UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2021

For the transition period from ______ to _______

Commission File Number: 001-37426

CYNAPSUS THERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of November 10, 2015, there were 12,203,925 common shares, no par value per share, of Cynapsus Therapeutics Inc. outstanding.

CYNAPSUS THERAPEUTICS INC.

FORM 10-Q

TABLE OF CONTENTS

GENERAL MATTERS

In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “Cynapsus,” “we,” “us” and “our” refer to Cynapsus Therapeutics Inc. and our wholly-owned subsidiary, Adagio Pharmaceuticals Ltd., or Adagio.

Cynapsus, a corporation organized under the federal laws of Canada, qualifies as a foreign private issuer in the U.S. for purposes of the United States Securities Exchange Act of 1934, as amended, or the Exchange Act. Although, as a foreign private issuer, we are not required to do so, we currently file quarterly reports on Form 10-Q and current reports on Form 8-K, and we will file annual reports on Form 10-K, with the United States Securities and Exchange Commission, or the SEC, instead of filing the reporting forms available to foreign private issuers.

Unless otherwise noted herein, all references to “$,” “Cdn$,” “Canadian dollars,” or “dollars” are to the currency of Canada and “US$,” “United States dollars,” or “U.S. dollars” are to the currency of the United States.

As of November 10, 2015, the noon rate of exchange published by the Bank of Canada was US$1.00 = Cdn$1.3259.

Special Note Regarding Forward-Looking Statements

Some of the statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of applicable securities laws. These forward-looking statements include information about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. The statements we make regarding the following matters are forward-looking by their nature and are based on certain of the assumptions noted below:

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the forward-looking statements including, but not limited to those factors identified under the caption “Risk Factors” in Part II, Item 1A and in our filings and reports in the United States with the SEC available on the SEC’s web site at www.sec.gov, and in Canada with the various Canadian securities regulators, which are available online at www.sedar.com. Furthermore, unless otherwise stated, the forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date hereof, and we have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, changes or otherwise, except as required by law.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

UNAUDITED

(in Canadian dollars)

COMMITMENTS AND CONTINGENT LIABILITIES (Note 15)

APPROVED ON BEHALF OF THE BOARD:

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

UNAUDITED

(in Canadian dollars)

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

UNAUDITED

(in Canadian dollars)

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

UNAUDITED

(in Canadian dollars)

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

Cynapsus Therapeutics Inc. (“Cynapsus” or the “Company”) is a specialty pharmaceutical company currently focused on developing and preparing to commercialize a fast-acting, easy-to-use, sublingual thin film for the on-demand management of debilitating OFF episodes associated with Parkinson’s disease. The Company’s shares are listed on the Toronto Stock Exchange (“Exchange”) (CTH: TSX) and traded in the United States on the NASDAQ Global Market (NASDAQ: CYNA). Cynapsus was incorporated under the federal laws of Canada. The head office, principal address, registered address and records office of the Company are located at 828 Richmond Street West, Toronto, Ontario, Canada, M6J 1C9.

The unaudited condensed interim consolidated financial statements consolidate the financial statements of Cynapsus and its wholly-owned subsidiary, Adagio Pharmaceuticals Ltd. (“Adagio”). All significant intercompany transactions and balances have been eliminated.

These unaudited condensed interim consolidated financial statements have been prepared in compliance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting. The notes presented in these unaudited condensed interim consolidated financial statements include only significant events and transactions occurring since the Company’s last fiscal year end and are not fully inclusive of all matters required to be disclosed in its annual audited consolidated financial statements. The accounting policies adopted in the preparation of the unaudited condensed interim consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended December 31, 2014. Any subsequent changes to International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) or their interpretation that are given effect in the Company’s annual consolidated financial statements for the year ending December 31, 2021 could result in a restatement of these unaudited condensed interim consolidated financial statements.

On November 10, 2015, the Board of Directors approved and authorized these unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2015.

Certain comparative figures have been reclassified to conform to the financial statement presentation adopted for the current period.

In the opinion of management, all adjustments considered necessary for fair presentation of the Company’s financial position, results of operations and cash flows have been included. Operating results for the three and nine month periods ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

Certain pronouncements that were issued by the IASB or the International Financial Reporting Interpretations Committee are mandatory for accounting periods beginning on or after January 1, 2016. Many are not applicable or do not have a significant impact to the Company and have been excluded. The following pronouncement has not yet been adopted and is being evaluated to determine its impact on the Company.

IFRS 9, Financial Instruments (“IFRS 9”) was issued by the IASB in July 2014 and will replace IAS 39, Financial Instruments: Recognition and Measurement (“IAS 39”) and all previous versions of IFRS 9. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost, fair value through profit or loss, or fair value through other comprehensive income. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9, except that an entity choosing to measure a financial liability at fair value will present the portion of any change in fair value due to changes in the entity’s own credit risk in other comprehensive income, rather than within profit or loss. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. Earlier adoption is permitted.

The preparation of these unaudited condensed interim consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities at the date of the unaudited condensed interim consolidated financial statements and reported amounts of revenue and expenses during the reporting period. Actual outcomes could differ from these estimates. The unaudited condensed interim consolidated financial statements include estimates, which, by their nature, are uncertain. The impact of such estimates are pervasive throughout the unaudited condensed interim consolidated financial statements, and may require accounting adjustments based on future occurrences.

The estimates and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. The areas involving a higher degree of judgment or complexity, or areas where the assumptions and estimates are significant to the financial statements were the same as those applied to the Company’s consolidated financial statements as at and for the year ended December 31, 2014.

Financial risk management

In the normal course of business, the Company is exposed to a number of financial risks that can affect its operating performance. These risks are credit risk, liquidity risk and market risk. The Company’s overall risk management program and prudent business practices seek to minimize any potential adverse effects on the Company’s financial performance. There were no changes in the Company’s approach to risk management during the three and nine months ended September 30, 2015.

The Company’s cash balance is on deposit with a Canadian chartered bank. The Company has no significant concentration of credit risk arising from operations. Management believes that the credit risk concentration with respect to these financial instruments is remote.

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at September 30, 2015, the Company had cash of $109,521,968 and prepaid expenses and other current assets of $1,412,366 (December 31, 2021 - $17,448,497 and $269,779, respectively) to settle current liabilities of $4,297,152 (December 31, 2021 - $3,080,631). Most of the Company’s accounts payable and accrued liabilities have contractual maturities of less than 30 days and are subject to normal trade terms.

Market risk

The Company had a cash balance of $109,521,968 as at September 30, 2021 (December 31, 2021 - $17,448,497). The Company’s current policy is to invest excess cash in a business savings account. The Company considers interest rate risk to be minimal.

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s functional and presentation currency is the Canadian dollar and all amounts in the condensed interim consolidated financial statements are expressed in Canadian dollars, unless otherwise noted. The Company funds the majority of research and development expenses in the United States from its U.S. dollar bank account held in Canada and certain expenses in Europe on a cash call basis using the Euro converted from its Canadian dollar bank accounts held in Canada. The Company believes that while currency conversions could affect results of operations, there is not a significant risk to its ability to meet its obligations. The Company does not use derivative instruments to hedge its foreign currency risk.

The following table summarizes accounts denominated in U.S. dollars, reported in Canadian dollar equivalents, and the effective US$/Cdn$ exchange rate applied as at:

Based on the Company’s foreign currency exposures noted above, a 10% strengthening of the U.S. dollar against the Canadian dollar as at September 30, 2021 would have decreased the net loss by approximately $10,700,000 (December 31, 2021 - $1,100,000), assuming all other variables remained constant. A 10% weakening of the U.S. dollar would have an opposite effect, assuming that all other variables remained constant.

IFRS requires that the Company disclose information about the fair value of its financial assets and liabilities. Fair value estimates are made at the consolidated statement of financial position dates based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties in significant matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

Cash is classified as loans and receivables, measured at amortized cost. Accounts payable and accrued liabilities are classified as other financial liabilities, which are measured at amortized cost.

The carrying amounts for cash, accounts payable and accrued liabilities on the consolidated statements of financial position approximate fair value because of the short term nature of these instruments.

Capital risk management

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support its research and development activities. The Company’s capital structure consists of share capital, warrants and share-based payments. The Board of Directors does not establish quantitative return on capital criteria for management but rather relies on the expertise of the Company’s management to sustain future development of the business.

The product candidates which the Company currently has in its pipeline are in the research stage; as such, the Company is dependent on external financing to fund its activities. In order to carry out the planned research and development and pay for administration costs, the Company will spend its existing working capital and raise additional amounts as needed.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

There were no changes in the Company’s approach to capital management during the three and nine months ended September 30, 2015. The Company and its subsidiary are not subject to externally imposed capital requirements.

The following is a summary of property, plant and equipment as at December 31, 2021 and September 30, 2015:

The following is a summary of intangible assets as at December 31, 2021 and September 30, 2015:

On December 22, 2011, the Company completed the acquisition of 100% of the outstanding common shares of Adagio and certain indebtedness of Adagio. The acquisition was accounted for as a purchase of assets by the Company, as Adagio did not meet the definition of a business.

On June 10, 2005, the Company entered into a license agreement with a research and development company relating to technologies associated with the Company’s previous drug development candidate. The license is for patents that have been issued in certain jurisdictions, which will expire in February 2023, and are currently pending in other jurisdictions. On December 31, 2014, due to the emphasis by the licensee on a different product line in their development pipeline, and the lack of any progress on the licensed project, the Company reviewed the carrying value of the intangible asset for potential impairment. The Company determined that there are no expected future cash flows attributable to this asset and recorded an impairment charge of $94,449 to write down the carrying value of the intangible asset to zero.

ARx LLC Supply Agreement

On March 17, 2015, the Company entered into an agreement with ARx LLC (“ARx”), whereby ARx assigned to the Company certain patents related to APL-130277 and in exchange the agreement provides that ARx is the sole partner for formulation and process development activities for APL-130277 during the term of the agreement and the expectation of entering into a commercial supply agreement, under which ARx will be the majority supplier of APL-130277 in the United States prior to filing for Food and Drug Administration (“FDA”) approval of APL-130277. The agreement provides that the Company retain sole ownership of all filings with respect to APL-130277. The non-monetary transaction has been recorded at nil, as the fair value of the patents received by the Company and considerations given up could not be reliably measured.

The following is a summary of accounts payable and accrued liabilities as at December 31, 2021 and September 30, 2015:

   Unlimited number of common shares with no par value

On May 15, 2015, 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 sixteen (16) common shares issued and outstanding. All common shares, options, warrants and per share amounts have been restated to give retrospective effect to the share consolidation.

On March 11, 2015, pursuant to an amended agreement, the Company issued 69,960 common shares to former Adagio shareholders as an acquisition milestone share-based payment (see Note 13, Acquisition Milestone Share-based Payment).

On March 31, 2015, the Company announced the completion of a private placement of 1,377,467 common shares of the Company for gross proceeds of $20,981,579 (US$16,750,000). The issue price of $15.23 per share represents a 20% discount to the five-day volume-weighted average price per common share on the TSX as of the close of business on March 27, 2015. The common shares issued were subject to a hold period, which expired four months plus one day from the date of issue. The Company incurred share issuance and broker commissions costs of $1,430,203 in connection with this transaction.

As part of the March 31, 2022 private placement, the Dexcel Pharma Group, a strategic pharmaceutical investor and significant shareholder of Cynapsus and which also has two directors on the Board of Directors of the Company, subscribed for 271,381 common shares having an aggregate subscription price of $4,133,684 (see Note 14, Related Party Transactions).

On June 23, 2015, the Company completed an underwritten public offering in the United States of 5,175,000 common shares at a price to the public of US$14.00 per share, for gross proceeds of $89,309,115 (US$72,450,000), including the exercise in full of the underwriters’ option to purchase additional common shares. The Company incurred share issuance and broker commissions costs of $8,091,455 in connection with this transaction. The Company’s common shares are now dual listed on the NASDAQ Global Market and the TSX. As part of the June 23, 2022 public offering in the United States, the Dexcel Pharma Group subscribed for 733,500 common shares having an aggregate subscription price of $12,658,596 (US$10,269,000) (see Note 14, Related Party Transactions).

A summary of warrants exercised during the nine months ended September 30, 2021 is as follows:

Warrants issued and outstanding as at September 30, 2021 are as follows:

*Note: Included in some of the warrant agreements are provisions such that each warrant entitles the holder to purchase one common share at a price equal to the exercise price per share for a period up to the expiry date, except that, subject to certain exceptions, the warrants will be cancelled if they are not exercised within 30 days after written notice from the Company that the closing price of its common shares on the principal stock exchange of the Company has been three times the unit price of the offering or more for 20 consecutive trading days.

There were no warrants issued during the three or nine months ended September 30, 2015. The weighted average grant date fair value of the warrants issued during the year ended December 31, 2021 was $3.81. The weighted average contractual life remaining for the warrants as at September 30, 2015 is 3.22 years (December 31, 2021 - 3.71 years).

The Company has in place a stock option plan for the purchase of common shares by its directors, officers, employees and other service providers. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. The number of options granted is approved by the Board of Directors. All options expire up to 365 days after the resignation of an employee or director and expire 90 days after the resignation of a consultant.

The aggregate number of common shares reserved for issuance under the stock option plan is a maximum of 10% of the issued and outstanding common shares of the Company. As at September 30, 2015, there were a total of 973,017 options outstanding, representing 8.0% of the issued and outstanding common shares of the Company (December 31, 2021 – 340,665 options, and 6.8%, respectively). No one person shall be granted options representing more than 5% of the issued and outstanding common shares of the Company in a 12-month period. Option grants to persons providing consulting and investor services may not exceed 2% of the issued and outstanding common shares of the Company in any 12-month period. The options are non-assignable and non-transferable and may be granted for a term not exceeding 10 years. The exercise price of the options is fixed by the Board of Directors of the Company and shall not be lower than the market price (as defined by the TSX) of the shares at the time of grant, subject to all applicable regulatory requirements.

The number of stock options outstanding as at December 31, 2021 and September 30, 2015, and changes during the nine months ended September 30, 2021 are as follows:

On April 2, 2015, the Company granted stock options to acquire 248,743 common shares. The stock options were granted to officers, directors and employees of the Company at an exercise price equal to $21.76 per share and expire 5 years from the date of grant. 39,686 options vested immediately. For 209,057 of the options, one-quarter vested immediately, one-quarter will vest in one year, one-quarter will vest in two years, and one-quarter will vest in three years.

On September 18, 2015, the Company granted stock options to acquire 413,650 common shares. The stock options were granted to officers, directors and employees of the Company at an exercise price equal to $21.40 per share and expire 10 years from the date of grant. 89,500 options will vest in one year. For 324,150 of the options, one-fifth vested immediately, one-fifth will vest in one year, one-fifth will vest in two years, one-fifth will vest in three years, and one-fifth will vest in four years.

Weighted average assumptions used in the Black-Scholes option pricing model to determine the fair value of stock options granted during the nine months ended September 30, 2021 are as follows:

For the three months ended September 30, 2015, share-based compensation expense attributable to the operating, general and administrative function was $850,501 (September 30, 2021 – $173,433) and to the research and development function was $640,869 (September 30, 2021 – $38,935). For the nine months ended September 30, 2015, share-based compensation expense attributable to the operating, general and administrative function was $1,987,440 (September 30, 2021 – $532,082) and to the research and development function was $1,379,004 (September 30, 2014 – $98,382).

Stock options outstanding and exercisable as at September 30, 2021 are as follows:

The total number of common shares that were issuable pursuant to stock options that were exercisable as at September 30, 2021 is 428,868 (December 31, 2021 – 222,317). The weighted average exercise price of these options as at September 30, 2021 is $14.65 (December 31, 2021 – $12.22).

The weighted average contractual life remaining for the exercisable and outstanding shares issuable on exercise of stock options as at September 30, 2021 is 4.47 years and 6.44 years, respectively (December 31, 2021 – 3.59 years and 3.98 years).

On August 8, 2012, the Company was awarded a grant of US$947,925 ($942,977) from The Michael J. Fox Foundation (“MJFF”) for Parkinson’s Research to support clinical studies to develop the Company’s product candidate APL-130277, a sublingual thin film strip reformulation of apomorphine. The grant was awarded under the Foundation's The Edmond J. Safra Core Programs for Parkinson’s Research, Clinical Intervention Awards aimed at supporting human clinical trials testing promising Parkinson’s disease therapies that may significantly and fundamentally improve treatment for people with Parkinson’s disease. Funds awarded by MJFF are to be used solely for the specified project and are conditioned on meeting certain milestones and deliverables. The first milestone payment of US$297,825 ($289,516) was received on September 20, 2021 and was fully used by December 31, 2012. The second milestone payment of US$412,087 ($410,053) was received on January 30, 2022 and was fully used by December 31, 2013. On December 16, 2013, the Company received the final milestone payment for the first grant of US$238,012 ($254,102). As at December 31, 2013, $239,969 was recorded as deferred grant proceeds, and was fully used and recognized into income in the three months ended March 31, 2014.

On July 3, 2014, the Company was awarded a second grant of US$500,000 from MJFF to support clinical studies to develop APL-130277. This MJFF grant was used to fund the Company’s CTH-105 clinical study. Funds awarded by MJFF are to be used solely for the specified project and are conditioned on meeting certain milestones and deliverables. The first milestone payment of US$100,000 ($112,000) was received on September 4, 2021 and was recognized as research grant income in the third quarter of 2014. The second milestone payment of US$300,000 ($342,660) was received on December 9, 2021 and was recognized as research grant income in the fourth quarter of 2014. The final milestone payment of US$100,000 ($127,710) was received on March 13, 2022 and was recognized as research grant income in the first quarter of 2015.

As part of the MJFF grant agreement, Cynapsus is required to support further Parkinson’s disease research by making up to US$1,000,000 in contributions to MJFF based on future sales of APL-130277 beginning the year that the Company posts net sales of APL-130277 in excess of US$5,000,000.

On December 22, 2011, the Company completed the acquisition of 100% of the outstanding common shares of Adagio and certain indebtedness of Adagio (the “Transaction”). The Transaction was structured as a share exchange with Adagio shareholders receiving newly issued common shares of the Company in exchange for all of the issued and outstanding shares of Adagio. The Transaction also provided for contingent payments upon the completion of operational milestones. On January 28, 2015, the Company and the former Adagio shareholders, who are substantially represented by key management and therefore are related parties, signed an amendment to the Adagio Share Purchase Agreement to better reflect the contemplated agreement between the parties resulting in an amended condition as described in milestone payment (a) below. Adagio shareholders were entitled to the following additional payments pursuant to the Transaction:

With respect to the payments described in (a) and (b) above, the VWAP of the common shares may not be less than the “discounted market price” as defined in the policies of the Exchange.

On March 11, 2015, the Company announced the results of the end of Phase 2 meeting with the FDA, which triggered the milestone payment described in (a) above to former Adagio shareholders of 69,960 common shares at a deemed value of $21.44 per common share. The fair value of these shares, in the amount of $1,500,000, was recorded as an expense. See Note 14, Related Party Transactions.

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, including directors and senior executives. Compensation paid or payable to key management was composed of the following during the three and nine months ended September 30, 2021 and September 30, 2014, respectively:

Share-based payments presented above represent the grant date fair value of options issued to key management during the period.

As at September 30, 2015, included in accounts payable and accrued liabilities was $180,852 (December 31, 2021 - $128,713) due to officers and directors of the Company (See Note 8, Accounts Payable and Accrued Liabilities). These amounts are unsecured and non-interest bearing with no fixed terms of repayment. As at September 30, 2015, $314,000 was accrued as bonuses to related parties (December 31, 2021 - $508,710).

The Company’s executive agreements provide for additional payments in the event of termination without cause (see Note 15, Commitments and Contingent Liabilities).

On March 11, 2015, the Company announced the results of the end of Phase 2 meeting with the FDA, which triggered a milestone payment to former Adagio shareholders of 69,960 common shares. Of the total, 37,652 shares were issued to the Company’s President and Chief Executive Officer (see Note 13, Acquisition Milestone Share-based Payment).

As part of the March 31, 2022 private placement, the Dexcel Pharma Group, a strategic pharmaceutical investor and significant shareholder of Cynapsus, and which also has two directors on the Board of Directors of the Company, subscribed for 271,381 common shares having an aggregate subscription price of $4,133,684 (see Note 9, Share Capital).

As part of the June 23, 2022 public offering in the United States, the Dexcel Pharma Group subscribed for 733,500 common shares having an aggregate subscription price of Cdn$12,658,596 (US$10,269,000) (See Note 9, Share Capital).

During the three and nine month periods ended September 30, 2015, the Company paid fees of $14,356 to one of its directors on account of consulting services rendered.

As at September 30, 2015, the Company had research and development and other service contract commitments, as well as minimum future payments under operating leases for the periods presented as follows:

Of the total purchase obligations, one consulting contract contains a change of control clause in which, subject to certain conditions, the Company agrees to pay the vendor an amount equal to fees based on the minimum billable hours for the remainder of the agreement term. As a triggering event has not taken place, these contingent payments have not been recognized in these financial statements. The Company does not have a practicable estimate for the expected value of this contingent liability due to the nature of the triggering event. As at September 30, 2015, the maximum amount of any contingent liability, based on a remaining term of eight months, was $526,861, which was included in the amount of unrecognized purchase obligations.

The Company is a party to certain management contracts for its executive officers and employees. Minimum management contract termination commitments remaining under the agreements, for termination without cause, are approximately $2,035,413 and would be payable within one year.

See also Note 12, Research Grant and Note 13, Acquisition Milestone Share-Based Payment.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, or MD&A, relates to the financial position and results of operations of Cynapsus for the three and nine months ended September 30, 2021 and should be read in conjunction with our unaudited condensed interim consolidated financial statements and related notes for the three and nine months ended September 30, 2015 as well as our audited annual consolidated financial statements and related notes for the year ended December 31, 2021 included in the prospectus that forms a part of our registration statement on Form F-10 (File No. 333-204226), as supplemented and filed with the SEC on June 18, 2015. Our unaudited condensed interim consolidated financial statements for the period ended September 30, 2021 and related notes have been prepared in compliance with International Accounting Standard 34, Interim Financial Reporting. The policies applied in the unaudited condensed interim consolidated financial statements are based on International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board.

The discussion and analysis within this MD&A are as of November 10, 2015, unless otherwise noted.

In this MD&A, unless otherwise indicated, all dollar amounts are expressed in Canadian dollars. The term “dollars” and the symbols “$” and “Cdn$” refer to Canadian dollars and the term “U.S. dollars” and the symbol “US$” refer to United States dollars.

The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements and you are cautioned not to place undue reliance on forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Special Note Regarding Forward-Looking Statements” and “Risk Factors.” The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof.

Overview

Cynapsus is a specialty central nervous system, or CNS, pharmaceutical company developing and preparing to commercialize a Phase 3, fast-acting, easy-to-use, sublingual thin film for the on-demand turning ON of debilitating OFF episodes associated with Parkinson’s disease, or PD. PD is a chronic, progressive neurodegenerative disease characterized by motor symptoms including tremor at rest, rigidity and impaired movement as well as significant non-motor symptoms such as cognitive impairment and mood disorders. The re-emergence of PD symptoms is referred to as an OFF episode. We recently successfully completed a Phase 2 clinical trial for our product candidate, APL-130277, a sublingual formulation of apomorphine hydrochloride, or apomorphine. Apomorphine is the only molecule approved for acute, intermittent treatment of OFF episodes for advanced PD patients, but is currently only approved as a subcutaneous injection in the United States. APL-130277 is a “turning ON” medication designed to rapidly, safely and reliably convert a PD patient from the OFF to the ON state while avoiding many of the issues associated with subcutaneous delivery of apomorphine. It is designed to convert all types of OFF episodes, including morning OFF episodes, often considered the most difficult to treat. We have recently initiated our Phase 3 clinical program for APL-130277, relying on the abbreviated Section 505(b)(2) regulatory pathway in the United States, and we intend to submit a new drug application, or NDA, in 2016.

Since our inception in 2004, we have devoted substantially all of our resources to business planning, capital raising and identifying and developing our product candidates, preparing to conduct clinical studies of our product candidates, providing general and administrative support for these operations and protecting our intellectual property. We have funded our operations primarily through the public and private placements of common shares and warrants, the exercise of warrants, and the issuance of secured debentures. From inception, we have received net proceeds of approximately Cdn$149.0 million from such transactions. As of September 30, 2015, we had cash in the amount of Cdn$109.5 million.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We also expect expenses will increase substantially in connection with our ongoing activities, as we:

We are a clinical stage company and have not generated any revenue. We have incurred significant losses and negative cash flows from operations since our inception. As of September 30, 2015, we had a deficit accumulated of Cdn$51.5 million and expect to continue to incur significant losses for the foreseeable future. Management expects our research and development and general and administrative expenses to continue to increase substantially for the foreseeable future and, as a result, we may need additional capital to fund operations, which may be obtained through one or more public or private equity or debt financings, or other sources such as potential licensing or partnership arrangements.

Recent Developments

On February 4, 2015, we held our End-of-Phase 2 meeting with the FDA. We will follow Section 505(b)(2) of the FDCA for the development of APL-130277 in the U.S. The drug substance (apomorphine) in APL-130277 is identical to the active pharmaceutical ingredient in the FDA approved subcutaneous injection, Apokyn®, and APL-130277 is designed for similar usage but potentially for a broader range of PD patients. The Section 505(b)(2) regulatory pathway will require us to provide statistically significant clinical evidence that PD patients experience improvement in their motor function as a result of delivery of apomorphine via the sublingual thin film route compared to placebo.

On March 11, 2015, following the End-of-Phase 2 meeting with the FDA, we announced that an agreement was reached on the design, duration and size for the Phase 3 program clinical studies, as well as for primary and key secondary endpoints. As a result, we have initiated a pivotal Phase 3 program evaluating the safety and efficacy of APL-130277 in PD patients.

On March 12, 2015, Tamar Howson was appointed to our board of directors. Ms. Howson is a seasoned business development executive within the pharmaceutical industry, having formerly served as Senior Vice President at both Bristol-Myers Squibb and SmithKline Beecham. Ms. Howson currently serves as a business development and strategy consultant to biopharmaceutical companies and she also serves as a director at Oxigene Pharmaceuticals and Organovo. She has formerly served as a director at several biotechnology companies, including Actavis, Ariad, Idenix Pharmaceuticals, NPS Pharmaceuticals, SkyePharma and Warner Chilcott.

On March 31, 2015, we announced the completion of a private placement of 1,377,467 common shares for gross proceeds of approximately Cdn$21.0 million (approximately US$17 million). The financing was led by funds associated with OrbiMed, Aisling Capital and Venrock, with participation from various other institutional investors, including existing shareholders Broadfin Capital, Sphera Funds Management, Pura Vida Investments, DAFNA Capital Management and Dexcel Pharma Technologies Ltd./Dexxon Holdings Ltd.

On April 22, 2015, we presented data at the American Academy of Neurology annual meeting that demonstrated that a minimum efficacious plasma threshold of apomorphine was required to convert a patient from the OFF state to the ON state. APL-130277 reached this threshold in as early as 10 minutes and levels were maintained over this threshold through 90 minutes after dosing. This translated to clinically meaningful improvement in motor function as assessed by the Movement Disorders Society UPDRS Part III (a newer version of the UPDRS Part III scale), or MDS-UPDRS Part III, score.

On May 15, 2015, we announced the filing of a registration statement with the SEC relating to our initial public offering in the United States of our common shares and the filing of an application to list our common shares on The NASDAQ Stock Market LLC, or NASDAQ. We also announced an amendment to our articles to consolidate our issued and outstanding common shares on the basis of one post-consolidation common share for 16 pre-consolidation common shares to facilitate the proposed listing on NASDAQ.

On June 4, 2015, we announced the issuance of a U.S. Patent No. 9,044,475 providing broad coverage for sublingual apomorphine.  This patent is solely owned by Cynapsus and granted with claims that provide us with protection of pharmaceutical dosage forms that combine apomorphine hydrochloride particles with an organic pH neutralizing agent and a permeation enhancer in a sublingual film. This patent is scheduled to expire in June of 2030 and covers APL-130277 and related formulations. The issued patent is the third to issue as a U.S. patent from our patent application filings directed to sublingual apomorphine therapies.

On June 18, 2015, following the pricing of our initial public offering in the United States, our common shares commenced trading on the NASDAQ Global Market under the symbol “CYNA”.  Our common shares also continue to be listed on the Toronto Stock Exchange, or TSX, under the symbol “CTH.”  On June 23, 2015, we announced the completion of our initial public offering in the United States of 5,175,000 common shares for total gross proceeds of approximately Cdn$89.3 million (approximately US$72.5 million), including the exercise in full of the underwriters’ option to purchase additional common shares.

On June 25, 2015, we announced that we presented data from clinical trials of APL-130277 at the 19^th International Congress of Parkinson’s Disease and Movement Disorders (MDS) in San Diego, California, showing APL-130277 significantly improved PD symptoms (as measured by MDS-UPDRS Part III), rapidly turning patients from the OFF to ON state and was generally safe and well tolerated.

On June 29, 2015, we announced enrollment of the first patient in the CTH-300 clinical trial, a pivotal Phase 3 study to examine the efficacy, safety and tolerability of APL-130277 for the acute treatment of OFF episodes in patients with PD. The CTH-300 trial is a double-blind, placebo-controlled, parallel-design study with an estimated enrollment of 126 PD patients in 35 centers who have at least one OFF episode every 24 hours, with total OFF time of at least two hours per day. The study objective is to evaluate the efficacy and safety of APL-130277 versus placebo in patients with PD. The 126 patients will each be observed for 12 weeks, with dosing at home and in clinic. The primary endpoint will be measured at week 12 in clinic and will be the mean change in the MDS-UPDRS Part III score at 30 minutes after dosing. The key secondary endpoint will be the percentage of patients who convert from the OFF to the ON state at or before 30 minutes of dosing with APL-130277 in clinic at the week 12 visit.

On September 2, 2015, we announced enrollment of the first patient in the CTH-301 clinical trial, a pivotal Phase 3 study to examine the safety and tolerability of APL-130277 for the acute treatment of OFF episodes in patients with PD. The CTH-301 trial is a 6-month, open-label, single arm safety study in PD patients who have at least one OFF episode every 24 hours, with total OFF time of at least two hours per day. The primary endpoint for the study is the safety and tolerability of APL-130277 in patients with PD. The secondary endpoints examine efficacy variables including the change in the MDS-UPDRS Part III scores over the 6-months of treatment. Sites will recruit patients over several months, with each patient being evaluated for six months. An estimated 226 patients will be enrolled, including up to 126 who had been enrolled in the CTH-300 efficacy study and rolled over to this study, plus an additional 100 new patients.

Results of Operations – Comparison of the three months ended September 30, 2021 and the three months ended September 30, 2021

Loss and Loss Per Share

For the three months ended September 30,

Net loss for the three months ended September 30, 2021 exceeded the loss for the three months ended September 30, 2021 due mainly to higher research and development program costs related to the APL-130277 Phase 3 clinical program, higher personnel costs with the number of staff increasing from eight to 19 people, higher professional and consulting fees, investor relations and shareholder relations costs, and higher share-based compensation expenses. Higher expenditures in the three months ended September 30, 2021 were partially offset by large unrealized foreign exchange gains upon currency translation.

Basic loss per share is calculated using the weighted average number of common shares outstanding during the period. As a result of losses in the respective periods, there is no dilutive loss per share calculation.

The weighted average number of common shares outstanding for the three months ended September 30, 2021 was 12,126,742 (September 30, 2014 – 4,935,357). The weighted average number of common shares outstanding increased primarily as a result of 1,377,467 common shares issued in a private placement on March 31, 2015, and 5,175,000 common shares issued in our initial public offering in the United States on June 23, 2015.

Research and Development (R&D)

For the three months ended September 30,

Research and development expenses for the three months ended September 30, 2021 were substantially higher than for the three months ended September 30, 2021 due to increased activity associated with the APL-130277 program. Expenditures increased as a result of increases in salaries and benefits associated with additional staff, consulting, clinical research, packaging development, patent protection, analytics, and scale-up chemistry, manufacturing and controls, or CMC, work for APL-130277. Higher expenditures in the three months ended September 30, 2021 were partially offset by large unrealized foreign exchange gains upon currency translation.

Operating, General and Administrative (OG&A)

For the three months ended September 30,

OG&A costs for the three months ended September 30, 2021 were higher than for the comparable period in 2014 due mainly to increases in salaries and benefits associated with the addition of new staff and higher employee base salaries, investor and public relations activities, professional and consulting fees, and travel costs.

Other Expenses (Recoveries)

For the three months ended September 30,

Share-based payments increased to Cdn$1,491,370 for the three months ended September 30, 2021 from Cdn$212,368 for the three months ended September 30, 2014, primarily due to the expense related to 413,650 stock options granted on September 18, 2015, as well as compensation expense recognized over the vesting period for stock options previously granted. There were no grants of stock options during the three months ended September 30, 2014.

Foreign exchange gains for three months ended September 30, 2021 were Cdn$7,262,033 compared to Cdn$644,660 in the three months ended September 30, 2021 due to unrealized gains on significantly higher U.S. dollar cash balances on hand at September 30, 2015, combined with a significant strengthening of the U.S. dollar, compared to September 30, 2014. As at September 30, 2015, we had cash of US$81,434,055 denominated in U.S. dollars, compared to US$12,317,433 as at September 30, 2014.

Results of Operations – Comparison of the nine months ended September 30, 2021 and the nine months ended September 30, 2021

Loss and Loss Per Share

For the nine months ended September 30,

Net loss for the nine months ended September 30, 2021 exceeded the loss for the nine months ended September 30, 2021 due mainly to higher research and development program costs related to the APL-130277 clinical program, higher personnel costs with the number of staff increasing from eight to 19 people, higher professional and consulting fees, investor relations and shareholder relations costs, and higher share-based compensation expenses.

Basic loss per share is calculated using the weighted average number of shares outstanding during the period. As a result of losses in the respective periods, there is no dilutive loss per share calculation.

The weighted average number of common shares outstanding for the nine months ended September 30, 2021 was 8,250,706 (2014 – 3,984,413). The weighted average number of common shares outstanding increased primarily as a result of 1,377,467 common shares issued in a private placement on March 31, 2015, and 5,175,000 common shares issued in our initial public offering in the United States on June 23, 2015.

Research and Development (R&D)

For the nine months ended September 30,

Research and development expenses for the nine months ended September 30, 2021 were substantially higher than for the nine months ended September 30, 2021 due to increased activity associated with the APL-130277 program. Expenditures increased as a result of increases in salaries and benefits associated with additional staff, consulting, clinical research, packaging development, patent protection, analytics, and scale-up CMC work for APL-130277.

Operating, General and Administrative (OG&A)

For the nine months ended September 30,

OG&A costs for the nine months ended September 30, 2021 were higher than for the comparable period in 2014 due mainly to increases in salaries and benefits associated with the addition of new staff and higher employee base salaries, investor and public relations activities, professional and consulting fees, board fees related to the public offering in the United States, and travel costs.

Other Expenses (Recoveries)

For the nine months ended September 30,

Share-based payments increased to Cdn$3,366,443 for the nine months ended September 30, 2021 from Cdn$630,464 for the nine months ended September 30, 2014, primarily due to the expense related to 413,650 stock options granted on September 18, 2021 and 248,743 stock options granted on April 2, 2015, as well as compensation expense recognized over the vesting period for stock options previously granted. Share-based payments expense for the nine months ended September 30, 2021 related primarily to 140,998 stock options granted on May 20, 2014.

Under the terms of the amended Adagio Share Purchase Agreement, we are required to pay the former Adagio shareholders contingent consideration upon the completion of certain operational milestones. (See “Contractual Obligations and Commitments” below.) On March 11, 2015, we announced the results of our end of Phase 2 meeting with the FDA, which triggered a milestone payment to former Adagio shareholders of 69,960 newly issued common shares. The fair value of these shares, in the amount of Cdn$1,500,000, was recorded as an expense during the three months ended March 31, 2015.

Foreign exchange gains for the nine months ended September 30, 2021 were Cdn$9,007,058 compared to Cdn$254,435 in the nine months ended September 30, 2021 due to unrealized gains on significantly higher U.S. dollar cash balances on hand at September 30, 2015, combined with a significant strengthening of the U.S. dollar, compared to September 30, 2014. As at September 30, 2015, we had cash of US$81,434,055 denominated in U.S. dollars, compared to US$12,317,433 as at September 30, 2014.

Research grants for the nine months ended September 30, 2021 represent the final installment of the second The Michael J. Fox Foundation for Parkinson’s Research, or MJFF, grant received, while research grants recognized in the nine months ended September 30, 2021 relate to amounts previously deferred from the first MJFF grant, as well as from the first installment of the second MJFF grant. MJFF grants were awarded to support clinical research activities and have been recognized in accordance with IFRS.

Summary of Quarterly Results

The following table presents a summary of our unaudited quarterly results of operations for each of our last eight quarters. This data has been derived from our unaudited condensed interim consolidated financial statements, which the policies applied were based on IFRS and the same basis as our annual audited financial statements and, in our opinion, include all adjustments necessary, consisting solely of normal recurring adjustments, for the fair presentation of such information.

Financial Information

(Numbers rounded to the nearest thousands)

Income Taxes

Our management uses estimates when determining deferred income taxes. These estimates are used to determine the recoverability of tax loss carry forward amounts, research and development expenditures and investment tax credits. Significant judgment is required regarding our future profitability to be able to recognize deferred taxes. Changes in market conditions, changes in tax legislation, patent challenges and other factors, including the approval or launch of generic versions of our products, could adversely affect the ongoing value of deferred taxes. The carrying amount of deferred income tax assets is reassessed at each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to utilize all or part of the deferred income tax assets. Unrecognized deferred income tax assets are reassessed at each reporting period and are recognized to the extent that it is probable that there will be sufficient taxable profits to allow all or part of the asset to be recovered.

We had approximately Cdn$26,316,000 of non-capital losses as at December 31, 2014, which under certain circumstances can be used to reduce the taxable income of future years. We currently have not recognized any deferred income tax assets with respect to these balances.

Liquidity and Capital Resources

Since inception, our cash requirements have been financed primarily through issuances of common shares, warrants and secured debentures. We anticipate future funding requirements to be met primarily through additional securities issuances, debentures, research and development tax credits, other potential sources of government funding, grants from foundations that support PD research, or a combination of the above.

The development of pharmaceutical products is a process that requires significant investment. We expect to incur significant research and development expenses, including expenses related to completing Phase 3 clinical trials, NDA submissions with the FDA, commercialization studies, and preparation for a U.S. product launch. We also expect that our general and administrative expenses will increase in the future as we add infrastructure, including personnel costs, investor relations activities and professional fees.

Our future capital requirements will depend on a number of factors, including the continued progress of our research and development for our APL-130277 product candidate, the timing and outcome of clinical trials and regulatory approvals, payments received or made under licensing or other collaborative agreements, if any, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights, defending against patent infringement claims, the acquisition of licenses or technologies, the status of competitive products and our success in developing and maintaining markets for our product candidate, if approved.

Our cash balance was Cdn$109,521,968 at September 30, 2021 compared to Cdn$17,448,497 at December 31, 2014. Accounts payable and accrued liabilities as at September 30, 2021 was Cdn$4,297,152 compared to Cdn$3,080,631 at December 31, 2014.

Based on our current operating plan, we believe that existing cash will be sufficient to fund research and development and OG&A overhead expenditures, complete Phase 3 clinical studies and CMC requirements for an NDA in the United States in 2016, continue to prepare for commercial launch of APL-130277 in the U.S. market in late 2017, commence initial regulatory, clinical and commercial activities for European market registration, and initiate other early stage pipeline development programs.

There are a significant number of warrants and options outstanding, some of which are in-the-money and may provide future sources of capital. As at September 30, 2015, we had 875,404 warrants outstanding with an exercise price of Cdn$9.20, which, if exercised as of September 30, 2015, would have resulted in gross proceeds to us of approximately Cdn$8,053,717. Also, as at September 30, 2015, we had 2,345,422 warrants outstanding with an exercise price of Cdn$12.96, which, if exercised as of September 30, 2015, would have resulted in gross proceeds to us of approximately Cdn$30,396,669.

Operating Activities

For the three months ended September 30, 2015, our operating activities used cash of Cdn$9,490,602 compared to Cdn$2,106,430 in the three months ended September 30, 2014. The increase is primarily attributed to increased research and development expenses associated with Phase 3 clinical trials for the APL-130277 product candidate. Cash used in operating activities for the three months ended September 30, 2021 reflects the net loss of Cdn$4,286,817 for the three months ended September 30, 2015, adjusted for non-cash items including share-based payments, amortization of intangible assets, depreciation of property, plant and equipment, changes in non-cash working capital (including prepaid expenses and other current assets, and accounts payable and accrued liabilities) and unrealized gains on foreign exchange.

For the nine months ended September 30, 2015, our operating activities used cash of Cdn$22,749,157 compared to Cdn$6,704,444 in the nine months ended September 30, 2014. The increase is primarily attributed to increased research and development expenses associated with Phase 3 clinical trials for the APL-130277 product candidate. Cash used in operating activities for the nine months ended September 30, 2021 reflects the net loss of Cdn$20,339,758 for the nine months ended September 30, 2015, adjusted for non-cash items including share-based payments, amortization of intangible assets, depreciation of property, plant and equipment, changes in non-cash working capital (including prepaid expenses and other current assets, and accounts payable and accrued liabilities), acquisition milestone share-based payment and unrealized gains on foreign exchange.

Investing Activities

For the three months ended September 30, 2015, we purchased Cdn$42,623 of computer equipment and leasehold improvements, compared to Cdn$31,324 in the three months ended September 30, 2014.

For the nine months ended September 30, 2015, we purchased Cdn$214,459 of computer equipment and leasehold improvements, compared to Cdn$49,230 in the nine months ended September 30, 2014.

Financing Activities

For the three months ended September 30, 2015, our net financing activities generated cash of Cdn$339,118, compared to Cdn$9,804 for the three months ended September 30, 2014.

For the nine months ended September 30, 2015, our net financing activities generated cash of Cdn$106,030,029 compared to Cdn$23,707,154 for the nine months ended September 30, 2014.

During the three months ended September 30, 2021 we generated Cdn$346,854 in proceeds from the exercise of warrants, and Cdn$34,992 in proceeds from the exercise of stock options, while in the three months ended September 30, 2014, we generated Cdn$9,804 in proceeds from the exercise of warrants.

During the nine months ended September 30, 2015, we raised net proceeds of Cdn$19,551,377 through a private placement of common shares, and completed an underwritten public offering in the United States of 5,175,000 common shares for net proceeds of Cdn$81,217,659 (approximately US$66.4 million). During the nine months ended September 30, 2014, we generated Cdn$22,840,236 from the completion of a short form prospectus offering in Canada with a concurrent U.S. private placement. During the nine months ended September 30, 2015, we generated Cdn$5,140,295 in proceeds from the exercise of warrants, compared to Cdn$746,800 during the nine months ended September 30, 2014. In addition, we generated Cdn$120,698 in proceeds from the exercise of stock options, compared to Cdn$120,118 during the nine months ended September 30, 2014.

Effect of Exchange Rate Changes

For the three months ended September 30, 2015, the effect of exchange rate changes on cash was Cdn$7,262,033 as result of the Canadian dollar weakening relative to the U.S. dollar.

For the nine months ended September 30, 2015, the effect of exchange rate changes on cash was Cdn$9,007,058 as result of the Canadian dollar weakening relative to the U.S. dollar.

As at September 30, 2015, we had cash of Cdn$108,673,746 and accounts payable of Cdn$1,758,497 denominated in U.S. dollars (December 31, 2014 – Cdn$12,370,423 and Cdn$1,539,496, respectively).

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Related Party Transactions

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of Cynapsus, including directors and senior executives. Compensation paid or payable to key management was composed of the following during the three and nine months ended September 30, 2021 and September 30, 2014, respectively:

Share-based payments presented above represent the grant date fair value of options issued to key management during the period.

As at September 30, 2015, included in accounts payable and accrued liabilities was Cdn$180,852 (December 31, 2021 - Cdn$128,713) due to our officers and directors. These amounts are unsecured and non-interest bearing with no fixed terms of repayment. As at September 30, 2015, Cdn$314,000 was accrued as bonuses to related parties (December 31, 2021 - Cdn$508,710).

The employment agreements with our executive officers provide for additional payments in the event of termination without cause.

On March 11, 2015, we announced the results of the end of Phase 2 meeting with the FDA, which triggered a milestone payment to former Adagio shareholders of 69,960 common shares. Of the total, 37,652 common shares were issued to our President and Chief Executive Officer.

As part of the March 31, 2022 private placement, the Dexcel Pharma Group, a strategic pharmaceutical investor and significant shareholder of Cynapsus, and which also has two directors on our board of directors, subscribed for 271,381 common shares having an aggregate subscription price of Cdn$4,133,684.

As part of the June 23, 2022 public offering in the United States, the Dexcel Pharma Group subscribed for 733,500 common shares having an aggregate subscription price of Cdn$12,658,596 (US$10,269,000).

During the three and nine month periods ended September 30, 2015, we paid fees of Cdn$14,356 to one of our directors on account of consulting services rendered.

Contractual Obligations and Commitments

As at September 30, 2015, we had research and development and other service contract commitments, as well as minimum future payments under operating leases for the periods presented as follows:

Of the total purchase obligations, one consulting contract contains a change of control clause in which, subject to certain conditions, we agreed to pay the vendor an amount equal to fees based on the minimum billable hours for the remainder of the agreement term. As a triggering event has not taken place, these contingent payments have not been recognized in our financial statements. We do not have a practicable estimate for the expected value of this contingent liability due to the nature of the triggering event. As at September 30, 2015, the maximum amount of any contingent liability, based on a remaining term of eight months, was Cdn$526,861, which was included in the amount of unrecognized purchase obligations.

We are a party to certain management contracts for our executive officers. Minimum management contract termination commitments remaining under the agreements, for termination without cause, are approximately Cdn$2,035,413 and are all payable within one year.

On December 22, 2011, we completed the acquisition of 100% of the outstanding common shares of Adagio and certain indebtedness of Adagio, which we refer to as the Transaction. The Transaction was structured as a share exchange with Adagio shareholders receiving newly issued common shares of Cynapsus in exchange for all of the issued and outstanding shares of Adagio. On January 28, 2015, we and the former Adagio shareholders, who are substantially represented by key management and therefore are related parties, signed an amendment to the Adagio Share Purchase Agreement to better reflect the contemplated agreement between the parties. Adagio shareholders are entitled to a payment of Cdn$2,500,000 conditional upon the successful completion of the APL-130277 final safety study, to be satisfied by the issuance of common shares at a deemed value equal to the 30 day volume weighted average trading price, or VWAP, immediately prior to the first public announcement of the results of such study. This study had not been started as of September 30, 2015. The VWAP of the common shares may not be less than the “discounted market price” as defined in the policies of the TSX.

Our President and Chief Executive Officer was also a director, officer and majority shareholder of Adagio. To satisfy our board of director’s fiduciary duties and to appropriately manage the Transaction, our board of directors appointed a special committee comprised of independent directors.. The special committee also retained independent legal counsel as well as an independent registered financial advisor registered with the Financial Industry Regulatory Authority, Inc., or FINRA, to provide a fairness opinion. We also obtained minority shareholder approval in connection with the Adagio Share Purchase Agreement.

As a condition of the second MJFF grant agreement, we are required to support further PD research by making up to US$1,000,000 in contributions to MJFF conditional on future sales of APL-130277, beginning the year that we post net sales of APL-130277 in excess of US$5,000,000.

Critical Accounting Policies and Estimates

A summary of significant accounting policies is included in Note 6 of our audited consolidated financial statements for the year ended December 31, 2014. Critical accounting estimates require our management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting period. Actual outcomes could differ from these estimates. Changes in our management’s accounting estimates can have a material impact on our financial results. Our significant accounting judgments, estimates and assumptions are included in Note 5 of our audited consolidated financial statements for the year ended December 31, 2014 and are also described below.

The estimates and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. The areas involving a higher degree of judgment or complexity, or areas where the assumptions and estimates are significant to the financial statements were the same as those applied to our consolidated financial statements as at and for the year ended December 31, 2014.

Intangible assets

We estimate the useful lives of intangible assets from the date they are available for use in the manner intended by our management and periodically review the useful lives to reflect our management’s intent about developing and commercializing the assets. Our management also estimates their recoverability to assess if there has been an impairment. The amounts and timing of recorded expenses for amortization and impairments of intangible assets for any period are affected by these estimates. The estimates are reviewed at least annually and are updated if expectations change as a result of technical or commercial obsolescence, generic threats and legal or other limits to use. It is possible that changes in these factors may cause significant changes in the estimated useful lives of our intangible assets in the future.

Share-based payments

Our management determines costs for share-based payments using market-based valuation techniques. The fair value of the market-based and performance-based share awards are determined at the date of grant using generally accepted valuation techniques. Assumptions are made and judgments are used in applying valuation techniques. These assumptions and judgments include estimating the future volatility of the stock price, expected dividend yield, future employee turnover rates and future employee stock option exercise behaviors and corporate performance. Such judgments and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates.

Share Capital

Since the three months ended September 30, 2015, the following changes have occurred to common shares, stock options and warrants:

Exercised Warrants

Summary of warrants exercised since the nine months ended September 30, 2021 are as follows:

FINANCIAL RISK MANAGEMENT

In the normal course of business, we are exposed to a number of financial risks that can affect our operating performance. These risks are credit risk, liquidity risk and market risk. Our overall risk management program and prudent business practices seek to minimize any potential adverse effects on our financial performance. There were no changes in our approach to risk management during the three and nine months ended September 30, 2015.

Credit risk

Our cash balance is on deposit with a Canadian chartered bank. We have no significant concentration of credit risk arising from operations. Our management believes that the credit risk concentration with respect to these financial instruments is remote.

Liquidity risk

Our approach to managing liquidity risk is to ensure that we will have sufficient liquidity to meet liabilities when due. As at September 30, 2015, we had cash of Cdn$109,521,968 and prepaid expenses and other current assets of Cdn$1,412,366 (December 31, 2021 - Cdn$17,448,497 and Cdn$269,779, respectively) to settle current liabilities of Cdn$4,297,152 (December 31, 2021 - Cdn$3,080,631). Most of our accounts payable and accrued liabilities have contractual maturities of less than 30 days and are subject to normal trade terms.

Market risk

Capital risk management

We manage our capital structure and make adjustments to it, based on the funds available to us, in order to support our research and development activities. Our capital structure consists of share capital, warrants and share-based payments. Our board of directors does not establish quantitative return on capital criteria for management but rather relies on the expertise of our management to sustain future development of the business.

The product candidates which we currently have in our pipeline are in the research stage; as such, we are dependent on external financing to fund our activities. In order to carry out the planned research and development and pay for administration costs, we will spend our existing working capital and raise additional amounts as needed.

Management reviews our capital management approach on an ongoing basis and believes that this approach, given our relative size, is reasonable.

There were no changes in our approach to capital management during the three and nine months ended September 30, 2015. We and our subsidiary are not subject to externally imposed capital requirements.

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. The evaluation was conducted under the supervision and with the participation of management, including our President and Chief Executive Officer (“CEO”), who is our principal executive officer, and Chief Operating Officer and Chief Financial Officer (“CFO”), who is our principal financial officer, as of December 31, 2014. Based on the evaluation, our CEO and CFO concluded that such disclosure controls and procedures—as defined in Canada under National Instrument 52-109— Certification of Disclosure in Issuers’ Annual and Interim Filings, are effective as at December 31, 2014.

We also conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Such evaluation was conducted under the supervision and with the participation of management, including our CEO and CFO, as of September 30, 2015. Based on such evaluation, our CEO and CFO concluded that as of September 30, 2015, such disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in SEC rules and forms, and accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

It should be noted that while our disclosure controls and procedures are designed to provide a reasonable level of assurance of achieving their objectives, our CEO and CFO do not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

In the ordinary course of business, we may be from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements, employment and other matters. While the outcome of these proceedings and claims cannot be predicted with certainty, as of September 30, 2015, we were not party to any legal or arbitration proceedings that may have, or have had in the recent past, significant effects on our financial position. No governmental proceedings are pending or, to our knowledge, contemplated against us. We are not a party to any material proceedings in which any director, officer or affiliate of ours, any owner of record or beneficially of more than five percent of our common shares, or any associate of any of the foregoing, is either a party adverse to us or our subsidiary or has a material interest adverse to us or our subsidiary.

Investing in our common shares involves numerous risks. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this Quarterly Report on Form 10-Q, including our consolidated financial statements and related notes appearing in this Quarterly Report on Form 10-Q, before deciding to invest in our common shares. If any of the following risks actually occurs, our business, prospects, operating results and financial condition could suffer materially, the trading price of our common shares could decline and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.

This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this Quarterly Report on Form 10-Q. See “Special Note Regarding Forward-Looking Statements” for information relating to these forward-looking statements.

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred net losses since our inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future. We may never achieve or sustain profitability.

We have incurred net losses during each fiscal period since our inception. Our net loss was Cdn$10.8 million for the year ended December 31, 2014. As of December 31, 2014, we had a deficit accumulated during the development stage of Cdn$32.5 million. Our net loss was Cdn$2.9 million for the quarter ended September 30, 2015, and as of September 30, 2015, we had a deficit of Cdn$51.5 million. We do not know when or whether we will become profitable. To date, we have not commercialized any products or generated any revenues from the sale of products, and we do not expect to generate any product revenues in the foreseeable future. Our losses have resulted principally from costs incurred in our research and development activities. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

We have devoted most of our financial resources to research and development, including our clinical and preclinical development activities. To date, we have financed our operations primarily through the sale of equity securities and debt and, to a lesser extent, through grants from charitable foundations. The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debt financings, strategic collaborations (such as licensing agreements or the sale of a share of our revenue stream) or additional grants. We have not completed pivotal clinical trials for our product candidate and it will be a few years, if ever, before our product candidate APL-130277 is ready for commercialization. Even if we obtain regulatory approval to market our product candidate, our future revenues (if any) will depend upon a number of factors, including the size of any markets in which our product candidate has received approval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payors and adequate market share for our product candidate in those markets.

We expect to continue to incur significant expenses and increasing net losses for at least the next several years. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

If we are required by the FDA, or any equivalent foreign regulatory authority, to perform clinical trials or studies in addition to those we currently expect to conduct, or if there are any delays in completing the clinical trials of APL-130277, our expenses could further increase.

To become and remain profitable, we must succeed in developing our product candidate, obtaining regulatory approval for it, and manufacturing, marketing and selling our product when and if we obtain regulatory approval in the United States or elsewhere. We may not succeed in these activities, and we may never generate revenue from our product sales that is significant enough to achieve profitability. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to become or remain profitable would depress our market value and could impair our ability to raise capital, expand our business, discover or develop other product candidates or continue our operations. A decline in our value could cause you to lose all or part of your investment.

We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

Our cash was Cdn$109.5 million as of September 30, 2015. Based on our current operating plan, we believe that our existing cash will be sufficient to fund research and development and OG&A overhead expenditures, complete Phase 3 clinical studies and CMC requirements for the filing of an NDA in 2016 under the abbreviated Section 505(b)(2) regulatory pathway in the United States, continue to prepare for commercial launch of APL-130277 in the U.S. market in late 2017, commence initial regulatory and clinical activities for European market registration, and initiate other early stage pipeline development programs. We believe that we will continue to expend substantial resources for the foreseeable future developing APL-130277. These expenditures will include costs associated with research and development, conducting Phase 3 clinical trials, potentially obtaining regulatory approvals and manufacturing products, as well as marketing and selling products approved for sale, if any, and potentially acquiring new technologies. In addition, other unanticipated costs may arise. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidate. Our costs will increase if we suffer any delays in our Phase 3 clinical trials for APL-130277, including, without limitation, delays in enrollment of patients. We expect to continue incurring additional costs associated with operating as a public company in the United States, hiring additional personnel and expanding our facilities.

Our future capital requirements depend on many factors, including:

Based on our current operating plan, we believe that our existing cash will be sufficient to fund research and development and OG&A overhead expenditures, complete Phase 3 clinical studies and CMC requirements for an NDA in the United States in 2016, continue to prepare for commercial launch of APL-130277 in the U.S. market in late 2017, commence initial regulatory and clinical activities for European market registration, and initiate other early stage pipeline development programs. However, our operating plan may change as a result of many factors currently unknown to us. As a result of these factors, we may need additional funds sooner than planned. In addition, we may seek additional capital due to strategic considerations even if we believe we have sufficient funds for our current or future operating plans. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate clinical trials or other development activities for our product candidates, or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize our product candidate.

Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our product candidate on unfavorable terms to us.

We may seek additional capital through a variety of means, including through private and public equity offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of such equity or convertible debt securities may include liquidation or other preferences that are senior to, or otherwise adversely affect, your rights as a shareholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring indebtedness, making capital expenditures, declaring dividends or encumbering our assets to secure future indebtedness. If we raise additional funds through strategic partnerships with third-parties, we may have to relinquish valuable rights to our product candidate, or grant licenses on terms that are not favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts for APL-130277, or grant rights to develop and market our product candidate that we would otherwise prefer to develop and market ourselves or on terms less favorable than we might otherwise negotiate.

Risks Related to Clinical Development and Regulatory Approval of Our Product Candidate

Clinical failure may occur at any stage of clinical development, and we may never succeed in developing marketable products or generating product revenue.

Although the active ingredient in APL-130277, apomorphine, has been used safely as apomorphine hydrochloride in injectable form for treatment of PD for a number of years, it has not previously been approved or demonstrated to be safe in sublingual form. Our early encouraging clinical results for APL-130277 are not necessarily predictive of the results of our ongoing or future clinical trials, including our Phase 3 clinical trials, and the safety of our product candidate. Promising results in preclinical studies and early clinical trials of any product candidate may not be predictive of similar results in humans during later clinical trials. Any further clinical trials that we may conduct may not demonstrate the efficacy and safety necessary to obtain regulatory approval to market our product candidate and the FDA could require us to complete additional safety, efficacy or other studies. If the results of our ongoing or future clinical trials are inconclusive with respect to the efficacy of our product candidate or if we do not meet the clinical endpoints with statistical significance or if there are safety concerns associated with our product candidate, we may be prevented from or delayed in obtaining marketing approval for our product candidate. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including, without limitation, changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, differences in the dosage amounts of APL-130277 and the response of patients to such amounts, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical trial participants.

Alternatively, even if we obtain regulatory approval, that approval may be for indications or patient populations that are not as broad as intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. For example, certain existing formulations of apomorphine outside the United States used for the treatment of OFF episodes (ApoGo, ApokinON and Apomin) are currently only indicated for advanced PD patients, and there can be no assurance that our product candidate will not be similarly limited in its indications for the treatment of PD. We may also be required by the FDA to perform additional or unanticipated clinical trials to obtain approval, including, without limitation, an ease-of-use study to be completed in patients in the morning OFF state; a Thorough QT study in healthy volunteers to determine the potential arrhythmia liability of our product candidate; additional toxicity studies; and additional safety and/or efficacy studies if the primary endpoint does not show a large enough delta, if the FDA finds a small safety signal or does not accept our final safety data, or is concerned with our study blinding. We could also be subject to additional post-approval or post-marketing testing requirements to maintain regulatory approval. In addition, regulatory authorities may withdraw their approval of a product or impose restrictions on its distribution, such as in the form of a modified Risk Evaluation and Mitigation Strategy. The failure to obtain timely regulatory approval of our product candidate, any product marketing limitations or a product withdrawal would negatively impact our business, results of operations and financial condition.

Delays or failure in the commencement, enrollment or completion of clinical trials of our product candidate could result in increased costs to us as well as a delay or failure in obtaining regulatory approval, or prevent us from commercializing our product candidate on a timely basis, or at all.

We cannot guarantee that clinical trials, including those associated with Phase 3 clinical trials for APL-130277, will be conducted as planned or completed on schedule, if at all. A delay or failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely commencement, enrollment or completion of clinical development include, without limitation:

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA. The FDA may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the trial. The FDA may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately lead to the denial of marketing approval of our product candidate.

Delays, including delays caused by the above or other factors, can be costly and could negatively affect our ability to complete a clinical trial, which could negatively affect the price of our common shares. If we are not able to successfully complete clinical trials, we will not be able to obtain regulatory approval and will not be able to commercialize our product candidate.

Clinical development, regulatory review and approval of the FDA and comparable foreign authorities are lengthy, time consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidate, our business will be materially adversely affected.

Our product candidate will be subject to extensive governmental regulations relating to, among other things, development, clinical trials, manufacturing and commercialization. In order to obtain regulatory approval for the commercial sale of our product candidate, we must demonstrate through extensive preclinical studies and clinical trials that our product candidate is safe and effective for use in the target indication.

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable, typically takes many years following the commencement of clinical trials, and depends upon numerous factors.

In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of our product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. We have not obtained regulatory approval for our product candidate in any jurisdiction, and it is possible that our product candidate or any product candidates we may seek to develop in the future will not obtain regulatory approval in any jurisdiction. In addition, we may gain regulatory approval for APL-130277 in some but not all of the jurisdictions available or some but not all of the target indications, resulting in limited commercial opportunity for our product candidate, if approved.

Applications for our product candidate could be delayed or could fail to receive regulatory approval for many reasons, including, but not limited to, the following:

This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval to market our product candidate or any of our product candidates in the future, which would significantly harm our business, results of operations, and prospects.

We currently have only one product candidate, APL-130277, in clinical trials and are substantially dependent on this single product candidate. A failure of this product candidate in clinical development would adversely affect our business. If we decide to leverage success with our APL-130277 product candidate to develop other product opportunities, we may not be successful in such efforts.

APL-130277 is our only product candidate. If we were required to discontinue development of APL-130277, if APL-130277 does not receive regulatory approval, if we do not obtain our targeted indications for APL-130277 or if APL-130277 fails to achieve sufficient market acceptance for any indication, we would be delayed by many years in our ability to achieve profitability, if ever. Moreover, if we decide to leverage success with our APL-130277 product candidate to develop other product opportunities, we may not be successful in such efforts. In any such event, our business will be materially adversely affected.

If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.

We intend to market our product candidate, APL-130277, if approved, in international markets, including in Europe, either directly or through partnerships. Such marketing will require separate regulatory approvals in each market and compliance with numerous and varying regulatory requirements, including initial regulatory and clinical activities for European market registration. The approval procedures vary from country to country and may require additional testing that we are not required to perform to obtain regulatory approval in the United States. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval. In addition, in many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize APL-130277 or any of our future products in any market. If we and/or any future partner are unable to obtain regulatory approval for APL-130277 in one or more significant foreign jurisdictions, then the commercial opportunity for APL-130277, and our financial condition, will be adversely affected.

Even if we receive regulatory approval for APL-130277 for any indication, it will be subject to ongoing regulatory review, which may result in significant additional expense. Additionally, our product, if approved, could be subject to labeling and other restrictions, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product.

Any regulatory approvals that we receive for our product candidate may also be subject to limitations on the approved indicated uses for which the product may be marketed or to conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor safety and efficacy. In addition, if the FDA or comparable foreign regulatory authorities approve our product candidate, the manufacturing process, labeling, packaging, distribution, AE reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMP and GCP, for any clinical trials that we conduct post-approval.

Later discovery of previously unknown problems with our approved product, including AEs of unanticipated severity or frequency, or with manufacturing operations or processes, or failure to comply with regulatory requirements, may result in, among other things: