

The Proposed Transaction is expected to close in the calendar third quarter of 2021, immediately following approval at an Acasti shareholders meeting, which is scheduled for August 26, 2021, as well as satisfaction of other closing conditions by each company specified in the definitive agreement.

Nasdaq Update

On May 11, 2021, Acasti received written notice from the NASDAQ Listing Qualifications Department notifying Acasti that based upon Acasti’s non- compliance with the $1.00 bid price requirement set forth in NASDAQ Listing Rule 5550(a) as of May 10, 2021, Acasti common shares were subject to delisting unless Acasti timely requested a hearing before the NASDAQ Hearings Panel. Acasti requested a hearing, which stayed any further action by NASDAQ pending the conclusion of the hearing process.

At the hearing on June 17, 2021, Acasti presented a detailed plan of compliance for the NASDAQ Hearing Panel’s consideration, which included Acasti’s commitment to implement a share consolidation if needed in connection with the Proposed Transaction.

On July 23, 2021, it was announced that on July 12, 2021 the NASDAQ Hearings Panel issued its decision, which extended the time for Acasti to regain compliance with Listing Rule 5550(a), subject to the following: 1) on or before August 26, 2021, Acasti will hold a shareholders meeting to obtain approval for a share consolidation if needed at a ratio that will allow for long term compliance with Listing Rule 5550(a); and 2) on or before September 10, 2021, Acasti will have regained compliance with Listing Rule 5550(a). The approval by NASDAQ of (i) the continued listing of Acasti’s common shares on NASDAQ following the effective time of the merger and (ii) the listing of the Acasti common shares being issued to Grace stockholders in connection with the merger on NASDAQ at or prior to the effective time are conditions to the closing of the merger.

COVID-19 Update

To date, the ongoing COVID-19 pandemic has not caused significant disruptions to our business operations and research and development activities.

The extent to which the COVID-19 pandemic impacts our business and prospects will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic and the actions to contain the COVID-19 pandemic or treat its impact, among others.

Basis of Presentation of the Financial Statements

Our Condensed Consolidated Interim Financial Statements, which include the accounts of our wholly owned subsidiary, Acasti Innovations AG, have been prepared in accordance with GAAP, and the rules and regulations of the U.S. Securities and Exchange Commission, or the SEC, related to interim reports filed on Form 10-Q. All intercompany transactions and balances are eliminated on consolidation.

The following summarizes the principal conditions or events relevant to the Corporation’s going concern assessment, which primarily considers the period of one year from the issuance date of these financial statements. We have incurred operating losses and negative cash flows from operations since our inception. In prior years there was substantial doubt regarding our ability to realize our assets and discharge our liabilities and commitments in the ordinary course of business. Our assets as at June 30, 2021, include cash and cash equivalents and short-term investments totaling $57.7 million. Our current liabilities total $2.3 million as at June 30, 2021 and are comprised primarily of amounts due to or accrued for creditors.

Our ability to continue as a going concern is dependent upon our ability to achieve a successful completion of our proposed merger with Grace or another strategic alternative and ultimately generate cashflows to meet our obligations. To date, we have financed our operations primarily through public offerings of common shares, private placements, and the proceeds from research tax credits, and will require additional financing in the future. There is no assurance that our proposed merger with Grace or another strategic transaction will be consummated as such transaction is not wholly within our control. As a result of our current liquidity profile, the reduction of operating expenses and our limited liabilities, management has assessed that substantial doubt no longer exists regarding our ability to continue as a going concern for one year from the issuance date of these financial statements.

Comparative Financial Information for the Three-Month Periods Ended June 30, 2021, and 2020

¹ Working capital is calculated by subtracting current liabilities from current assets. Because there is no standard method endorsed by GAAP requirements, the results may not be comparable to similar measurements presented by other public companies. 

Statement of Net Loss

Results of Operations for the Three-Month Periods Ended June 30, 2021, and 2020

The net loss of $3,118 or $0.01 per share for the three months ended June 30, 2021, decreased by $1,548 from the net loss of $4,666 or $0.05 per share for the three months ended June 30, 2020.

The reduction in net loss resulted primarily from a decrease in research and development expenses of $1,287 the TRILOGY Phase 3 clinical program for CaPre has been completed. Sales and marketing expenses also decreased by $716 as a result of the discontinuation of CaPre commercialization activities due to the primary endpoint not being met in our TRILOGY 2 Phase 3 clinical trials. These decreases are offset by an increase of $1,027 related to General and administrative expenses from the prior period, due to legal and professional fees incurred in relation to the Proposed Transaction.

Net financial expenses decreased by $572 to a gain of $27 for the three months ended June 30, 2021, as compared to net financial expenses of $545 for the three months ended June 30, 2020. This is due mostly to a decrease from the change in fair value of the derivative warrant liability as compared to the comparative fiscal quarter in 2020 caused by a proportionately higher decrease in our quarter over quarter closing share price.

Two separate derivative warrant liabilities are included in the statement of financial position as at June 30, 2021, and June 30, 2020. These derivative warrant liabilities stem from the financing transactions that took place in May 2018 and December 2017. The derivative warrant liabilities are re-measured to fair value at each reporting date using the Black-Scholes option pricing model. The valuations are mainly driven by the fluctuation in our share price resulting in an increased or decreased loss or gain related to the change in fair value of the warrant liabilities and increasing or decreasing the corresponding liability in the balance sheet.

Breakdown of Major Components of the Statement of Loss and Comprehensive Loss

During the three months ended September 30, 2020, we released our TRILOGY 2 Phase 3 clinical study results for CaPre. TRILOGY 2 failed to meet the primary endpoint, and consequently we will not be filing an NDA with the FDA. In addition to winding down our clinical programs for CaPre, we have discontinued our marketing activities to reduce operating expenses, while we evaluated a range of strategic alternatives. As a result, research and development expenses before depreciation, amortization and stock-based compensation expense for the three months ended June 30, 2021, totaled $419 compared to $1,070 for the three months ended June 30, 2020. The net decrease was mainly attributable to a reduction in research contracts associated with the completed TRILOGY trials as well as a reduction in headcount within the research and development and marketing departments.

General and administrative expenses totaled $2,573 before depreciation and stock-based compensation expense for the three-months ended June 30, 2021, and increased by $1,272 from $1,301 for the three months ended June 30, 2020. This increase is a result of increased legal and professional fees related to the Proposed Transaction.

Sales and marketing expenses were nil for the three months ended June 30, 2021, compared to $573 for the three months ended June 30, 2020. The decrease was due to an end to planned pre-launch marketing activities for CaPre.

Stock-based compensation expense decreased by $479 for the three-month period ended June 30, 2021, amount to a loss of $153, as compared to a loss of $632 for the three-month period ended June 30, 2020. The decrease in expense is due to forfeited options as well as the fact that no options have been granted in the three-month period ended June 30, 2021.

The depreciation expense decreased by $545 for the three-month period ended June 30, 2021, to nil as compared to $545 for the three-month period ended June 30, 2020. This is due to the impact of the equipment being classified as held for resale and no additional depreciation recognized.

Liquidity and Capital Resources

Share Capital Structure

Our authorized share capital consists of an unlimited number of Class A, Class B, Class C, Class D and Class E shares, without par value. Issued and outstanding fully paid shares, stock options, restricted shares units and warrants, were as follows for the periods ended:

Cash Flows and Financial Condition Between the Three-Months Ended June 30, 2021, and 2020

Summary

As at June 30, 2021, cash and cash equivalents totaled $40,975, a net increase of $28,853 compared to cash and cash equivalents totaling $12,122 at June 30, 2020.

Operating activities

During the three months ended June 30, 2021, and June 30, 2020, the Corporation’s operating activities used cash of $3,401 and $4,169, respectively, further modified by changes in working capital, excluding cash.

Investing activities

During the three-months ended June 30, 2021, the Corporation’s investing activities used cash of $6,927, compared to cash used of $36 for the three months ended June 30, 2020. The increase in cash used of $6,891 is due to the increase in investments held and invested.

Financing activities

During the three-months ended June 30, 2021, the Corporation’s financing activities provided cash totaling nil, compared to cash generated of $1,635 due to proceeds from the sale of shares under the ATM program during the three months ended June 30, 2020.

ATM program 

On February 14, 2019, the Corporation entered into an ATM sales agreement with B. Riley pursuant to which the common shares may be sold from time to time for aggregate gross proceeds of up to $30 million, with sales only being made on the NASDAQ Stock Market. The common shares would be issued at market prices prevailing at the time of the sale and, as a result, prices may vary between purchasers and during the period of distribution. The ATM has a 3-year term and requires the Corporation to pay between 3% and 4% commission to B. Riley based on volume of sales made. On June 29, 2020, the Corporation entered into the Sales Agreement the Agents to amend the existing ATM program. Under the terms of the Sales Agreement, which has a three-year term, the Corporation may issue and sell from time-to-time common shares having an aggregate offering price of up to $75,000,000 through the Agents. Subject to the terms and conditions of the Sales Agreement, the Agents will use their commercially reasonable efforts to sell the common shares from time to time, based upon the Corporation’s instructions. The Corporation has no obligation to sell any of the common shares and may at any time suspend sales under the Sales Agreement. The Corporation and the Agents may terminate the Sales Agreement in accordance with its terms. Under the terms of the Sales Agreement, the Corporation has provided the Agents with customary indemnification rights and the Agents will be entitled to compensation, at a commission rate equal to 3.0% of the gross proceeds from each sale of the common shares. The remaining balance of the costs incurred during February 2019 for an amount of $115 were written off to financing expenses.

During the three-month period ended June 30, 2021, no common shares were sold under the ATM program. During the three-month period ended June 30, 2020, 2.3 million common shares were sold for total net proceeds of approximately $1.8 million with commission, legal and costs related to the share sale amounting to $84. The shares were sold at the prevailing market prices, which resulted in an average price of approximately $0.81 per share. Accordingly, proportional costs of $10 related to the common shares sold, have been reclassified from deferred financings costs to equity.

Financial Position

The following table details the significant changes to the statements of financial position as at June 30, 2021, compared to the prior fiscal year end at March 31, 2021:

See the statement of changes in equity in our financial statements for details of changes to the equity accounts during the three-months periods ended June 30, 2021, and 2020.

Treasury Operations

Our treasury policy is to invest cash that is not required immediately into instruments with an investment strategy based on capital preservation. Cash equivalents and marketable securities are primarily made in guaranteed investment certificates, term deposits and high-interest savings accounts, which are issued and held with Canadian chartered banks, highly rated promissory notes issued by government bodies and commercial paper. We hold cash denominated in both U.S. and CAD dollars. Funds received in U.S. dollars from equity financings are invested as per our treasury policy in U.S. dollar investments and converted to CAD dollars as appropriate to fulfill operational requirements and funding.

Assets Held for Sale

During the period we committed to a plan and are actively marketing for sale, Other Assets and Equipment which have met the criteria for classification of assets held for sale:

Other assets

Other assets represent krill oil (RKO) held that was expected to be used in the conduct of research and development activities and commercial inventory scale up related to the development and commercialization of the CaPre drug. Given that the development of CaPre will no longer be pursued, we expected to sell this reserve. The Other asset is being recorded at the fair value less costs to sell. Management’s estimate of the fair value of the RKO less cost -to sell, is based primarily on estimated market prices at year end obtained from an appraiser specializing in the krill oil market. Market prices have not changed materially since year end. These projections are based on Level 3 inputs of the fair value hierarchy and reflect management’s best estimate of market participants’ pricing of the assets as well as the general condition of the asset.

Equipment

Equipment is made up of laboratory, production, computer, and office equipment that was utilized in the development of CaPre. Similarly, to the intangible assets and Other assets, the announcement of the failed Phase 3 clinical trials resulted in an impairment trigger for the laboratory and production equipment. The impairment loss is based on management’s estimate of the fair value of the equipment less cost -to sell, which is based primarily on estimated market prices obtained from brokers specialized in selling used equipment. These projections are based on Level 3 inputs of the fair value hierarchy and reflect our best estimate of market participants’ pricing of the assets as well as the general condition of the assets.

Derivative Warrant Liabilities

A total of 10,959,500 warrants were issued as part of our May 2018 public offering in Canada and recognized as derivative warrant liabilities with a fair value at inception of $3,323. As of June 30, 2021, the derivative warrant liability for the remaining 6,593,750 warrants totaled $2,339, which represents the fair value of these warrants as at June 30, 2021. The weighted average fair value of the warrants issued in the May 2018 public offering in Canada was determined to be CAD $0.39 per warrant at inception and approximately CAD $0.44 (US $0.35) per warrant as at June 30, 2021. 

On December 27, 2017, 9,802,935 warrants were issued as part of our U.S. public offering and recognized as derivative warrant liabilities with a fair value at inception of $4,548. The December 2017 warrants are derivative warrant liabilities for accounting purposes due to the currency of the exercise price (US$) being different from our Canadian dollar functional currency. As of June 30, 2021, the derivative warrant liability for the remaining 7,072,962 warrants totaled $2,312, which represents the fair value of these warrants as at June 30, 2021. The weighted average fair value of the 2017 warrants issued was determined to be CAD $0.60 per warrant at inception and approximately CAD $0.41 (US $0.33) per warrant as at June 30, 2021. 

The variance in the fair value of both existing derivative warrant liabilities as at June 30, 2021, is mostly due to the fluctuations in our share price and the dilution factor.