Grace Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Expressed in thousands except share and per share data)

1. Nature of operations

General

Grace Therapeutics, Inc. (formerly known as Acasti Pharma Inc.) (“Acasti Delaware” or “the Company”), is a Delaware corporation that, as further described below, previously existed under the laws of the Province of Québec, Canada (“Acasti Québec”), before changing its jurisdiction on October 1, 2024 (the “Continuance”) to the Province of British Columbia, Canada (“Acasti British Columbia”). On October 7, 2024, Acasti British Columbia changed its jurisdiction to the State of Delaware in the United States of America (the “Domestication”). Effective October 28, 2024, the Company changed its corporate name to Grace Therapeutics, Inc.

Liquidity and Financial Condition

The Company has incurred operating losses and negative cash flows from operations in each period since its inception. The Company expects to incur significant expenses and continued operating losses for the foreseeable future.

In May 2023, the Company implemented a strategic realignment plan to enhance shareholder value that resulted in the Company engaging a new management team, streamlining its research and development activities, and greatly reducing its workforce. Following the realignment, the Company is a smaller, more focused organization, based in the United States, and concentrated on its development of its lead product candidate GTx-104. Further development of GTx-102 and GTx-101 will occur at such a time when the Company is able to secure additional funding or enters into strategic partnerships for license or sale with third parties.

In February 2025, the Company completed a private placement of the Company securities with certain institutional and accredited investors. Net proceeds to the Company were $13,705. Refer to Note 5, Stockholder’s Equity - 2025 Private Placement, for additional information.

In October 2025, the Company received $4,040 in gross proceeds from exercises of 1,345,464 common warrants that were previously issued in a private placement in September 2023 for 1,345,464 shares of Common Stock. The remaining 1,190,927 common warrants issued in the 2023 private placement have expired in accordance with the terms of the common warrants as the 60th day after the FDA’s acceptance for review of the Company’s NDA for GTx-104 has passed.

The Company plans to use its cash and cash equivalents to further the regulatory review process for GTx-104, pre-commercial planning, commercial team buildout, and product launch if GTx-104 is approved, working capital and other general corporate purposes. The Company believes its existing cash and cash equivalents will be sufficient to sustain planned operations through at least 12 months from the issuance date of these unaudited condensed consolidated financial statements.

The Company will require additional capital to fund its daily operating needs. The Company does not expect to generate revenue from product sales unless and until it obtains regulatory approval for GTx-104, which is subject to significant uncertainty. To date, the Company has financed its operations primarily through public offerings and private placements of its common equity, warrants and convertible debt, warrant exercises, and the proceeds from research tax credits. Until such time that the Company can generate significant revenue from drug product sales, if ever, it will require additional financing, which is expected to be sourced from a combination of public or private equity or debt financing or other non-dilutive sources, which may include fees, milestone payments and royalties from collaborations with third parties. Arrangements with collaborators or others may require the Company to relinquish certain rights related to its technologies or drug product candidates. Adequate additional financing may not be available to the Company on acceptable terms, or at all. The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and its ability to pursue its business strategy. The Company plans to raise additional capital in order to maintain adequate liquidity. Negative results from studies or trials, if any, the timing and ability to receive FDA approval for marketing the Company’s drug candidates or depressed prices of the Company’s stock could impact the Company’s ability to raise additional financing. Raising additional equity capital is subject to market conditions that are not within the Company’s control. If the Company is unable to raise additional funds, the Company may not be able to realize its assets and discharge its liabilities in the normal course of business.

The Company remains subject to risks similar to other development stage companies in the biopharmaceutical industry, including compliance with government regulations, protection of proprietary technology, dependence on third-party contractors and consultants and potential product liability, among others. Please refer to the risk factors included in Part 1, Item 1A of the Company’s Annual Report on Form 10-K for the year ended March 31, 2025, filed with the SEC on June 23, 2025 (the “Annual Report”).

2. Summary of significant accounting policies:

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X under the Securities Exchange Act of 1934. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements as of and for the year ended March 31, 2025, and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated financial position as of December 31, 2025, the consolidated results of its operations for the three and nine months ended December 31, 2025 and 2024, its statements of stockholders’ equity for the three and nine months ended December 31, 2025 and 2024, and its consolidated cash flows for the nine months ended December 31, 2025 and 2024.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the year ended March 31, 2025 included in the Annual Report. The condensed consolidated balance sheet data as of March 31, 2025 presented for comparative purposes was derived from the Company’s audited consolidated financial statements. The results for the three and nine months ended December 31, 2025 are not necessarily indicative of the operating results to be expected for the full year or for any other subsequent interim period.

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended March 31, 2025 included in the Annual Report. There have been no changes to the Company’s significant accounting policies since the date of the audited consolidated financial statements for the year ended March 31, 2025 included in the Annual Report.

Use of estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

Estimates are based on management’s best knowledge of current events and actions that management may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Estimates and assumptions include the measurement of stock-based compensation, derivative warrant liabilities, accruals for research and development contracts and contract research organization agreements, and valuation of intangibles and goodwill.

Recent accounting pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)(“ASU 2024-03”), to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization and depletion) in commonly presented expense captions (such as cost of sales, SG&A and research and development).

ASU 2024-03 applies to all public business entities and is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted. The Company is currently evaluating the effect of adopting this new guidance on its consolidated financial statements and disclosures. The Company is currently assessing the impact of the new guidance on its financial statement disclosures.

The Company has considered all other recent accounting pronouncements and concluded that they are either not applicable to the Company’s business or that the effect is not expected to be material to the consolidated financial statements as a result of future adoption.

3. Fair value measurements

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 are as follows:

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2025 are as follows:

There were no changes in valuation techniques or transfers between Levels 1, 2 or 3 during the nine months ended December 31, 2025.The Company’s derivative warrant liabilities are measured at fair value on a recurring basis using unobservable inputs that are classified as Level 3 inputs. The Company doesnot have derivative warrant liabilities on its consolidated balance sheet as of December 31, 2025, as the derivative warrant liabilities were settled on October 21, 2025. Refer to Note 5,Stockholders’ Equity, for the valuation techniques and assumptions used in estimating the fair value of the derivative warrant liabilities.

4. Trade and other payables

5. Stockholders’ equity

Preferred Stock

The Company is authorized to issue up to 10,000,000 shares of preferred stock, par value $0.0001 per share. No shares of the Company’s preferred stock are issued or outstanding.

Common Stock

In connection with the consummation of the Domestication, on October 7, 2024, the Company adopted a Certificate of Incorporation (as amended, the “Charter”) and Bylaws (as amended, the “Bylaws”). The rights of holders of the Company’s Common Stock, par value $0.0001 per share (“Common Stock”) are governed by the Charter, the Bylaws, and the General Corporation Law of the State of Delaware. The Company is authorized to issue up to 100,000,000 shares of Common Stock.

2025 Private Placement

In February 2025, the Company agreed to offer and sell in a private placement (the “2025 Private Placement”) an aggregate of 3,252,132 shares of Common Stock at a purchase price of $3.395 per share of Common Stock (the “Shares”) and pre-funded warrants (the “2025 Pre-Funded Warrants”) to purchase up to 1,166,160 shares of Common Stock at a purchase price equal to the purchase price per Share less $0.0001 (the “2025 Pre-Funded Warrant Shares”). Each 2025 Pre-Funded Warrant is exercisable forone share of Common Stock at an exercise price of $0.0001 per share, exercisable immediately and will expire once exercised in full.

Pursuant to the securities purchase agreement with certain institutional and accredited investors in connection with the 2025 Private Placement (the “2025 Purchase Agreement”) for each Share and each 2025 Pre-Funded Warrant issued, the Company agreed to issue to each purchaser an accompanying common warrant (the “2025 Common Warrants” and, together with the 2025 Pre-Funded Warrants, the “2025 Warrants”) to purchase shares of Common Stock (or 2025 Pre-Funded Warrants in lieu thereof), exercisable for an aggregate of 4,418,292 shares of Common Stock (or 2025 Pre-Funded Warrants in lieu thereof). Each 2025 Common Warrant is exercisable forone share of Common Stock at an exercise price of $3.395 per share (orone 2025 Pre-Funded Warrant at an exercise price of $3.3949 per share in lieu thereof), is immediately exercisable and will expire on the earlier of (i) the 60th day after the date the FDA approves the NDA for GTx-104 and (ii) September 25, 2028. The 2025 Common Warrants were offered and sold at a purchase price of $0.125 per 2025 Common Warrant, which purchase price is included in the offering price per Share and 2025 Pre-Funded Warrant issued in the 2025 Private Placement.

The 2025 Private Placement included the issuance of Common Stock, 2025 Pre-Funded Warrants, and 2025 Common Warrants to related parties namely (i) Shore Pharma LLC, an entity held in a trust for the benefit of immediate family members of Vimal Kavuru, the Chair of the Company’s Board of Directors, (ii) ADAR1 Partners, LP, (iii) AIGH Investment Partners, LP, and (iv) SS Pharma LLC, each a beneficial owner of more than 5% of the Common Stock prior to the 2025 Private Placement, resulting in proceeds of $5,694 in the year ended March 31, 2025.

The Company paid TD Securities (USA) LLC, the placement agent, customary placement fees in its capacity as placement agent for the sale of the Company’s securities to certain of the investors in the 2025 Private Placement.

The 2025 Private Placement closed on February 11, 2025 (the “Closing Date”). The net proceeds to the Company were $13,705, after deducting fees and expenses.

Both 2025 Pre-funded Warrants and 2025 Common Warrants are presented under additional paid-in capital in the equity section of the unaudited condensed consolidated balance sheet as of December 31, 2025.

During the three and nine months ended December 31, 2025,0 and 410,460 of the 2025 Pre-Funded Warrants were exercised for 0 and 410,456 shares of Common Stock, respectively, resulting in inconsequential proceeds.

2023 Private Placement

In September 2023, the Company entered into a securities purchase agreement (the “2023 Purchase Agreement”) with certain institutional and accredited investors in connection with a private placement offering of the Company’s securities (the “2023 Private Placement”). Pursuant to the 2023 Purchase Agreement, the Company offered and sold 1,951,371 Common Shares, at a purchase price of $1.848 per Common Share and pre-funded warrants (“2023 Pre-Funded Warrants”) to purchase up to 2,106,853 Common Shares at a purchase price equal to the purchase price per Common Share less $0.0001. Each 2023 Pre-Funded Warrant is exercisable forone Common Share at an exercise price of $0.0001 per Common Share, is immediately exercisable, and will expire once exercised in full. Pursuant to the 2023 Purchase Agreement, the Company also issued, to such institutional and accredited investors, common warrants (the “2023 Common Warrants” and, together with the 2023 Pre-Funded Warrants, the “2023 Warrants”) to purchase Common Shares exercisable for an aggregate of 2,536,391 Common Shares. Under the terms of the 2023 Purchase Agreement, for each Common Share and each 2023 Pre-Funded Warrant issued in the 2023 Private Placement, an accompanying five-eighths (0.625) of a 2023 Common Warrant was issued to the purchaser thereof. Each whole 2023 Common Warrant is exercisable forone Common Share at an exercise price of $3.003 per Common Share, is immediately exercisable, and will expire on the earlier of (i) the 60th day after the date of the acceptance by the FDA of an NDA for the Company’s product candidate GTx-104 or (ii)five years from the date of issuance. The 2023 Private Placement closed on September 25, 2023. The net proceeds to the Company from the 2023 Private Placement were $7,338, after deducting fees and expenses.

The 2023 Private Placement included the issuance of Common Shares, 2023 Pre-Funded Warrants, and 2023 Common Warrants to related parties namely (i) Shore Pharma LLC, an entity that was controlled by Vimal Kavuru, , the Chair of the Company’s Board of Directors, at the time of the 2023 Private Placement and (ii) SS Pharma LLC, the beneficial owner of 5.5% of Common Shares outstanding prior to the 2023 Private Placement, resulting in proceeds of $2,500.

In October 2025, the Company received $4,040 in gross proceeds from exercises of 1,345,464 common warrants that were previously issued in a private placement in September 2023 for 1,345,464 shares of Common Stock. The remaining 1,190,927 common warrants issued in the 2023 private placement have expired in accordance with the terms of the common warrant as the 60th day after the FDA’s acceptance for review of the Company’s NDA for GTx-104 has passed.

The following table summarizes the Company’s outstanding warrants as of December 31, 2025, all of which are exercisable for shares of Common Stock:

1. Following the exercise of 1,345,464 2023 Common Warrants in October 2025, the remaining 1,190,927 2023 Common Warrants expired on October 21, 2025, which was the 60th day after the date of the acceptance by the FDA of the NDA for the Company’s product candidate GTx-104.

2. The 2025 Common Warrants will expire on the earlier of: (i) the 60th day after the date the FDA approves the NDA for GTx-104 or (ii)September 25, 2028.

In connection with the Continuance and the Domestication, the Company continues its obligations under the 2023 Purchase Agreement and the 2023 Warrants. Upon the effectiveness of the Continuance, each outstanding 2023 Warrant exercisable for Common Shares remained exercisable for an equivalent number of common shares of Acasti British Columbia for the equivalent exercise price per share without any action by the holder. Upon the effectiveness of the Domestication, each outstanding 2023 Warrant exercisable for common shares of Acasti British Columbia remained exercisable for an equivalent number of shares of Common Stock for the equivalent exercise price per share without any action by the holder.

Derivative Warrant Liabilities

The 2023 Common Warrants issued as a part of the 2023 Private Placement were derivative warrant liabilities given that the 2023 Common Warrants did not meet the fixed-for-fixed criteria and that the 2023 Common Warrants were not indexed to the Company's own stock.

The derivative warrant liabilities are measured at fair value at each reporting period and the reconciliation of changes in fair value is presented in the following table:

The warrant liability was determined based on the fair value of 2023 Common Warrants at the issue date and the reporting dates using the Black-Scholes model with the following assumptions. The 2023 Common Warrants expired on October 21, 2025, which was the 60th day after the date of the acceptance by the FDA of the NDA for the Company's product candidate GTx-104, which resulted in a $241 settlement of the derivative warrant liability on our consolidated balance sheet as of December 31, 2025. The settlement value of the warrant liability was determined using the Black-Scholes model with the following assumptions:

As of December 31, 2025 and March 31, 2025, the balance of derivative warrant liabilities from related parties was $0 and $952, respectively.

6. Stock-based compensation

2024 Equity Incentive Plan

At the Annual and Special Meeting of Shareholders on September 30, 2024, the Company’s shareholders approved the Acasti Pharma Inc. 2024 Equity Incentive Plan (the “2024 Plan”) which became effective on the date of the Domestication. The 2024 Plan replaced the Acasti Pharma Inc. Stock Option Plan and the Acasti Pharma Inc. Equity Incentive Plan (the “Prior Plans”). The 2024 Plan provides for the grant of awards of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, performance-based awards and other equity-based awards to eligible persons as defined under the 2024 Plan. Any of these awards may, but need not, be made as performance incentives to reward the holders of such awards for the achievement of performance goals in accordance with the terms of the 2024 Plan. Stock options granted under the 2024 Plan may be non-qualified stock options or incentive stock options, as provided in the 2024 Plan.

In connection with the Continuance and the Domestication, the Company continues its obligations under the Prior Plans and all of the outstanding equity awards under the Prior Plans. Upon effectiveness of the Continuance, each outstanding option exercisable for and restricted share unit settleable into Common Shares remained exercisable for or able to be settled into an equivalent number of common shares of Acasti British Columbia for the equivalent exercise price per share (if applicable), without any action by the holder. Upon effectiveness of the Domestication, each outstanding option exercisable for and restricted share unit settleable into common shares of Acasti British Columbia remained exercisable for or able to be settled into an equivalent number of shares of Common Stock for the equivalent exercise price per share (if applicable), without any action by the holder.

Following the Effective Date of the 2024 Plan, no awards shall be made under the Prior Plans. However, Common Shares reserved under the Prior Plans to settle awards which were made under the Prior Plans may be issued and delivered following the Effective Date to settle such awards.

The 2024 Plan is administered by a committee designated from time to time, by resolution of the Company’s Board of Directors. The committee will also be responsible for determining, among others, the key terms of the awards including their grant dates, pricing, basis for fair value determination, vesting terms, restrictions, and terminations. The Board has designated its Compensation Committee to administer the 2024 Plan. As of December 31, 2025, there were 1,350,000 shares of Common Stock authorized for issuance under the 2024 Plan and 964,470 shares available for future issuance under the 2024 Plan.

The 2024 Plan will terminate automaticallyten years after the Effective Date and may be terminated on any earlier date as provided by the 2024 Plan.

The following table summarizes information about activities within the 2024 Plan and Prior Plans for the nine months ended December 31 , 2025:

The weighted-average grant date fair value of awards for options granted during the nine months ended December 31, 2025 was $1.78. The fair value of options granted was estimated using the Black-Scholes option pricing model, resulting in the following weighted-average assumptions for the options granted:

Compensation expense recognized under the 2024 Plan and the Prior Plan is summarized as follows:

As of December 31, 2025, there was $398 of total unrecognized compensation cost, related to non-vested stock options, which is expected to be recognized over a remaining weighted-average vesting period of 1.12 years.

7. Loss per share

The Company has generated a net loss for all periods presented. Therefore, diluted loss per share is the same as basic loss per share since the inclusion of potentially dilutive securities would have had an anti-dilutive effect. All currently outstanding options and warrants could potentially be dilutive in the future.

The Company excluded the following potential shares of Common Stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Basic and diluted net loss per share is calculated based upon the weighted-average number of shares of Common Stock outstanding during the year. Common Stock underlying the 2025 Pre-Funded Warrants and 2023 Pre-Funded Warrants are included in the calculation of basic and diluted earnings per share.

8. Segment Information

An operating segment is a component of an entity whose operating results are regularly reviewed by its chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance. Factors used by the Company in determining the reportable segment include the nature of the Company's operating activities, the organizational and reporting structure and the type of information reviewed by the CODM to allocate resources and evaluate financial performance.

The Company hasone reportable operating segment: the development and commercialization of pharmaceutical applications of its patents and licensed rights. The Company’s CODM is its Chief Executive Officer. The accounting policies of the segment are those described in the summary of significant accounting policies.

The CODM assesses the performance of the segment based on net loss, which is reported on the unaudited condensed consolidated statement of net loss and comprehensive loss as Net loss and total comprehensive loss. The measure of segment assets is reported on the unaudited condensed consolidated balance sheet as Total assets.

The Company has not generated any revenue and expects to continue to incur significant expenses and operating losses as it advances product candidates through all stages of development, and ultimately, receive regulatory approval. Accordingly, the CODM utilizes the cash budget and forecasts in assessing the entity-wide operating results and performance, and in deciding how to allocate resources across the organization and its segment. Net loss and total comprehensive loss is used to monitor budgets against actual results, which then is used in assessing the performance of the segment.

The table below summarizes the significant expenses, by category regularly reviewed by the CODM, for the three and nine months ended December 31, 2025 and 2024:

1. Other general and administrative expenses include depreciation, travel, and other administrative costs.

2. Other segment income includes change in fair value of derivative warrant liabilities and foreign exchange (loss)/gain.

3. Income taxes

The provision for income taxes and the effective income tax rates were as follows:

The variance in effective tax rates for the three and nine months ended December 31, 2025 and 2024 is primarily attributable to the Company’s partial valuation allowance applied to its net domestic deferred tax assets.

As of December 31, 2025, the Company had a partial valuation allowance against its net domestic deferred tax assets, for which realization cannot be considered more likely than not at this time. Management assesses the need for the valuation allowance on a quarterly basis. In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), which requires incremental annual disclosures on income taxes, including rate reconciliations, income taxes paid, and other disclosures. The Company will prospectively adopt this guidance beginning March 31, 2026. The Company does not anticipate a material impact onits consolidated financial statements.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provision of the Tax Cuts and Jobs Act, modification to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and other implemented through 2027. The Company does not anticipate the bill will have a material impact on its consolidated financial statements.

10. Commitments and contingencies

Research and development contracts and contract research organizations agreements

The Company utilizes CMOs for the development and production of clinical materials and CROs to perform services related to its clinical trials. Pursuant to the agreements with these CMOs and CROs, the Company has either the right to terminate the agreements without penalties or under certain penalty conditions. As of December 31, 2025, the Company has $185 of commitments to CMOs andno commitments to CROs for the next twelve months.

Legal proceedings and disputes

In the ordinary course of business, the Company is at times subject to various legal proceedings and disputes. The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its unaudited condensed consolidated financial statements. These legal contingencies may be adjusted to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of loss is not estimable, the Company does not accrue legal contingencies. While the outcome of legal proceedings is inherently uncertain, based on information currently available, no reserves or liabilities have been accrued at December 31, 2025.

Item 2.