Annual information form
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PHARMALA BIOTECH HOLDINGS INC. Annual Information Form For the Fiscal Year Ended August 31, 2025 Dated: October 9, 2026
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TABLE OF CONTENTS ANNUAL INFORMATION FORM 2 MARKET AND INDUSTRY DATA 2 CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION 3 CAUTIONARY NOTE REGARDING FUTURE ORIENTED FINANCIAL INFORMATION 9 CERTAIN DOCUMENTS INCORPORATED BY REFERENCE 10 CORPORATE STRUCTURE 12 GENERAL DEVELOPMENT OF THE BUSINESS 12 REGULATORY OVERVIEW 31 RISK FACTORS 34 DIVIDENDS AND DISTRIBUTIONS 35 DESCRIPTION OF CAPITAL STRUCTURE 35 MARKET FOR SECURITIES 36 ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTIONS ON TRANSFER 39 DIRECTORS AND OFFICERS 39 PROMOTERS 41 LEGAL PROCEEDINGS AND REGULATORY ACTIONS 42 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS 42 TRANSFER AGENTS AND REGISTRARS 42 MATERIAL CONTRACTS 43 INTERESTS OF EXPERTS 43 AUDIT COMMITTEE 43 ADDITIONAL INFORMATION 46 SCHEDULE “A” NON-EXHAUSTIVE LIST OF RISK FACTORS 1
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3,4-methylenedioxymethamphetamine (“MDMA”) is currently a Schedule I drug under the Controlled Drugs and Substances Act (Canada) (“CDSA”) and it is a criminal offence to possess substances under the CDSA except with a prescription or under the auspices of a controlled drugs and substances license (“CDSL”). Currently, there are no approved therapeutic products containing MDMA in Canada, although it can be legally prescribed through the Special Access Program. MDMA is currently a Schedule I drug and a controlled substance under the Controlled Substances Act (the “CSA”) in the United States of America (the “United States” or “U.S.”) and it is a criminal offence to possess substances under the CSA without a prescription. MDMA is a drug with no currently accepted medical use in the United States, although it is being researched under Clinical Trial in a large number of government and academic institutions PharmAla (as defined herein) does not have any direct or indirect involvement with the illegal selling, production or distribution of substances in the jurisdictions in which it operates. PharmAla does not advocate for the legalization of psychedelic substances for recreational purposes and does not deal with psychedelic substances except within laboratory and clinical trial settings conducted within approved regulatory frameworks. PharmAla has a Health Canada Controlled Drugs and Substances Dealer’s License (License 6 -1505), allowing for the legal sale of MDMA and Psilocybin. The current CDSL is valid through January 31, 2027. Given the Company’s history of renewal, management expec ts to continue obtaining subsequent renewals. PharmAla, through its research partners, conducts research and development on MDMA and products that may contain psychedelic compounds in Canada and the United States with a focus on developing and commercializ ing psychedelic-inspired regulated medicines. While PharmAla is focused on developing products using psychedelic compounds, PharmAla does not have any direct or indirect involvement with the illegal selling, production or distribution of any substances in the jurisdictions in which it operates. PharmAla does not directly deal with psychedelic substances and will only do so through agents within laboratory and clinical trial setting s conducted within approved regulatory frameworks in the jurisdictions in whi ch it operates. The Canadian federal government regulates drugs through the CDSA, which places controlled substances in a schedule. Under the CDSA, MDMA is currently a Schedule I drug. CDSA prohibits the possession, sale or distribution of a Schedule I drug absent authorization under the CDSA or a related regulation (either via a license or an authorized exemption). It is a criminal offence to possess substances under the CDSA without a prescription. Health Canada has not approved MDMA as a drug. It is anti cipated that all of PharmAla’s MDMA related activities in Canada will be carried out in partnership with institutions (in Canada) under licenses held by and exemptions afforded to such partners to legally handle and administer such drugs. In the United States, MDMA is a Schedule I drug under the CSA. It is currently illegal under federal United States law to possess, produce and sell MDMA absent regulatory approval. There are currently no federally recognized medical uses in the United States for MDMA. The U.S. Food and Drug Administration (the “FDA”) has approved certain trials for the study of MDMA, however, this drug is still currently illegal under federal law absent such approval. PharmAla’s operations are conducted in strict compliance with local laws where such activities are permissible and do not require any specific legal or regulatory approvals unless otherwise specifically cited. PharmAla oversees and monitors compliance with applicable Canadian and United States laws in which it operates. For these reasons, PharmAla may be: (a) subject to heightened scrutiny by regulators, stock exchanges, clearing agencies and other U.S. and Canadian authorities; (b) susceptible to regulatory changes or other changes in law; and (c) subject to risks related to drug development, among other things. There are a number of risks associated with the business, operations, and activities of PharmAla and its subsidiaries (the “Business”). See “ Regulatory Overview” and “Risk Factors” herein for further details.
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2 ANNUAL INFORMATION FORM This annual information form (the “Annual Information Form”) is dated as of October 9, 2026 (the “AIF Date”), and unless otherwise indicated, the information contained herein is dated as of the last day of the most recently completed financial year of Phar mAla (as defined hereinafter) ended August 31, 2025 (the “Fiscal Year-End Date”). Unless otherwise indicated, all references to “$” in this Annual Information Form refer to Canadian dollars. In this Annual Information Form, unless otherwise indicated or if the context otherwise requires, (i) “ PharmAla” means PharmAla Biotech Holdings Inc., and where the context so requires, includes its predecessors, (ii) the “ Company”, “we”, “us” and “our” means, collectively, PharmAla and its Subsidiaries (as defined hereinafter), together with their respective predecessors (where the context so requires), (iii) “Material Adverse Effect” means a material adverse effect on the Business (as defined hereinafter), the properties, assets, liabilities (including contingent liabilities), results of operations, financial performance, financial condition, or the mar ket and trading price of the securities, of the Company and its Subsidiaries, taken as a whole, (iv) “ Authorizations” means, collectively, all consents, licenses, registrations, permits, authorizations, permissions, orders, approvals, clearances, waivers, certificates, and declarations issued, granted, given or otherwise made available by or under the authority of any G overnment Entity or pursuant to any requirement under applicable Law, (v) “Governmental Entities” means: (a) any international, multi-national, national, federal, provincial, territorial, State, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral bo dy, commission, board, bureau, c ommissioner, minister, cabinet, governor in council, ministry, agency or instrumentality, domestic or foreign, including, for greater certainty, Health Canada and the FDA, (b) any subdivision or authority of any of the foregoin g, (c) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing, or (d) any stock exchange, including, for greater certainty, the Canadian Securities Exchange (the “ CSE”), (vi) “ Laws” means, with respect to any Person, any and all applicable law (statutory, common or otherwise), constitution, treaty, convent ion, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or similar requirement, whether domestic or f oreign, enacted, adopted, promulgated or applied by a Governmental Entity that is binding upon or applicable to such Person or its bu siness, undertaking, property or securities, and to the extent that they have the force of law, policies, guidelines, notic es and protocols of any Governmental Entity, as amended, unless expressly specified otherwise, and for greater certainty, includes MDMA Laws, (vii) “MDMA Laws” means, all applicable State, provincial, municipal, and/or federal legislation and regulations governing MDMA, MDMA products, MDMA accessories, MDMA extracts, and activities related thereto in the United States, Canada and other jurisdiction s in which the Company operates the Business, together with any successor legislation and regulations thereto, and for greater certainty, includes the CSA, CDSA, Federal Food, Drug, and Cosmetic Act (the “FDCA”), and the Controlled Substances Import and Export Act (the “CSIEA”); (viii) “ Person” includes any individual, partnership, association, body corporate, organization, trust, estate, trustee, executor, administrator, legal representative or government (including any Governmental Entity), syndicate or other entity, w hether or not having legal status; and (ix) “Applicable Securities Laws” means, as applicable, the securities legislation, securities regulation and securities rules, and the policies, notices, instruments and blanket orders of each Canadian securities regulator having the force of applicable Law and in force from time to time. All financial information and all dollar amounts in this Annual Information Form are prepared in Canadian dollars, unless oth erwise indicated, and in accordance with International Financial Reporting Standards (“ IFRS”) as issued by the International Accounting Standards Board, and as set out in Part I of the Handbook of the Chartered Professional Accountants of Canada. MARKET AND INDUSTRY DATA Unless otherwise indicated, information contained in this Annual Information Form (or in a document incorporated or deemed to be incorporated by reference herein) concerning the industry and the markets in which the Company operates, including its genera l expectations and market position, market opportunities and market share, is, or may be, based on information from independent industry organizations, other third -party sources (including industry publications, surveys and forecasts) and the studies and est imates of management of the Company (“Management”). Unless otherwise indicated, the Company’s estimates are derived from publicly available information released by independent i ndustry analysts and third-party sources as well as data from the Company’s internal research, and include assumptions made by Mana gement which Management believe to be reasonable based on their knowledge of the relevant industry and markets. Such internal resear ch and assumptions have not been verified by any independent source, and the Company and Management have not independently verified any third-party information. While Management believes the market position, market opportunity and market share information included, or which may be included, in this Annual Information Form or in a document incorporated or deemed to be incorporat ed by reference herein is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates o f the Company’s future performance and the future performance of the industry and markets in which the Company oper ates are subject to a
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3 high degree of uncertainty and risk due to a variety of factors, including those described under the headings “Cautionary Note Regarding Forward-Looking Information” and “Risk Factors”. CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION Certain statements contained in this Annual Information Form, and in the documents incorporated by reference in this Annual Information Form, constitute “forward -looking information” and “forward -looking statements” (together, “ forward-looking statements”) within the meaning of Applicable Securities Laws and are based on assumptions, expectations, estimates and projections as at the AIF Date. Forward-looking statements relate to future events or future performance and reflect Management’s expectations or beliefs regarding future events. In certain cases, forward -looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “ma y”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved” or the negative of these terms or comparable terminology. Forward-looking statements in this Annual Information Form and in documents incorporated by reference herein include, but are not limited to, statements with respect to the following (capitalized terms used below that are not defined in this section have the meanings given to them elsewhere in this Annual Information Form): ● the Business objectives and milestones and the anticipated timing of, and costs in connection with, the execution or achievement of such objectives and milestones; ● the Company’s future growth prospects and intentions to pursue one or more viable business opportunities; ● the development of the Business and future activities following the AIF Date; ● expectations relating to market size and anticipated growth in the jurisdictions within which the Company may from time to time operate or contemplate future operations; ● expectations with respect to economic, business, regulatory and/or competitive factors related to the Company or pharmaceutical industry generally; ● the market for the Company’s current and proposed product offerings and candidates, as well as the Company’s ability to capture market share; ● the Company’s strategic investments and capital expenditures, and related benefits; ● the distribution methods expected to be used by the Company to deliver its product offerings and candidates; ● the competitive landscape within which the Company operates and the Company’s market share or reach; ● the performance of the Business and the operations and activities of the Company; ● the Company’s ability to generate cash flow from operations and from financing activities; ● the Company’s ability to obtain, maintain, and renew or extend, applicable Authorizations, including the timing and impact of the receipt thereof; ● the Company’s intention to devote resources to the protection of its intellectual property (“ IP”) rights, including by seeking and obtaining registered protections and developing and implementing standard operating procedures; ● the intention of the Company to complete future financings, including under the Prospectus or in connection with the Company’s engagement of Canaccord Genuity, and any additional offering of securities of the Company and the aggregate amount of the total proceeds that the Company will receive pursuant to any future offering; ● the Company’s expected use of the net proceeds from any future offering; ● the anticipated effects of any future offering on the Business and operations of the Company;
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4 ● the listing of common shares in the capital of the Company (“Common Shares”) offered in any future offering; ● projections for development plans and progress of products and technologies, including with respect to timely and successful discovery and identification of psychedelic-derived pharmaceuticals suitable for repurposing; ● the Company’s ability to attract partners in the development process; ● the Company’s ability to license identified product candidates to pharmaceutical companies; ● future IP, research and development, product formulations, and business lines; ● expectations regarding acceptance of products and technologies by the market; ● demonstration of such product offerings and candidates’ safety and efficacy in clinical trials; ● factors affecting pre-clinical research, clinical trials and regulatory approval process of the Company’s product candidates; ● the Company’s ability to commercialize on its own or find and enter into agreements with potential partners to bring viable product candidates to commercialization; ● the Company’s ability to source markets which have demand for its products and successfully supply those markets in order to generate sales; ● the anticipated issuance to the Company of the Reserved Shares, or payment of the value thereof in cash, under the Jupiter Licence Agreement, including the timing of Jupiter’s stockholder approval, and the potential receipt by the Company of development, regulatory and commercialization milestone payments and royalties thereunder (see “ Developments Subsequent to the Fiscal Year-End Date”); ● the negotiation and execution of a supply agreement with Jupiter for GMP-grade ALA-002 drug product, and the terms thereof; ● the development of ALA -002, including the completion of GMP manufacturing of ALA -002 drug product, the Company’s planned clinical trial activities for ALA-002, including a Phase 2 clinical trial in social anxiety disorder, the anticipated timing of the dos ing of patients, the grant of a licence to ALA -002 to PharmAla Australia, and the commercialization of ALA -002 outside of the United States, including in Australia by Cortexa as LaNeo ™ Gen 2; ● the Company’s evaluation of opportunities to develop APA -01 in-house or through a co -development arrangement, and the wind-down of Restora (see “Developments Subsequent to the Fiscal Year-End Date”); ● the expected renewal of the Company’s CDSL, which is currently valid through January 31, 2027; ● the performance of the Company’s supply, distribution, licensing and data agreements, including the anticipated use of clinical trial data licensed to the Company for regulatory and commercial purposes and the anticipated use of stability data generated under the Company’s supply agreement with Amsterdam UMC in the development of commercial-grade blister packaging for LaNeo™ MDMA; ● the Company’s entitlement to a royalty on net profits generated by Cortexa, and the satisfaction of the conditions thereto; ● expectations regarding demand for LaNeo ™ MDMA in the United States, the receipt of pending approvals for U.S. clinical trials that the Company has agreed to supply, and the implementation and potential impact of Executive Order 14401; ● the Company’s regulatory strategy, including the potential use of the FDA 505(b)(2) regulatory pathway and FDA expedited development and review programs; ● the Company’s ability to continue as a going concern; ● the potential implementation, timing and ratio of the Consolidation; ● the Company’s belief that its product is one of the highest quality products available; and
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5 ● future actions with respect to and potential impacts of any claims. Forward-looking statements are subject to certain risks and uncertainties. Although Management believes that the expectations reflected in these forward -looking statements are reasonable in light of, among other things, its perception of trends, current co nditions and expected developments, as well as other factors that Management believes to be relevant and reasonable in the circumstances at the date that such statements are made, readers are cautioned not to place undue reliance on forward -looking statements, as forward -looking statements may prove to be incorrect. A number of factors could cause actual results to differ materially from a conclusion, forecast or projection contained in the forward-looking statements. Importantly, forward-looking statements contained in this Annual Information Form and in documents incorporated by reference are based upon certain assumptions that Management believes to be reasonable based on the information currently available to Management, including, but not limited to, th e assumptions that: ● current and future members of Management will abide by the Business objectives and strategies from time to time established by the Company; ● the Company will retain and supplement its board of directors (“ Board”) and Management, or otherwise engage consultants and advisors having knowledge of the industries (or segments thereof) within which the Company may from time to time participate; ● the Company will have sufficient working capital and the ability to obtain the financing required in order to develop and continue its Business and operations; ● the Company will continue to attract, develop, motivate and retain highly qualified and skilled consultants and/or employees, as the case may be; ● no adverse changes will be made to the regulatory framework governing MDMA, pharmaceuticals, taxes and all other applicable matters in the jurisdictions in which the Company conducts Business and any other jurisdiction in which the Company may conduct Business in the future; ● the Company will be able to generate cash flow from operations, including, where applicable, distribution and sale of its product candidates; ● the Company will be able to execute on its business strategy as anticipated; ● the Company will be able to meet the requirements necessary to obtain and/or maintain Authorizations required to conduct the Business; ● general economic, financial, market, regulatory, and political conditions will not negatively affect the Company or its Business; ● the Company will be able to successfully compete in the pharmaceutical industry; ● the Company will be able to effectively manage anticipated and unanticipated costs; ● the Company will be able to maintain internal controls over financial reporting and disclosure, and procedures in order to ensure compliance with applicable Laws; ● the Company will be able to conduct its operations in a safe, efficient and effective manner; ● general market conditions will be favourable with respect to the Company’s future plans and goals; ● the Company will use the net proceeds from any future offering as outlined; ● the Company will list the Common Shares offered in any future offering; ● any future offering will have the anticipated effects on the Business and operations of the Company; ● the Company will be able to attract partners in the development process; ● the Company will be able to license identified product candidates to pharmaceutical companies;
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6 ● the Company’s products and technologies will be accepted by the market; ● financing will be available for development of new product candidates and conducting clinical studies; ● the actual results of the clinical trials will be favourable; ● development costs will not exceed the Company’s expectations; ● the Company will be able to recruit suitable patients for clinical trials; ● all requisite regulatory and governmental approvals to commercialize the product candidates will be received on a timely basis upon terms acceptable to PharmAla; ● applicable economic conditions are favourable to PharmAla; ● actual costs of pre -clinical research, clinical and regulatory processes will be consistent with the Company’s current expectations; ● the Company will be able to complete pre-clinical research and clinical studies on a timely basis with favourable results; ● debt and equity markets, exchange and interest rates, and other applicable economic and political conditions will be favourable to PharmAla; ● there will be a ready market for the product candidates; ● PharmAla will be able to commercialize on its own or find a suitable partner and enter into agreements to bring product candidates to market within a reasonable time frame and on favourable terms; ● the costs of commercializing on its own or entering into a partnership will be consistent with PharmAla’s expectations; ● partners will provide necessary financing and expertise to bring product candidates to market successfully and profitably; ● patents and other IP rights will be obtained for viable product candidates and once obtained will not infringe on others; ● the anticipated markets for the Company’s potential products and technologies will continue to exist and expand; ● the Company’s products will be commercially viable and it will successfully compete with other research teams who are also examining potential products; ● Jupiter will obtain the stockholder approval required to issue the Reserved Shares or will otherwise pay the value of the Reserved Shares in cash when due, and Jupiter will perform its other obligations under the Jupiter Licence Agreement; ● Jupiter will advance the development, regulatory approval and commercialization of ALA -002 in the United States; ● the Company and Jupiter will agree on the terms of a supply agreement for ALA-002 drug product on commercially reasonable terms; ● GMP manufacturing of ALA -002 drug product will be completed, and the regulatory and ethics approvals required for the Company’s planned ALA-002 clinical trials will be obtained, on a timely basis; ● the Company’s CDSL will be renewed prior to its expiry on terms that are not materially less favourable to the Company; ● the counterparties to the Company’s supply, distribution, licensing and data agreements, including Cortexa, Duchefa, Rua and the Company’s contract manufacturing organizations, will perform their obligations thereunder; ● Cortexa will generate net profits and satisfy the conditions to the Company’s entitlement to a royalty on those net profits;
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7 ● demand for LaNeo ™ MDMA in the United States will continue, and pending approvals for the U.S. clinical trials that the Company has agreed to supply will be obtained; ● the wind-down of Restora will be completed without material cost or liability to the Company; ● any Consolidation will be implemented, if at all, at a time and on a ratio determined by the Board to be in the best interest s of the Company; ● the Company has the ability to produce one of the highest quality products available; and ● PharmAla will be able to settle or otherwise obtain disposition of claims against it on favourable terms. By their very nature forward -looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performanc e or achievements expressed or implied by the forward -looking statements. Although Management believes that the expectations reflected in, and assumptions underlying, such forward -looking statements are reasonable, it can give no assurance that such expectat ions will prove to have been correct. New factors emerge from time to time, and it is not possible for Management to predict all of tho se factors or to assess in advance the impact of each such factor on the Business or the extent to which any factor, or c ombination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. Some of the risks that could cause results to differ materially from those expressed in forward-looking statements in this Annual Information Form and in documents incorporated by reference herein include: ● the Company’s inability to attract and retain qualified members of Management to grow the Business and its operations; ● unanticipated changes in economic and market conditions or in applicable Laws; ● the impact of the publications of inaccurate or unfavourable research by securities analysts or other third parties; ● the Company’s failure to complete future acquisitions or enter into strategic business relationships; ● interruptions or shortages in the supply of MDMA and/or ingredients from time to time available to support the Company’s operations from time to time; ● unanticipated changes in the pharmaceutical industry in the jurisdictions within which the Company may from time to time conduct its Business and operations, including the Company’s inability to respond or adapt to such changes; ● the Company’s inability to secure or maintain the required Authorizations necessary to conduct the Business and operations and meet its targets; ● risks relating to projections of the Company’s operations; ● the Company’s inability to effectively manage unanticipated costs and expenses, including costs and expenses associated with product recalls and judicial or administrative proceedings against the Company; ● the Company’s inability to list the Common Shares offered in any future offering; ● the Company’s failure to utilize the use of proceeds from any future offering as expected; ● the Company’s inability to complete its proposed acquisitions; ● availability of financing in the amount and time frame needed for the development and clinical trials may not be favourable; ● the Company’s inability to recruit suitable patients for clinical trials; ● delays in, or failure to obtain or maintain, required regulatory and governmental approvals; ● interest rate and exchange rate fluctuations;
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8 ● the Company’s ability to produce and sell products in, and export products to, other jurisdictions within and outside of Canada and the United States, which is dependent on compliance with additional regulatory or other requirements; ● that the Company’s international business operations, including expansion to new jurisdictions, could expose it to regulatory risks or factors beyond our control such as currency exchange rates, interest rates, and changes in governmental policy; ● the material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern, and the Company’s need for additional financing, which may not be available on acceptable terms or at all; ● Jupiter may not obtain the stockholder approval required to issue the Reserved Shares or may fail to pay the value of the Reserved Shares in cash, the value of the Jupiter shares received by the Company may decline, including during the applicable lock-up period, and the events on which milestone payments and royalties under the Jupiter Licence Agreement are contingent may not be achieved; ● the Company and Jupiter may not agree on the terms of a supply agreement for ALA -002 drug product; ● delays in, or the failure to complete, GMP manufacturing of ALA -002 drug product or to obtain the approvals required to commence the Company’s planned ALA-002 clinical trials; ● the failure to renew the Company’s CDSL on a timely basis or at all; ● the Company’s reliance on third parties, including contract manufacturing organizations, distributors and clinical trial counterparties, and the failure of any such third party to perform its obligations; ● Cortexa may not generate net profits or satisfy the conditions to the Company’s entitlement to a royalty on its net profits; ● demand for LaNeo ™ MDMA in the United States may decline, and pending approvals for the U.S. clinical trials that the Company has agreed to supply may not be obtained; ● the access pathway contemplated by Executive Order 14401 may not be implemented, or may be implemented on terms that do not benefit the Company; ● costs or liabilities associated with the wind-down of Restora; ● the Consolidation, if implemented, may not have the intended effect on the market price or liquidity of the Common Shares; ● changes in economic conditions; ● increases in cost of research and operations; ● PharmAla’s product candidates may require time -consuming and costly preclinical and clinical studies and testing and regulatory approvals before commercialization; ● adverse changes in regulatory and governmental processes; ● the Company will be adversely affected by market competition; ● PharmAla will not be able to commercialize on its own or find a partner and/or enter into agreements within a reasonable time frame; ● if the Company enters into agreements, these agreements may not be on favourable terms to PharmAla; ● costs of entering into agreements may be excessive; ● potential partners will not have the necessary financing or expertise to bring product candidates to market successfully or profitably; ● PharmAla will not be able to obtain appropriate patents and other IP rights for viable product candidates;
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9 ● patents and other IP rights obtained will be contested by third parties; ● no proof that acquiring a patent will make the product more competitive; ● the anticipated market for the Company’s potential products and technologies will not continue to exist and expand for a variety of reasons, including competition from other products and the degree of commercial viability of the potential product; ● PharmAla may not be able to settle any claims on favourable terms; ● the Company cannot produce one of the highest quality products available; and ● claims may be adjudicated in a manner that is not favourable to PharmAla. Readers are cautioned that the foregoing list of factors are not exhaustive. The Company provides no assurance that forward -looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward -looking statements, and, in evaluating these forward -looking statements, readers should specifically consider various factors, including the risks outlined under the heading “ Risk Factors”, and in documents incorporated by reference herein, which may cause actual results to differ materially from the results, performance or achievements of the Company expressed or implied by any forward-looking statements. References in this Annual Information Form to consideration that may become payable to the Company under the Jupiter Licence Agreement, including total consideration of up to approximately US$100 million and the milestone payments and royalties descr ibed under “Developments Subsequent to the Fiscal Year-End Date”, reflect the contractual terms of the Jupiter Licence Agreement and are not estimates or projections by Management of the amounts that the Company will receive. The milestone payments and royalties are contingent on the achievement of specified development, regulatory and sales events, which may not occur. The issuance of the Reserved Shares is subject to Jupiter obtaining stockholder approval, and the Company may not receive all or any portion of the contin gent consideration described above. The forward-looking statements contained herein are made as of the AIF Date, and except as required by Applicable Securities Laws, the Company does not intend, and does not assume any obligation, to update these forward -looking statements. CAUTIONARY NOTE REGARDING FUTURE ORIENTED FINANCIAL INFORMATION This Annual Information Form, and documents incorporated by reference herein, may contain future-oriented financial information and financial outlooks (collectively, “ FOFI”) within the meaning of Applicable Securities Laws, about prospective results of operations, financial position or cash flows, based on assumptions about future economic conditions and courses of action, whether or not presented in the format of a histori cal statement of financial position, statement of comprehensive income or statement of cash flows. The FOFI has been prepared by Management to provide an outlook of the Company’s activities and results and has been prepared based on a number of assumptions including the assumptions discussed under the heading “ Cautionary Note Regarding Forward -Looking Information” and assumptions with respect to the costs and expenditures to be incurred by the Company, capital expenditures and operating costs, taxation rates for the Company and general and administrative expenses. Readers are cautioned that the FOFI may not be appropriate for purposes other than to provide such an outlook. Management does not have, or may not have had at the relevant date, firm commitments for all of the costs, expenditures, prices or other financial assumptions which may have been used to prepar e the FOFI or assurance that such operating results will be achieved and, accordingly, the complete financial effects of all of tho se costs, expenditures, prices and operating results are not, or may not have been at the relevant date of the FOFI, objectivel y determinable. Importantly, the FOFI contained in this Annual Information Form, and in documents incorporated by reference herein are, or ma y be, based upon certain additional assumptions that Management believes to be reasonable based on the information currently availa ble to Management, including, but not limited to, assumptions about: (i) the future pricing for the Company’s products, (ii) the fut ure market demand and trends within the jurisdictions in which the Company may from time to time conduct the Business, (iii) the Company’s ongoing inventory levels, and operating cost estimates, (iv) the Company’s net proceeds from future financings. The FOFI or f inancial outlook contained in this Annual Information Form, and in documents incorporated by reference herein do not purport to present the Company’s financial condition in accordance with IFRS as issued by the International Accounting Standards Board, and there ca n be no assurance that the assumptions made in preparing the FOFI will prove accurate. The actual results of operations of the Company and the resulting financial results will likely vary from the amounts set forth in the analysis presented in any such document, a nd such variation may be material (including due to the occurrence of unforeseen events occurring s ubsequent to the preparation of the FOFI). The Company and Management believe that the FOFI has been prepared on a reasonable basis, reflecting Management’s best estimates and judgments as at the applicable date. However, because this information is highly subjective and subject to numerous risks including
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10 the risks discussed under the heading “Risk Factors”, FOFI or financial outlook within this Annual Information Form, and in documents incorporated by reference herein, should not be relied on as necessarily indicative of future results. Readers are cautioned not to place undue reliance on the FOFI, or financial outlook contained in this Annual Information Form , and in documents incorporated by reference herein. Except as required by Applicable Securities Laws, the Company does not intend, and does not assume any obligation, to update such FOFI. CERTAIN DOCUMENTS INCORPORATED BY REFERENCE Information has been incorporated by reference in this Annual Information Form from documents filed with the various securiti es commissions or similar regulatory authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request without charge from the chief financial officer (“CFO”) of the Company at 1 Adelaide Street East, Suite 801, Toronto, ON M5C 2V9, Telephone: +1 (855) 444-6362, Email: outreach@pharmala.ca, and are also accessible under the Company’s profile on SEDAR+ at www.sedarplus.ca. The following documents, filed with the various securities commission or similar securities regulatory authorities in Canada are specifically incorporated by reference in, and form an integral part of, this Annual Information Form: (a) the non-offering final prospectus of the Company dated December 20, 2021; (b) the CSE listing statement of the Company dated January 6, 2022; (c) the management information circular of the Company dated January 24, 2023; (d) the offering document under the listed issuer financing exemption of the Company dated June 12, 2023; (e) the material change report of the Company dated June 21, 2023 in respect of the Company receiving the Sydney Export Permit and cancelling the Proposed Life Offering (each as defined hereinafter); (f) the material change report of the Company dated April 29, 2024, in respect of the April 2024 Offering and April 2024 Debt Settlement (each as defined hereinafter); (g) the material change report of the Company dated December 23, 2024 in respect of the closing of the December 2024 Offering and completion of the Continuance (each as defined hereinafter); (h) the management information circular of the Company dated February 11, 2025; (i) the material change report of the Company dated May 9, 2025 in respect of: the Company entering into the UAMS Research Agreement, August 2022 Phase 3 Manufacturing Agreement, Mindset Agreement, Clariti Partnership Agreement, Merhavim Supply and Data Agreement, Duchefa Distribution and Licensing Agreement, the Company establishing the Cortexa Joint Venture and entering into the Vitura Cortexa Agreements, the Company receiving a Controlled Drugs and Substances Dealer’s License, the Company entering into and terminating the Red Light Consulting Agreement, and the completion of the November 2024 Debt Settlement (each as defined hereinafter); (j) the material change report of the Company dated June 20, 2025, pertaining to the filing of the preliminary short form base shelf prospectus (the “Preliminary Prospectus”); (k) the material change report of the Company dated September 5, 2025, pertaining to the resignation of Dr. Shane Morris as Chief Operating Officer effective September 5, 2025; (l) the material change report of the Company filed October 9, 2025, including events as follows: dated September 18, 2025, pertaining to the filing of an amended and restated preliminary short form base shelf prospectus (the “ Prospectus”) dated September 18, 2025 amending and restating the Preliminary Prospectus dated June 20, 2025; dated October 1, 2025, settlement of debt of C$150,000 owing to an arm’s length creditor through the issuance of 1,666,667 common shares in the capital of th e Company at the deemed price of C$0.09 per common share; and, dated October 8, 2025, the appointment of Dr. Farnoud Kazemzadeh as Chief Operating Officer and the resignation of Dr. Harriet De Wit from the Board;
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11 (m) the material change report of the Company dated October 31, 2025 in respect of the filing of the Prospectus dated October 30, 2025 (such date, the “Prospectus Effective Date”); (n) the audited consolidated financial statements as at August 31, 202 5 and 2024 and the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity, and cash flows for each of the years in the three -year period ended August 31, 2025 (the “Annual Financial Statements”), together with the notes thereto and the auditors’ report dated December 23, 2025; (o) the management’s discussion and analysis of financial condition and results of operations dated December 2 3, 2025, for the year ended August 31, 2025; (p) the unaudited interim financial statements of the Company for the three months ended November 30, 2025 and 2024, together with the notes thereto (together, the “Q1 Interim Financial Statements”); (q) the management’s discussion and analysis of the Company for the Q1 Interim Financial Statements; (r) the material change report of the Company dated February 9, 2026, in respect of changes to the composition of the Board, specifically the resignation of Dr. Malik Slassi from, and appointment of Mr. Lennie Ryer, CPA, CA, of Montreal to, its Board; (s) the unaudited interim financial statements of the Company for the three and six months ended February 28, 2026 and 2025 together with the notes thereto (together, the “Q2 Interim Financial Statements”); (t) the management’s discussion and analysis of the Company for the Q2 Interim Financial Statements; (u) the material change report of the Company dated May 22, 2026 in respect of (i) the execution of the SPV Formation, Shareholder and License Agreement dated May 7, 2026 among the Company, Aluvaris Inc. (“ Aluvaris”) and Diteba Inc. (“Diteba”) (the “SPV Agreement”), pursuant to which the parties established Restora Neurosciences (“Restora”) as a jointly- owned special purpose vehicle for the proposed clinical and regulatory development of APA -01, and (ii) the entry into a term sheet effective May 20, 2026 with Jupiter Neurosciences, Inc. (“ Jupiter”) in respect of the grant of exclusive United States licensing rights to ALA-002 (the “Jupiter Term Sheet”); (v) the management information circular of the Company dated May 25, 2026 (the “ 2026 AGSM Circular”); (w) the material change report of the Company dated July 20, 2026 in respect of the execution of the Jupiter Licence Agreement (as hereinafter defined); (x) the unaudited condensed interim consolidated financial statements of the Company for the three and nine months ended May 31, 2026, together with the notes thereto (together, the “Q3 Interim Financial Statements”); (y) the management’s discussion and analysis of the Company for the Q3 Interim Financial Statements; and (z) the material change report of the Company dated August 13, 2026 in respect of the cancellation of the proposed licensing of APA-01 to Restora, the initiation of wind-down procedures in respect of Restora and the Company’s retention of full ownership of APA-01 and all associated intellectual property. Any statement contained in this Annual Information Form or in a document incorporated or deemed to be incorporated by referen ce herein shall be deemed to be modified or superseded, for purposes of this Annual Information Form, to the extent that a state ment contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or super seding statement shall not be deemed an admission for any purposes that the modified or superseded statement, wh en made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stat ed or that is necessary to make a statement not misleading in light of the circumstances in which it was mad e. Any statement so modified or superseded shall not be deemed in its unmodified or superseded form to constitute part of this Annual Information Form.
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12 CORPORATE STRUCTURE Name, Address and Incorporation PharmAla Biotech Holdings Inc. (formerly, Greenridez 3.0 Acquisitions Corp.) was incorporated under the Business Corporations Act (British Columbia) (“BCBCA”) on January 12, 2021. On April 22, 2021, the Company changed its name from “Greenridez 3.0 Acquisitions Corp.” to “PharmAla Biotech Holdings Inc.”. On January 11, 2022, the Common Shares were listed on the CSE under the symbol “MDMA” and on May 18, 2023, the Common Shares were listed in the United States on the OTC Pink Market under the symbol “PMBHF”. On September 6, 2023, the Common Shares were uplisted from the OTC Pink Market to the OTCQB Venture Market (the “ OTCQB”) under the symbol “PMBHF”. On January 24, 2024, the OTCQB ticker was changed from “PMBHF” to “MDXXF”. Effective December 17, 2024, the Company completed its continuance from the Province of British Columbia governed under the Business Corporations Act (British Columbia) into the Province of Ontario governed under the Business Corporations Act (Ontario) (the “Continuance”). The registered and head office of the Company is located at 1 Adelaide Street East, Suite 801, Toronto, ON M5C 2V9. PharmAla is a reporting issuer in Canada in the provinces of British Columbia and Ontario. Intercorporate Relationships The following chart sets out the Company’s material subsidiaries, the percentage of voting securities of each that are held b y the Company either directly or indirectly and their respective jurisdictions of incorporation, continuance, formation or organization as at the AIF Date: GENERAL DEVELOPMENT OF THE BUSINESS The following is a description of the general development of the Business during the last three financial years ended August 31, 2025, 2024 and 2023: Restora has not been reflected in the above as it is inactive and is intended to be wound down. Developments during the Financial Year ended August 31, 2023 PharmAla Biotech Holdings Inc. (Ontario, Canada) 100% PharmAla Biotech Inc. (British Columbia, Canada) 50% Cortexa Pty Ltd. (Australia) 100% PharmAla Biotech Australia Pty Ltd. (Australia)
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13 ● On October 4, 2022, the Company announced that it was selected as the MDMA manufacturing partner for a human MDMA trial at a campus of the University of California. ● On October 11, 2022, the Company retained Clerkenwell Health, a UK -based Contract Research Organization, to assist the Company in regulatory proceedings with both the FDA and the United Kingdom Medicines and Health Regulatory Authority (“MHRA”) with the intention to bring ALA-002, its leading NCE, to both jurisdictions. ALA-002 was designed to provide the same efficacy as MDMA, has an improved safety profile, including Cardio - and Neuro-tox, and fewer adverse events. ● On October 13, 2022, the Company retained Dr. Leah Mayo to the Company’s Scientific Advisory Board. ● On November 2, 2022, the Company submitted its pre-Investigational New Drug (“ IND”) data meeting package to the FDA to request FDA feedback on the nonclinical and CMC development plan to support the initial clinical trial for ALA -002. ● On November 16, 2022, the Company entered into an exclusive sales agreement with Mindset Pharma Inc. (“ Mindset”), pursuant to which the Company is the exclusive global reseller of Mindset’s cGMP synthetic 3-[2- (Dimethylamino)ethyl]-1H- indol-4-yl dihydrogen phosphate (“Psilocybin”) to appropriately licensed clinical researchers (the “Mindset Agreement”). ● On January 24, 2023, the Company’s manufacturing partners received an export permit for 300 grams of LaNeo ™ MDMA. ● On February 6, 2023, the Company signed an agreement to act as exclusive supplier of both GMP LaNeo ™ MDMA and Engineering MDMA to Revive Therapeutics. ● On February 14, 2023, the Company completed an agreement to sell a shipment of its GMP LaNeo ™ MDMA to Emyria Ltd. and submitted a trademark application for “LaNeo” in Australia. ● On February 23, 2023, the Company’s key PCT application containing 6 NCE was published. ● On February 28, 2023, the Company held an annual general meeting of its shareholders. At the meeting, shareholders: (i) reappointed Clearhouse LLP, Chartered Professional Accountants as the auditors of the Company for the ensuing year and authorized the au dit committee of the Board (the “ Audit Committee”) to fix the auditor’s remuneration; and (ii) appointed Nicholas Kadysh, Kevin Roy, Jodi Butts, Perry Tsergas, Fraser Macdonald, Dr. Abdelmalik Slassi and Harriet de Wit as directors. ● On March 2, 2023, the Company was named the exclusive MDMA supplier to Awakn LS Europe Holdings Limited. ● On April 11, 2023, the Company and Filament Health Corp. (“ Filament”), a clinical -stage natural psychedelic drug development company, and announced the GMP release of MDMA capsules at the Metro Vancouver facility operated by Filament’s subsidiary Psilo Scientific. ● On April 20, 2023, the Company was selected as a MDMA manufacturing partner for the Clinical Psychedelic Lab at Monash University’s upcoming Phase 2 Clinical Trial. ● On April 25, 2023 the Company received a signed purchase order for GMP LaNeo ™ MDMA and Psilocybin by Incannex (ASX: IHL), a NASDAQ-listed psychedelic research company and clinic operator based in Australia. ● On May 1, 2023, the Company, along with Australian -based Vitura Health Limited (ASX: VIT) (“ Vitura”), established Cortexa Pty Ltd. (“Cortexa”), a 50% joint venture between the parties (the “Cortexa Joint Venture”). Cortexa has exclusive rights to manufacture and distribute MDMA and Psilocybin in Australia under GMP conditions using PharmAla’s manufacturing technology and IP pursuant to (i) an exclusive IP license agreement dated May 1, 2023 entered into between the Company and Cortexa (the “ Cortexa Licensing Agreement ”) and (ii) an exclusive supply agreement dated May 1, 2023 entered into between the Company and Cortexa (the “ Cortexa Supply Agreement” and together with the Cortexa Licensing Agreement, the “Vitura Cortexa Agreements”). ● On May 1, 2023, Cortexa entered into a distribution agreement with Burleigh Heads Cannabis Pty Ltd. (“ Burleigh”) pursuant to which Burleigh was appointed the exclusive distributor in Australia of MDMA and Psilocybin products for Cortexa (the “Cortexa Distribution Agreement”).
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14 ● On May 1, 2023, Vitura entered into a loan agreement with Cortexa for the aggregate principal sum of $2,200,000.00 in connection with the Cortexa Joint Venture (the “Cortexa Loan Agreement”). ● On June 9, 2023, the Company was granted a research grant by the Ontario Centre for Innovation in conjunction with the University of Windsor. ● On June 9, 2023, the Company reported that the FDA approved a clinical trial utilizing LaNeo ™ MDMA Investigational Medical Product capsules (40mg). ● On June 12, 2023, the Company announced its intention to complete a non-brokered private placement of a minimum 3,333,333 units and a maximum 16,666,666 units of the Company at a price of $0.30 per unit (the “Proposed Life Offering”). Each unit would consist of one Common Share and one-half of one Common Share purchase warrant. Each whole warrant would entitle the holder thereof to acquire one Common Share for a period of 24 months following the closing. In the event that, during th e period following 24 months from the closing date, the volume-weighted average trading price of the Common Shares exceeded $0.675 per Common Share for any period of 20 consecutive trading days, the Company may, at its option, following such 20 - day period, accelerate the expiry date of the warrants by issuing a press release, and, in such case, the expiry date of the warrants shall be deemed to be 5:00 p.m. (Toronto time) on the 30 th day following the date of issuance of the press release. Effective June 16, 2023, the Company decided to cancel the Proposed Life Offering. ● On June 16, 2023, the Company received an export permit for the shipment of its allotment of PharmAla’s GMP LaNeo ™ MDMA to the University of Sydney, which completed the Company’s US$125,000 contract with the University of Sydney (the “Sydney Export Permit”). ● On July 4, 2023, Cortexa executed its first purchase order for PharmAla’s GMP LaNeo ™ MDMA, in both finished capsule and raw active pharmaceutical ingredient (“API”) forms, having total value of approximately US$300,000. ● On July 20, 2023, the Company received written guidance from the MHRA. The guidance constituted, in part, advice that ALA-002 does not require further preclinical data in order for clinical trials to proceed. ● On July 31, 2023, the Company completed proof-of-concept animal experimentation and filed a patent for PharmAla-1, a NCE, which it believes will have broad commercial applicability as a psychiatric pharmaceutical. Further the Company announce the acceptance of its review article titled “Balancing therapeutic efficacy and safety of MDMA and novel MDXX analogues as novel treatments for autism spectrum disorder” for publication in the academic journal Psychedelic Medicine. ● On August 10, 2023, the Company made shipments to Mind Medicine Australia, and Orygen Institute affiliated with the University of Melbourne. The shipment to Orygen represented the first of two shipments which will support a Clinical Trial registered by the Orygen Institute, with the second shipment scheduled for 2024. Developments during the Financial Year ended August 31, 2024 ● On September 6, 2023, the Common Shares were uplisted from the OTC Pink Market to the OTCQB under the symbol “PMBHF”. ● On September 25, 2023, the Company received the first office action from the PCT filing for the Company’s novel PharmAla- 1 (“P-1”) molecule. The filing for P-1 showed the molecule to be novel, with no previous prior art shown; it was also found to be inventive, due to the beneficial toxicology of P-1 compared to similar molecules, as shown by preclinical rodent model data generated by the laboratory of Prof. William Fantegrossi at the UAMS. ● On November 7, 2023, the Company completed its first shipment of MDMA and psilocybin to Cortexa. ● On November 8, 2023, the Company signed an exclusive long -term agreement (the “Clariti Partnership Agreement”) with Clariti Strategic Advisors Inc. (“ Clariti”), pursuant to which Clariti provides strategic and financial advisory services to the Company. In connection with Clariti’s engagement, the Company issued Clariti: (i) 2,300,000 stock options (each an “Option”); and (ii) 2,300,000 restricted share units (each an “ RSU”), pursuant to the Company’s Option and RSU plans, respectively. Each Option is exercisable at a price of $0.175 per Common Share, expires ten years from the date of grant and vests only if there is, and prior to, a liquidity event (as such term is define d in the Clariti Partnership Agreement). Each RSU expires ten years from the date of grant and vests only, (i) if there is, and prior to, a liquidity event (as such term is defined the Clariti Partnership Agreement), and (ii) upon the Company receiving sha reholder approval for the creation of the RSU plan,
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15 and shareholders ratifying this RSU grant, at the next meeting of shareholders of the Company. On February 27, 2024, the Company held an annual general and special meeting of its shareholders where disinterested shareholders approved the prior grants to Clariti. ● On November 9, 2023, the University of Calgary and Heroic Hearts Canada announced that they have completed a letter of intent, and received initial Ethics Board Approval, to initiate an Observational Trial on patients treated with MDMA through Health Canad a’s Special Access Program. PharmAla is a party to the letter of intent and provides drug product to the consortium. ● On November 15, 2023, the Company announced the GMP release of a second batch of MDMA capsules encapsulated at Filament’s Metro Vancouver facility. The Company also reported on the execution of two exports by Filament, fulfilling contracts with Emyria and Monash University. The majority of the capsules manufactured in this Batch will be utilized in the Health Canada Special Access Program, as well as fulfillment of clinical trials in a variety of jurisdictions. ● On January 8, 2024, the Company received approval to move the P-1 molecule through the United States Patent and Trademark Office (“USPTO”) Patent Prosecution Highway pathway based on the positive PCT initial office action previously announced by PharmAla. ● On January 24, 2024, the Company’s OTCQB ticker changed from “PMBHF” to “MDXXF”. ● On January 25, 2024, the Company received a Controlled Drugs and Substances Dealer’s License, which allows the Company to communicate directly with appropriate individuals about its MDMA and Psilocybin offerings. ● On February 9, 2024, the Company entered into a one -year consulting agreement (the “ Red Light Consulting Agreement ”) with Red Light Holland Corp. (“ Red Light ”) to consult on the development of a clinical -grade psilocybin drug product extracted from Red Light’s mushroom portfolio, with the goal of developing GMP and regulatory documentation for Red Light’s Psilocybin capsule products. Pursuant to the terms of t he Red Light Consulting Agreement, upon completion of the drug product to specification, PharmAla and Red Light may enter into a sales agreement, where PharmAla would sell the products or provide them to its affiliates in global markets as Red Light’s excl usive sales agent. Effective September 3, 2024, the Red Light Consulting Agreement was terminated. ● On February 22, 2024, the Company announced that it has been accepted as a client of Intellectual Property Ontario (“IPON”). IPON works with innovators, businesses, and researchers to provide access to expert IP education, financial support, and mentorship to help maximize the value of IP, strengthen their capacity to grow, compete in the market, and enhance research and com mercialization outcomes. PharmAla is further pleased to note that IPON has approved its initial Scope of Work pertaining to the national phase entry into numerous markets of the PharmAla ALA and ABA molecule families and will provide a non -dilutive grant o f approximately $35,000 to PharmAla to complete this work. IPON will cover up to 80% of eligible costs based on approved scopes of work. IPON clients have access to future calls of up to $100,000 of non -dilutive IP funding. ● On February 27, 2024, the Company held an annual general and special meeting of its shareholders. At the meeting: (i) shareholders reappointed Clearhouse LLP, Chartered Professional Accountants as the auditors of the Company for the ensuing year and author ized the Audit Committee to fix the auditor’s remuneration; (ii) shareholders re -appointed Nicholas Kadysh, Kevin Roy, Jodi Butts, Perry Tsergas, Fraser Macdonald, Dr. Abdelmalik Slassi and Harriet de Wit as directors, (iii) shareholders approved the Continuance and ratified, confirmed and approved the repeal and replacement of the existing articles of the Company with the adoption of a new general by -laws of the Company following the Continuance; (iv) disinterested shareholders ratified and approved the ad option of the Company’s RSU plan and the prior grant of 2,300,000 RSUs pursuant to the RSU Plan; and (iv) disinterested shareholders ratified the repeal and replacement the Option plan and RSU plan with the adoption of the equity incentive plan for the Company (the “Equity Incentive Plan”). ● On March 8, 2024, the Company granted an aggregate of 2,050,000 RSUs to certain directors, officers, employees and consultants of the Company pursuant to the Equity Incentive Plan. A total of 950,000 RSUs granted vest quarterly over a one - year period with the remaining 1,100,000 RSUs vesting quarterly over a two year period. ● On March 18, 2024, the Company, through Cortexa, supplied GMP psilocybin for therapeutic use outside of a clinical trial to a patient under the Therapeutic Goods Administration’s (“ TGA”) authorised prescriber scheme. In doing so, Cortexa is the only Australian company able to immediately supply and deliver both GMP MDMA and psilocybin for both clinical trials and
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16 prescriptions via the TGA’s authorised prescriber scheme. The patient was being treated with psilocybin for treatment resistant depression. ● On March 20, 2024, the Company was granted a patent allowance for the composition of matter of its P -1 molecule by the USPTO. ● On March 27, 2024, the Company was granted an allowance of a patent for ALA -002, the Company’s investigational MDXX Novel Chemical Entity by the USPTO. ● On April 5, 2024, the Company, through Cortexa, commenced batch manufacturing of GMP LaNeo™ MDMA 40mg capsules to support both clinical trials and clinical use under the TGA’s authorised prescriber pathway. ● On April 5, 2024, Cortexa entered into an exclusive arrangement with Perth -based contract manufacturer Optima Ovest (“Optima”). Optima was established in 1995 and has extensive experience in the manufacture of GMP, clinical -grade pharmaceutical products, with the capacity to scale operations in line with demand. ● Effective April 19, 2024, the Company closed a non-brokered private placement offering (the “April 2024 Offering”) through the issuance of 4,166,665 units of the Company (each, a “ April 2024 Unit”) for gross proceeds of approximately $750,000. Each Unit was sold at a price of $0.18 per April 2024 Unit and consisted of one Common Share and one -half of one warrant (each whole warrant, a “April 2024 Warrant”). Each April 2024 Warrant entitles the holder thereof to acquire one additional Common Share at a price of $0.27 per Common Share at any time prior to 4:30 pm (Toronto Time) until April 19, 2027 (the “April 2024 Warrant Term ”), provided that, if the closing price of the Common Shares on the CSE is $0.38 or greater per Common Share for a period of ten consecutive trading days at any time after the completion of the April 2024 Offering, the Company may accelerate the April 2024 Warrant Term, in compliance with the policies of the CSE, such that the April 2024 Warrants shall expire on the date which is thirty days following the date a press release is issued by the Company announcing the reduced April 2024 Warrant Term in accorda nce with the terms and conditions of the certificate representing such April 2024 Warrants. The Company intends to use the net proceeds of the Offering for the securing of global patent rights for its portfolio of novel IP assets, manufacture of products for sale, clinical trials into the Company’s novel patented drug candidates, sales, general corporate and working capital purposes. ● On April 19, 2024, the Company completed a debt settlement in the amount of $108,000 with Aaron Logan, a third -party consultant of the Company, to preserve the Company’s cash for working capital through the issuance of 600,000 Common Shares at a price of $0.18 per Common Share (the “April 2024 Debt Settlement”). Aaron Logan is a consultant of the Company who advises the Company on IP and commercialization matters. Mr. Logan’s work was critical in the Company’s negotiation for the establishment of Cortexa. ● On May 3, 2024, the Company launched its “Prescribers Portal” for medical practitioners with prescribing power to learn more about MDMA, its effects, and the potential ability to access the molecule for their patients. The portal, which is accessible at http://sap.pharmala.ca, is available only to pre -approved medical professionals. PharmAla’s Prescriber Portal will host tools and resources that assist medical practitioners in treating their patients. The Company is also working towards the creation of an accredited training a nd continuing education module for physicians in both Canada and Australia, which summarizes technical information pertaining to the clinical use of MDMA. ● On July 30, 2024, the Company announced that it completed all precedents relating to the transfer of intellectual property to Cortexa, and as such the Cortexa Joint Venture was made permanent and irrevocable. ● On July 30, 2024, the Company announced that the USPTO has issued patent 12042478, supporting PharmAla’s APA -01 composition of matter for (R)-2-[(2H-1,3-Benzodioxol-5-YL) Methyl]Pyrrolidine. ● On July 30, 2024, the Board approved a new contract for the Company’s chief executive officer (“ CEO”) pursuant to which his salary was increased to $170,000 per annum, subject to a 50% discretionary annual bonus. In addition, the Company granted the CEO 2,000,000 RSUs, vesting quarterly over a one year period, subject to applicable hold periods. ● On August 9, 2024, the Company announced that the USPTO has issued patent 12,053,452, supporting the composition of matter for its novel, non-racemic mixture of MDMA enantiomers, internally deemed ALA-002. ● On August 22, 2024, the Company announced the appointment of Mr. William Avery, CPA, CA as CFO effective October 1, 2024.
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17 Developments during the Financial Year ended August 31, 2025 ● On September 3, 2024, the Red Light Consulting Agreement was terminated. ● On October 8, 2024, the Company announced that it was contracted as a supplier of MDMA to a proposed clinical trial at the University of Texas, San Antonio (“UT Health”). ● On October 21, 2024, the Company announced it had terminated the supply agreement with CCrest Labs, whereby CCrest was contracted to distribute PharmAla’s MDMA to doctors under the Special Access Program. The Company will rely on other contracted distributors for fulfillment going forward. ● On November 17, 2024, the Company completed a debt settlement, which satisfied the amount owing of $100,000 to an arm’s length creditor through the issuance of 459,770 Common Shares at a deemed price of $0.2175 (the “ November 2024 Debt Settlement”). ● On December 20, 2024, the Company closed a non -brokered private placement offering (the “ December 2024 Offering ”) through the issuance of 8,676,221 units of the Company (each, a “December 2024 Unit”) for gross proceeds of approximately $1,561,719.88. The December 2024 Offering was oversubscribed by 12%, with an additional 898,444 December 2024 Units sold. Each December 2024 Unit was sold at a price of $0.18 per December 2024 Unit and consisted of one Common Share and one-half of one warrant (each whole warrant, a “December 2024 Warrant”). Each December 2024 Warrant entitles the holder thereof to acquire one additional Common Share at a price of $0.27 per Common Share at any time prior to 4:30 pm (Toronto Time) on the date that is 36 months following the Closing Date (the “ December 2024 Warrant Term”), provided that, if the closing price of the Common Shares on the CSE is $0.38 or greater per Common Share for a period of ten consecutive trading days at any time after the completion of the December 2024 Offering, the Company may accelerate the December 2024 Warrant Term, in compliance with the policies of the CSE, such that the December 2024 Warrants shall expire on the date which is thirty days following the date a press release is issued by the Company announcing the reduced December 2024 Warrant Term in accordance with the terms and conditions of the certificate representing such December 2 024 Warrants. ● On January 20, 2025, the Company announced that it had executed an agreement (the “ Merhavim Supply and Data Agreement”) with the Merhavim Mental Health Centre of Beer Yaakov, Israel (“Merhavim”). All data generated in the clinical trial, entitled “MDMA Assisted Psychotherapy for PTSD of Early Sexual Trauma Compared to All Trauma in Adulthood”, will be licensed to PharmAla for regulatory and commercial purposes in exchange for the clinical trial material, which will be provided by PharmAla on a zero -cost basis. MAPS Israel, an Israeli non -profit organization whose mission is to develop psychedelic research and educational programs based in public health, is also a partner to the clinical trial. ● On February 6, 2025, the Company announced the signing of an advisory agreement with Mr. Matthew Azrielli, which includes up to 1,000,000 performance share units (“ PSUs”), which may be released to Mr. Azrieli upon execution of pre -set corporate goals spanning 3 major categories: media advisory, market development, and investment advisory. ● On February 27, 2025, the Company announced commencement of its clinical partnership with UT Health, with the trial being funded by a grant via the Defense Appropriations Act . This partnership will result in the Company developing a new 20mg clinical drug product dose of its LaNeo™ MDMA. ● On March 3, 2025, the Company announced that it completed its shipment of LaNeo™ MDMA to the University of California, Los Angeles, for its schizophrenia study. The Company believes that this is the first such shipment of MDMA capsules across the American-Canadian border. ● On March 4, 2025, the Company signed a distribution and licensing agreement (the “ Duchefa Distribution and Licensing Agreement”) with Duchefa Farma B.V. (“ Duchefa”). Pursuant to the terms and conditions of the Duchefa Distribution and Licensing Agreement, Duchefa will act as the exclusive distributor for LaNeo ™ MDMA in the Netherlands market. The Duchefa Distribution and Licensing Agreement includes an annual purchase minimum, as well as restrictions on re-export and price controls. It also includes an escalator provision which would significantly increase the minimum purchase amounts in the 24 months following regulatory changes which allow for use of MDMA in the h ealthcare system. Duchefa will also act as Importer of Record as well as providing Qualified Person (“QP”) Release of PharmAla’s products. Under EU regulations, QP release is necessary prior to use of a drug product in either commercial use or in clinical trial. The Duchefa Distribution a nd Licensing Agreement has a three year term with additional three year automatic renewals unless terminated by either party.
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18 ● On March 21, 2025, the Company announced that it has completed a shipment of LaNeo ™ MDMA to the University of Washington. The Company also announced the appointment of Ali Taghva as Chief Commercial Officer and Counsel to the Company. ● On March 24, 2025, the Company announced that it contracted with a third party logistics company specializing in pharmaceutical products to act as its U.S. clinical trial distribution partner in its shipment of LaNeo ™ MDMA across the American-Canadian border. ● On March 28, 2025, the Company held an annual general meeting of its shareholders. At the meeting: (i) shareholders reappointed Clearhouse LLP, Chartered Professional Accountants as the auditors of the Company for the ensuing year and authorized the Audit Committee to fix the auditor’s remuneration and (ii) re -appointed Nicholas Kadysh, Kevin Roy, Jodi Butts, Perry Tsergas, Fraser Macdonald, Dr. Abdelmalik Slassi and Harriet de Wit as directors. ● On May 15, 2025, the Company launched the "Phenesafe AI" platform, an artificial intelligence technology stack specifically designed to derive novel substituted phenethylamine molecules for patent and subsequent development. This drug discovery platform can be used to identify additional molecules in the MDXX class. ● On June 3, 2025, the Company announced it successfully completed a shipment of LaNeo™ MDMA to Yale University for an open-label trial investigating the effects of MDMA on social cognition in adults with Borderline Personality Disorder. Further, the Company granted 1,500,000 options to Directors and Officers. ● On June 3, 2025, the Company granted MAPS authorization to post the Company’s LaNeo™ MDMA Investigator’s Brochure publicly on the MAPS website, to encourage broader adoption of LaNeo ™ MDMA for clinical trial and patient use. ● On August 7, 2025, the Company completed customs clearance and delivery of over 500 capsules of LaNeo ™ 40mg MDMA to Merhavim Mental Health Centre of Beer Yaakov, Israel, fulfilling the Merhavim Supply and Data Agreement in exchange for a full data license. ● On August 11, 2025, the Company incorporated PharmAla Biotech Australia Pty Ltd (“ PharmAla Australia ”), a wholly - owned Australian subsidiary, to conduct research and development activities and execute clinical trial activities for ALA -002 in Australia, which was subsequently announced by the Company on September 3, 2025. Developments subsequent to the Financial Year ended August 31, 2025 ● On September 5, 2025, Dr. Shane Morris resigned as Chief Operating Officer of the Company. ● On September 8, 2025, the Company announced completion of onboarding for its U.S. domestic distribution centre, enabling the first domestic U.S. shipment of LaNeo™ MDMA. ● Effective September 1, 2025, PharmAla appointed Dr. Evan Lewis (MD, FRCPC) to its Scientific Advisory Board. Dr. Lewis is an adult and pediatric neurologist with specialized training in epilepsy and pediatric neurology, and formerly served as Vice President of Psychedelic Neurology at Numinus. ● On September 19, 2025, the Company announced the filing of the Prospectus in addition to a debt settlement involving an aggregate of $150,000 of amounts owing to arm’s length creditors through the issuance of common shares in the capital of the Company. ● On September 25, 2025, the Company signed a distribution agreement with Veridion Group of New Zealand (“Veridion”), appointing Veridion as exclusive distribution agent for LaNeo™ MDMA in New Zealand. ● Effective October 1, 2025, Dr. Farnoud Kazemzadeh was appointed as Chief Operating Officer of the Company. Dr. Kazemzadeh is a seasoned executive and co -founder with extensive experience scaling growing businesses, having most recently served as Co-Founder – Operations at Vital Biosciences in Toronto, Ontario. ● On October 2, 2025, the Company completed a shipment of LaNeo ™ MDMA to Johns Hopkins University from its new U.S. domestic distribution site.
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19 ● On October 8, 2025, the Company announced the launch of NEXUS, an updated digital portal designed to connect Prescribers, Therapists and Clinic managers involved in MDMA-assisted therapy. NEXUS is designed to deliver and share knowledge on the latest advances to regulatory processes, scientific evidence, and best-in-class patient care. ● On October 8, 2025, Dr. Harriet de Wit resigned from the Board. ● On October 30, 2025, the Company filed its final short form base shelf prospectus, being the Prospectus, in each of the provinces and territories of Canada. ● The Prospectus provides the Company with the flexibility to take advantage of financing opportunities and favourable market conditions, if and when needed, during the 25-month period following the Prospectus Effective Date (the “Effective Period”). ● The Prospectus enables the Company to offer, issue and sell, from time to time, common shares, warrants, units, subscription receipts, debt securities, or any combination of such securities for up to an aggregate offering price of C$30,000,000, in one or more transactions during the Effective Period. ● On November 3, 2025, the Company shipped LaNeo™ MDMA to Mount Sinai Hospital and announced it had commenced manufacturing of its patented ALA-002 novel MDXX drug candidate, in preparation for a Phase 2 clinical trial into Social Anxiety Disorder. ● On November 3, 2025, the Company announced that PharmAla Australia had signed a term sheet with Radium Capital (“Radium”) providing PharmAla Australia with a loan facility leveraging its estimated Australian Research and Development Tax Incentive (“ RDTI”) refunds. Once PharmAla Australia commences incurring qualifying expenses, Radium may advance up to 80% of the expected RDTI refund. As at the date of the announcement, PharmAla Australia had not commenced operations in Australia and no tranches of the facility had been drawn. No definitive facility agreement has been entered into with Radium, and the Company does not intend to enter into one. ● On December 10, 2025, the Company announced the completion of release testing of its first Australian -manufactured batch of LaNeo™ MDMA 40mg capsules, produced through its Cortexa joint venture at Optima Ovest in Perth. ● On December 15, 2025, the Company announced that its wholly -owned subsidiary, PharmAla Biotech Australia, contracted with a UK-based contract development and manufacturing organization for the manufacture of ALA -002 drug substance, representing the first m anufacture of a wholly new active pharmaceutical ingredient by the Company since 2022. ● On December 15, the Company completed one of two contracted shipments of LaNeo™ MDMA to the Parsons Research Centre for Psychedelic Healing at Mount Sinai Hospital. ● On December 24, 2025, the Company filed its audited financial statements for Fiscal Year 2025 (ended August 31, 2025) and unaudited Q1 Fiscal Year 2026 interim financial statements (ended November 30, 2025). Customer deposits grew to $276,000 at Fiscal Year 2025 year-end and $433,000 at the end of Q1 of Fiscal Year 2026. ● On January 8, 2026, the Company executed an agreement to supply LaNeo™ MDMA clinical research materials to Østfold Hospital Trust in Oslo, Norway. The agreement includes financial and data -sharing provisions. ● On February 9, 2026, Dr. Abdelmalik Slassi resigned from the Board. Effective the same date, the Company appointed Lennie Ryer, CPA, of Montreal to the Board and the Audit Committee. Mr. Ryer is a seasoned financial executive with over 25 years of experien ce in the life science sector, having held numerous CFO and board roles in public and private pharmaceutical, biotechnology, and technology companies. ● On February 23, 2026, the Company announced that it had executed a binding supply agreement with Amsterdam University Medical Center (“Amsterdam UMC”) in the Netherlands for the provision of LaNeo™ 40mg MDMA capsules for use in a proposed clinical trial. Under the terms of the agreement, PharmAla will supply its LaNeo ™ 40mg capsule dosage, repackaged in a new single capsule packaging format. Critically, the agreement also includes a three-year stability testing program for the single -capsule dosage form, which will generate new stability data that PharmAla expects to leverage in the development of commercial -grade blister packaging for its LaNeo ™ MDMA product line. The stability data generated under this agreement is expected to provide critical support for PharmAla’s broader commercial strategy.
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20 Single-capsule stability data is a prerequisite for the development of blister packaging, which represents the commercial standard for pharmaceutical distribution. PharmAla anticipates that the data collected through this program may be bridged into the generation of new commercial-grade blister packaging for its LaNeo™ MDMA product, potentially enabling more efficient distribution to clinical trial sites and commercial partners globally. ● On February 26, 2026, the Company announced it had signed a drug donation agreement for an MDMA-Assisted Therapy clinical trial in fibromyalgia, through Spaulding Rehabilitation, a member of the Mass General Brigham healthcare system. In return, Spaulding will deliver comprehensive study results to PharmAla, including group means, pre and post -therapy analyses, and regression analysis plots, within 90 days of the study's completion. PharmAla will have the ability to leverage these findings for a broad range of public applications, including potential regulatory submissions, while Spaulding retains the right of first publication in a peer -reviewed journal. Intellectual property arising from the study will be held by the respective parties best positioned to advance its potential, with PharmAla retaining rights to innovations directly related to the study drug, and Spaulding retaining rights to discoveries made independently by its research team. ● On March 3, 2026, the Company announced it had signed a supply and data agreement with Nautilus Sanctuary Inc., for the provision of MDMA drug product for use in a Phase 2 clinical trial in the United States in exchange for a perpetual, non-exclusive license to the clinical trial data, which includes pseudonymized and de -identified raw data sets as well as Nautilus Sanctuary’s analysis of the safety and efficacy of the intervention. The license permits PharmAla to use the data for regulatory approvals and any commercial purpose in any jurisdiction globally. ● On March 23, 2026, the Company announced that its Australian joint venture, Cortexa, had advanced the commercialisation of MDMA supply in Australia and that the payments related to the existing license commitment, which involved the annual payment of $250, 000 Australian dollars for manufacturing and intellectual property rights, had concluded. ● On April 20, 2026, the Company responded to the Executive Order signed on April 18, 2026 by the President of the United States, which directs the U.S. Food and Drug Administration (" FDA") and the U.S. Drug Enforcement Administration ("DEA") to establish a pathway for eligible patients to access investigational psychedelic drugs, and directs the FDA Commissioner to issue National Priority Vouchers to appropriate psychedelic drugs that have received Breakthrough Therapy designation. Further, the Company confirmed that it had initiated manufacture of ALA-002 active pharmaceutical ingredient and that the Company expects ALA-002 will be dosed in patients in fiscal 2026. ● On April 21, 2026, Ali Taghva resigned as Chief Commercial Officer and Counsel of the Company. Further, the Company announced the grant of 4,850,000 options to the Directors and Officers of the Company. ● On April 21, 2026, the Company filed its Q2 Fiscal Year 2026 financial statements (period ended February 28, 2026). Revenues for the six months ended February 28, 2026 were $487,024 compared to $202,954 for the prior year period. Net loss for the period wa s $747,391 compared to $1,289,875 the prior year. Customer deposits grew to approximately $619,000. ● On May 13, 2026, the Company announced that it had executed the SPV Agreement with Aluvaris and Diteba, establishing Restora as a jointly -owned special purpose vehicle to lead the clinical and regulatory development of APA -01, the Company’s patented novel MDXX molecule, with the objective of filing a first Investigational New Drug application with the U.S. Food and Drug Administration. The SPV Agreement was executed on the timeline contemplated by the binding letter of intent announced on April 27, 2026. Under the SPV Agreement, the Company and Aluvaris were each to be issued 50% of the founding common shares of Restora, the Company was to grant Restora a conditional exclusive worldwide licence in respect of APA -01 becoming final and irrevocable on satisfact ion of a US$2,500,000 third -party funding threshold, and Diteba was appointed Restora’s principal provider of bioanalytical and scientific project -management services. On August 21, 2026, the Company announced that it had exercised its option to cancel the proposed licensing of APA-01 to Restora. The proposed licence was never consummated, no termination fee was payable and the Company retained full ownership of APA-01 and all associated intellectual property. Restora is inactive and is intended to be wound down. See “Developments Subsequent to the Fiscal Year -End Date – Restora Neurosciences – Cancellation of Proposed APA-01 Licence” below. ● On May 20, 2026, the Company entered into the Jupiter Term Sheet in respect of a proposed exclusive, perpetual licence of United States rights to ALA-002. Jupiter agreed to deposit US$600,000 into escrow, creditable against the upfront cash consideration payable at closing and payable to the Company as a reverse termination fee if a definitive agreement were
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21 not executed within 90 days of signing, subject to fault -based carve-outs. See “Developments Subsequent to the Fiscal Year-End Date – ALA-002 – United States Out-Licence to Jupiter” below. ● On June 8, 2026, the Company made available its notice of meeting, the 2026 AGSM Circular, and related proxy materials for its annual general and special meeting of Shareholders held on July 9, 2026. ● On July 6, 2026, the Company announced that it had completed GMP manufacturing of the drug substance required for the manufacture of ALA -002 and was prepared to commence GMP manufacturing of the drug product, being the formulated finished form to be used i n clinical activities. In the same announcement, the Company disclosed (i) the grant of Australian Patent No. 2022330718, entitled “Compositions Comprising Non -Racemic Mixtures of (R) - and (S)-3,4- Methylenedioxymethamphetamine or (R) and (S) N -Methyl-1,3-Benzodioxolylbutanamine and Uses Thereof”, being the composition-of-matter patent for ALA-002; (ii) that the board of directors of Cortexa had voted to exercise its right of first refusal under the Cortexa Joint Venture to commercialize the ALA-002 intellectual property, such rights relating solely to the Australian territory; and (iii) that the ALA -002 drug product will be known in Australia as LaNeo ™ Gen 2, under branding owned by the Company and sublicensed to Cortexa. ● On July 20, 2026, the Company entered into a definitive licence agreement with Jupiter (the “ Jupiter Licence Agreement”), announced July 21, 2026, granting Jupiter an exclusive, perpetual, royalty -bearing licence to develop, manufacture and commercialize ALA -002 in the United States for total consideration of up to approximately US$100 million. The Company retains all rig hts to ALA -002 outside the United States. See “Developments Subsequent to the Fiscal Year-End Date – ALA-002 – United States Out-Licence to Jupiter” below. ● On July 30, 2026, the Company filed its Q3 Fiscal Year 2026 financial statements and related management’s discussion and analysis for the three and nine months ended May 31, 2026. Revenues for the nine months ended May 31, 2026 exceeded $1,000,000 compared to approximately $338,000 for the comparable prior year period, and were $513,000 for the three months ended May 31, 2026 compared to $135,000. Net loss and comprehensive loss for the three and nine months ended May 31, 2026 was $499,759 and $1,247,150 re spectively, compared to $524,235 and $1,814,110 for the comparable prior year periods. Cash used in operating activities was $673,588 for the nine months ended May 31, 2026 compared to $748,758 for the comparable prior year period. In the same announcement , the Company confirmed that all motions recommended by management at its annual general and special meeting were duly passed. ● On August 21, 2026, the Company announced three corporate updates: (i) the grant of United States Patent No. 12,679,817, covering novel processes for preparing the (R) - and (S) -enantiomers of MDMA and of N -methyl-1,3- benzodioxolylbutanamine (“MBDB”); (ii) that the Company had exercised its option to cancel the proposed licensing of APA-01 to Restora in accordance with the terms of the SPV Agreement, following which the SPV partners were required to initiate wind -down procedures in respect of Restor a, with the Company retaining full ownership of APA -01 and all associated intellectual property and continuing to examine opportunities to develop APA -01 in-house and by way of co - development; and (iii) the engagement of Canaccord Genuity LLC (“ Canaccord Genuity ”), pursuant to a letter of engagement dated August 10, 2026, as the Company’s exclusive financial advisor, including as exclusive placement agent, lead agent or lead left bookrunner in connection with one or more private placements or public offerings of the Company’s securities during a 12-month financing exclusivity period, subject to earlier termination by either party upon 10 days’ prior written notice, and as exclusive financial advisor in connection with one or more possible business combinations. Th e engagement letter also provides for a nine-month fee tail in respect of certain financings and transactions involving covered parties and grants Canaccord Genuity a right of first refusal to provide certain financial advisory and investment banking services during the term of the engagement and for six months following its termination, subject to the terms and limitations set out in the engagement letter. See “Developments Subsequent to the Fiscal Year -End Date” below. ● On September 17, 2026, the Company announced (i) the resignation of Clearhouse LLP as auditor of the Company and the appointment of Davidson & Company LLP as successor auditor of the Company, effective September 14, 2026; (ii) the execution of a subscripti on services agreement dated April 23, 2026 with Water Tower Research LLC (“ WTR”), effective May 15, 2026, pursuant to which WTR provides research coverage and investor engagement services to the Company; and (iii) the engagement of Oak Hill Financial Inc. (“ Oak Hill”) on April 21, 2026 to provide business and capital markets advisory services to the Company. See “Developments Subsequent to the Fiscal Year -End Date” below. ● On October 8, 2026, the Company announced that it had signed a distribution and licence agreement with Rua Bioscience Limited (“Rua”, NZX: RUA). Under the agreement, Rua will import, distribute and sell PharmAla’s pharmaceutical-grade LaNeo™ MDMA in New Zealand. The agreement follows the approval by New Zealand’s Medicines and Medical Devices Safety Authority (“Medsafe”), on September 4, 2026, of two psychiatrists to prescribe pharmaceutical -grade MDMA for
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22 post-traumatic stress disorder (PTSD). This makes New Zealand only the second country, after Australia, to allow authorised psychiatrists to prescribe MDMA. Rua will supply PharmAla’s 40 mg LaNeo ™ MDMA capsules, manufactured to good manufacturing practice (GMP) standards, to authorised prescribers in New Zealand. The first shipment will be supplied on a consignment basis. Rua will work with the Company and Medsafe to complete the remaining regulato ry and quality steps before the first shipment. Further, the Company announced that prior to the agreement, on September 1, 2026, it had terminated, by mutual consent, the previously announced agreement with Veridion. Significant Acquisitions Not applicable. Description of the Business PharmAla is a Canadian biotechnology company dedicated to the development, manufacture, and sales of MDMA and MDXX class molecules in service to the burgeoning clinical research community and growing commercial use cases in select jurisdictions. PharmAla has 3 primary business lines: (1) the manufacture of MDMA and MDXX class molecules for sale to clinical researchers in both th e commercial and academic sphere, (2) the research and development of novel MDXX class compounds which offer unique benefits above and beyond currently known substances and (3) the development of novel delivery mechanisms for MDMA and MDXX class compounds. The Company believes that there is a significant market for clinical -grade MDMA for scientific research and non -research sales, in selected jurisdictions. However, supply is constrained by manufacturing bottlenecks and regulatory restrictions. While the Co mpany anticipates that its first business line, namely the manufacture of clinical grade MDMA for sale to end -users like researchers and clinicians, is currently generating revenue, the Company also believes that manufacturing of generic molecules is unlikely to yield stable long-term revenue as the supply of these molecules increases over time. As such, the Company believes that significantly more long - term value can be derived from activity which generates significant IP, such as the Company’s second business line. While these business lines are likely to generate significant value in the long -term, they are unlikely to generate short -term cash revenue as this revenue is dependent on the Company achieving its regulatory milestones. The following sections are intended to provide a summary of the business and operations of PharmAla’s material Subsidiaries w ithin the retail, as well as manufacturing and wholesale segments of the Business, as at the AIF Date. PharmAla Biotech Inc. PharmAla Biotech Inc. was incorporated under the BCBCA on December 23, 2020. The fiscal year end of PharmAla Biotech Inc. is August 31. On March 15, 2021, the Company entered into a share exchange agreement with the securityholders of PharmAla Biotech Inc., pursuant to which the Company agreed to acquire all of the issued and outstanding securities of PharmAla Biotech Inc. in consideration for the issuance of a total of 40,000,000 Common Shares at a deemed price of $0.05 per Common Share (the “ PharmAla Share Exchange Agreement”). Pursuant to the PharmAla Share Exchange Agreement, on March 19, 2021, PharmAla Biotech Inc. became a wholly -owned subsidiary of the Company, after the Company acquired all of its issued and outstanding securities. PharmAla operates the Business through PharmAla Biotech Inc. The registered and head office of PharmAla Biotech Inc. is located at Suite 3606 – 833 Seymour Street, Vancouver B.C. V6B 0G4. Cortexa Cortexa was incorporated in Australia pursuant to the Corporations Act 2001 on April 26, 2023. On May 1, 2023, the Company, along with Australian-based Vitura established the Cortexa Joint Venture. Cortexa has exclusive rights to manufacture and distribute MDMA and psilocybin in Australia under GMP conditions using PharmAla’s manufacturing technology and IP pursuant to the Cortexa Licensing Agreement and Cortexa Supply Agreement.
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23 On May 1, 2023, Cortexa entered into the Cortexa Distribution Agreement with Burleigh pursuant to which Burleigh was appointed the exclusive distributor in Australia of MDMA and Psilocybin products for Cortexa. On May 1, 2023, Vitura entered into the Cortexa Loan Agreement with Cortexa pursuant to which Vitura loaned to Cortexa $2,200,000.00 in connection with the Cortexa Joint Venture. Pursuant to the terms and conditions of the Cortexa Joint Venture, Cortexa is controlled by a board of directors consisting o f equal representatives from both the Company and Vitura. PharmAla Biotech Inc. may from time to time make available products to Co rtexa for import into Australia for supply to medical practitioners under the TGA's authorised prescriber scheme. During the year e nded August 31, 2025, the Company recognized license revenue of $225,670 (year ended August 31, 2024 – $224,337). As at the Fiscal Year- End Date, the Company had accrued license revenue receivable from Cortexa of $18,433 (A$20,833) (August 31, 2024 – $18,949 (A$20,833)). In accordance with the terms of the Cortexa Licensing Agreement, during the year ended August 31, 2026, the Company received the final license payments. In accordance with the Cortexa Licensing Agreement, upon the earlier of repayment of the loan from Vi tura or the date that Cortexa has generated consistent profits over two years of 250,000 Australian dollars, the Company is entitled to a 5% royalty on net profits generated by Cortexa. The registered and head office of Cortexa is located at Suite 8, Level 3, 299 Toorak Road South Yarra VIC 3141, Australia. On August 11, 2025, the Company incorporated PharmAla Biotech Australia Pty Ltd, a wholly -owned Australian subsidiary, for the purpos es of conducting research and development activities in Australia. PharmAla Australia is expected to receive a full and perpetual l icense to the Company’s ALA-002 asset and all associated patents, and will be positioned to execute both manufacturing development and clinical research in Australia. Since its inception in May 2023, Cortexa has quickly established itself as the leader in the emerging therapeutic area of psy chedelic- assisted therapy in Australia through navigating the regulatory framework, being the first to complete importation, achiev ing supply of products to clinical trials and the authorised prescriber scheme and now the commencement of onshore manufacturing. In addition, Cortexa will shortly commence a medical education program designed to increase awareness of Psychedelic Assisted Therapy amongst the broader adult psychiatry community and continue its engagement with peak bodies and key customers to furt her expand the market in Australia. LaNeo™ MDMA PharmAla has a Health Canada CDSL, allowing for the legal sale of MDMA and Psilocybin. PharmAla, through its research partner s, conducts research and development on MDMA and products that may contain psychedelic compounds in Canada and the United States with a focus on developing and commercializing psychedelic-inspired regulated medicines. While PharmAla is focused on developing products using psychedelic compounds, PharmAla does not have any direct or indirect involvement with the illegal selling, production or distribution of any substances in the jurisdictions in which it operates. PharmAla does not directly deal with psychedelic substances and will only do so through agents within laboratory and clinical trial settings conducted within approved regulato ry frameworks in the jurisdictions in which it operates. The Canadian federal government regulates drugs through the CDSA, which places contro lled substances in a schedule. Under the CDSA, MDMA is currently a Schedule I drug. Health Canada restored access to certain restricted drugs, including MDMA, through the Special Access Program (“ SAP”) on January 5, 2022. The SAP allows health care practitioners to request for patients, on an emergency basis, access to drugs that are not yet approved in Canada. Since 2013, Canadians had been unable to access certain restricted drugs, such as MDMA, thr ough the SAP. Through our Health Canada CDSL and our manufacturing and distribution partners, our MDMA product is available upon request under the SAP or for research purposes. SAP sales are currently fulfilled through distribution partners. The Company believes that there is a significant market in Canada for clinical-grade MDMA for scientific research, the supply of which is constrained by manufacturing bottlenecks and regulatory restrictions. In the United States, MDMA is a Schedule I drug under the CSA. It is currently illegal under federal United States law to pos sess, produce and sell MDMA absent regulatory approval. There are currently no federally recognized medical uses in the United Stat es for MDMA. The FDA has approved certain trials for the study of MDMA, however, this drug is still currently illegal under federal law absent such approval. On April 18, 2026, the President of the United States issued Executive Order 14401, "Accelerating Medical Treatments for Seri ous Mental Illness". The Executive Order directs the Commissioner of the FDA to issue Commissioner's National Priority Vouchers t o
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24 appropriate psychedelic drugs that have received Breakthrough Therapy designation for the treatment of serious mental illness and that meet the criteria of that program; directs the FDA and the DEA to facilitate and establish a pathway for eligible patient s to access investigational psychedelic drugs, including ibogaine compounds, under the Right to Try Act, including any necessary Schedule I handling authorizations for treating physicians and researchers; and allocates funding through the Advanced Research Projects Agency for Health to match state government investment in psychedelic research. The Executive Order does not reschedule MDMA or any other psychedelic substance, and MDMA remains a Schedule I drug under the CSA. On April 24, 2026, the FDA announced the first three Commissioner's National Priority Vouchers issued under the Executiv e Order, none of which related to an MDMA program. The access pathway contemplated by the Executive Order has been directed but is not yet operational, and the timing and terms of its implementation are not known. There can be no assurance that the Executi ve Order will result in any expansion of the market for the Company's products in the United States. We have established a supply chain to the U.S. through our Canadian and U.S. distribution partners and currently have invento ry for supply in the U.S. market. We expect the U.S. market to continue to be strong for our product, due to the lack of other suitable providers and we have agreed to commercial terms to supply a number of U.S. clinical trials, for which clinical trial approval is pendi ng. Further, the Company has opened up new markets for supplying MDMA product in Israel, the Netherlands, New Zealand and Norway, as described below: 1) On January 20, 2025, the Company announced that it had executed the Merhavim Supply and Data Agreement with Merhavim. All data generated in the clinical trial, entitled “MDMA Assisted Psychotherapy for PTSD of Early Sexual Trauma Compared to All Trauma in Adulthood”, will be licensed to PharmAla for regulatory and commercial purposes in exchange for the clinical trial material, which will be provided by PharmAla on a zero-cost basis. MAPS Israel, an Israeli non-profit organization whose mission is to develop psychedelic research and educational programs based in public health, is also a partner to the clinical trial. 2) On March 4, 2025, the Company signed the Duchefa Distribution and Licensing Agreement with Duchefa. Pursuant to the terms and conditions of the Duchefa Distribution and Licensing Agreement, Duchefa will act as the exclusive distributor for LaNeo ™ MDMA in the Netherlands market. The Duchefa Distribution and Licensing Agreement includes an annual purchase minimum, as well as restrictions on re -export and price controls. It also includes an escalator provision which would significantly increase the minimum purchase amounts in the 24 months following regulatory changes which allow for use of MDMA in the healthcare system. Duchefa will also act as Importer of Record as well as providing QP release of PharmAla’s products. Under EU regulations, QP release is necessary prior to use of a drug product in either commercial use or in clinical trial. The Duchefa Distribution and Licensing Agreement has a three year term with additional three year automatic renewals unless terminated by either party. 3) On September 25, 2025, the Company signed a distribution agreement with Veridion, appointing Veridion as exclusive distribution agent for LaNeo™ MDMA in the New Zealand market. 4) On January 8, 2026, the Company executed an agreement to supply LaNeo™ MDMA clinical research materials to Østfold Hospital Trust in Oslo, Norway. The agreement includes financial and data-sharing provisions. 5) On February 23, 2026, the Company executed a binding supply agreement with Amsterdam UMC in the Netherlands for the provision of LaNeo ™ 40mg MDMA capsules for use in a proposed clinical trial. The agreement includes a three -year stability testing program for the single -capsule dosage form, which the Company expects to leverage in the development of commercial - grade blister packaging for its LaNeo™ MDMA product line. 6) On October 8, 2026, the Company signed a distribution and licence agreement with Rua. Under the agreement, Rua will import, distribute and sell PharmAla’s pharmaceutical -grade LaNeo ™ MDMA in New Zealand. The agreement follows Medsafe’s approval, on September 4, 2026, of two psychiatrists to prescribe pharmaceutical -grade MDMA for post-traumatic stress disorder (PTSD). This makes New Zealand only the second country, after Australia, to allow authorised psychiatrists to prescribe MDMA. Rua will supply PharmAla’s 40 mg LaNeo™ MDMA capsules, manufactured to good manufacturing practice (GMP) standards, to authorised prescribers in New Zealand. The first shipment will be supplied on a consignment basis. Rua will work with the Company and Medsafe to complete the remaining regulatory and quality steps before the first shipment. Further, prior to the Rua agreement, on September 1, 2026, the Company and Veridion terminated the agreement by mutual consent. MDXX Class Molecules
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25 The research and development of novel MDXX class compounds and the development of novel delivery mechanisms for MDMA and MDXX class compounds, we believe will offer unique benefits above and beyond currently known substances. On July 30, 2024, the Company announced that the USPTO issued patent 12042478, supporting PharmAla’s composition of matter fo r (R)-2-[(2H-1,3-Benzodioxol-5-YL)Methyl]Pyrrolidine, internally deemed APA-01. On August 9, 2024, the Company announced that the USPTO issued patent 12,053,452, supporting the composition of matter for it s novel, non-racemic mixture of MDMA enantiomers, internally deemed ALA-002. On January 17, 2022, the Company initiated preclinical research on its patented NCEs at the laboratory of Dr. William Fantegr ossi at the University of Arkansas for Medical Sciences. The preclinical data obtained through the UAMS Research Agreement was used to support the successful application for the patents noted above. The Company is exploring options with potential funding partners to take one of our MDXX molecules into clinical trials. The Company retains full ownership of APA -01 and all associated intellectual property. Following the cancellation of the proposed licensing of APA -01 to Restora, the Company is evaluating opportunities to develop APA -01 in -house or through a future co - development arrangement. Restora is inactive and is intended to be wound down. Production and Services LaNeo™ MDMA PharmAla produces LaNeo ™ MDMA, in both finished drug product and API forms. PharmAla provides development services based on its drug manufacturing expertise, where such services may result in a significant future benefit to PharmAla. Currently an d for the foreseeable future, we u tilize contract manufacturing organizations (“ CMOs”) to manufacture our MDMA product. Our current manufacturing partner, Dalton Chemical Laboratories, Inc. o/a Dalton Pharma Services (“ Dalton”), a well established CMO of API, in order to perform process development and manufacturing. Dalton has warranted to PharmAla that they are able to legally perfor m all relevant work, and have warranted that they are the current holder of a Controlled Drugs and Substances Dealer’s License. PharmAla produces its LaNeo™ MDMA API in batches of approximately 1kg. The pharmaceutical ingredient is produced in a proprietary GMP process, developed for this purpose by PharmAla, and which it holds as a trade secret. PharmAla subsequently blends the API with generally used pharmaceutical excipients, such as Magnesium Stearate, to produce a specific blend appropriate for the filling of pharmaceutical capsules. These capsules are produced at one of several GMP manufacturing sites and are sold by PharmAla as LaNeo™ 40mg capsules. PharmAla may develop new capsule sizes in the future, as dosage needs change. PharmAla researches and develops novel IP, including both processes for the manufacture of pharmaceuticals and novel molecula r and chemical entities. These may be protected as either trade secret or under forms of IP protection, including patents. PharmAla has been allowed two composition of matter patents for novel MDXX molecules. These represent assets which may be licensed or sold. MDXX Class Molecules The research and development of novel MDXX class compounds and the development of novel delivery mechanisms for MDMA and MDXX class compounds, we believe will offer unique benefits above and beyond currently known substances. As noted previously, the Company is exploring options with potential funding partners to take one of our MDXX molecules into clinical trials. Further, the Company is currently manufacturing ALA -002 for commercial purposes, with commercialisation outside of the United States expected in fiscal 2027, including in Australia. Components
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26 Currently, the Company utilizes widely available plant-based hydroxypropyl methylcellulose capsules, excipients and LaNeo™ MDMA API as the components for its products. Revenues The following is a breakdown of the Company's revenues by type: Type 2025 2024 Product Sales(1)(3) $379,828 $722,710 License Revenue(2) $225,670 $224,337 Total $605,498 $947,047 Notes 1. Consists solely of LaNeo™ MDMA. 2. Solely in connection with the Cortexa Licensing Agreement. As described under “General Development of the Business”, the annual licence payments under the Cortexa Licensing Agreement concluded in March 2026. 3. Cortexa is a 50% joint venture between the Company and Vitura and is a related party of the Company. As part of its operations, the Company from time to time may sell either raw GMP or encapsulated product to Cortexa to facilitate sales (downstream transac tion). Under the equity method transactions involving downstream sales must be recognised only to the extent of unrelated investors’ interests. During the year ended August 31, 2024, the Company made sales of $476,723 to Cortexa, and deferred the gain on sales of $157,430 as at August 31, 2024. There were no additional product sales to Cortexa and the Company recognized $30,643 of the deferred gain during the year ended August 31, 2025. Specialized Skill and Knowledge PharmAla has significant specialized skills in the areas of pharmaceutical manufacturing and process development, in the disc overy, research and development of novel molecules which may have use as pharmaceutical preparations, and in the regulatory licens ing and development of pharmaceuticals and consumer products. PharmAla requires the specialized skills and knowledge of people skilled in MDMA drug development, operations, scientific res earch, licensing, IP and capital markets. Certain of these skills, especially in the field of MDMA drug development, are highly spe cialized. Currently, where necessary, the Company has been able to identify individuals and companies in the Canadian talent pool as employees, consultants, and/or advisors. Competitive Conditions PharmAla faces competition from psychedelic biotech companies which are developing and patenting synthetic psychedelics for therapy and may face future competition from large pharmaceutical companies. By supplying natural psychedelics for clinical trials and research purposes, the Company is competing with other psychedelic companies who are primarily supplying these trials with synthetic variants. Many of the Company’s competitors have financial, technical and human resources capabilities in competition wi th PharmAla. We currently sell into the Canadian, U.S., Australian, Israeli, Netherlands and Norwegian markets. We have executed distribut ion agreements with Duchefa Farma B.V. for the Netherlands, Rua for New Zealand, and supply agreements with the Merhavim Mental Health Centre in Israel and Østfold Hospital Trust in Norway. Currently, we believe we are the only supplier of GMP MDMA product under the SAP in Canada and the primary (largest) supplier through the TGA’s authorised prescribers scheme in Australia via C ortexa; however, that competitive landscape could change if a competitor offers a similar product or if the regulators relax quality (such as GMP) requirements. Our clinical trial sales in the U.S., Canada and Australia could also face competition from competing products, but we currently believe our product to be one of the highest quality products available. PharmAla benefits from certain barriers to entry within its industry. These include the requirement for competitors manufactu ring and supplying other trials with natural psychedelics to obtain and hold a Controlled Drugs and Substances Dealer’s License and to conduct their manufacturing processes under GMP manufacturing conditions. To the extent other parties in the sector are unable to obt ain these designations, or operate in accordance with these standards, PharmAla may benefit from lesser competition . Intellectual Property Intellectual Property Strategy PharmAla has a two-track intellectual property strategy, each aligning with an element of its current Business. Relating to the LaNeo™ MDMA manufacturing business, PharmAla has secured trademarks in multiple jurisdictions as the molecule is in commercial sales .
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27 While LaNeo™ MDMA is a generic molecule, meaning no patents can be obtained on the composition of matter of the molecule itself, PharmAla has secured its manufacturing IP as trade secret. In the future, PharmAla will seek to monetize this IP by partnering with third parties to execute novel dosage forms of drug product, which could provide incremental IP value. Relating to the MDXX novel molecules business, PharmAla is aggressive in asserting its IP rights through the filing of global PCT patents, prosecuted by IP counsel Smart and Biggar, and filing subsequent divisional and national patents as required. Severa l of these patents have already been granted in the US, while others are in progress. Patents The following table sets forth the status of each patent applicable to the Company’s current and anticipated business and act ivities: Title Jurisdiction of Filing Patent/ Application Number Filed Date (YYYY/MM/DD) Status Program COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 Australia 2022330718 2024-03-12 Granted ALA002 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF Australia 2023314829 2024-08-14 Granted APA01 COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 Brazil 11 2024 003274 4 2024-02-20 Application ALA002 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF Brazil BR 11 2024 016794 1 2024-08-16 Application APA01 COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 Canada 3229363 2024-02-16 Application ALA002 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF Canada 3242698 2024-06-28 Application APA01 COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 China 202280070576.8 2024-04-19 Application ALA002 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF China 202380034248.7 2024-10-15 Application APA01 COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 European Union 22857191.5 2024-03-15 Application ALA002 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF European Union 23844736.1 2024-07-02 Application APA01 COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 Hong Kong 62024095564.6 2024-08-14 Application ALA002 COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 Hong Kong 62024095435.9 2024-08-12 Application ALA002 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF Hong Kong 62025103433.1 2025-02-13 Application APA01 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES Indonesia P00202407886 2024-08-15 Published APA01
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28 Title Jurisdiction of Filing Patent/ Application Number Filed Date (YYYY/MM/DD) Status Program FOR PREPARATION, COMPOSITIONS AND USES THEREOF COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 Israel 310937 2024-02-19 Application ALA002 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF Israel 317451 2024-12-04 Application APA01 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF India 202417061098 2024-08-13 Application APA01 COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 Japan 2024-510674 2024-02-20 Application ALA002 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF Japan 2024-562783 2024-10-22 Application APA01 COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 South Korea 10-2024-7009362 2024-03-20 Application ALA002 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF South Korea 10-2024-7027412 2024-08-14 Application APA01 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF Mexico MX/a/2024/015198 2024-12-06 Published APA01 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF New Zealand 813661 2024-08-14 Application APA01 PROCESSES FOR THE PREPARATION OF THE ENANTIOMERS OF 3,4- METHYLENEDIOXYMETHAMPHETAMINE (MDMA) AND N-METHYL-1,3-BENZODIOXO Global (Patent Cooperation Treaty ) PCT/CA2022/050719 2022-05-06 Application ALA002 COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 Global (Patent Cooperation Treaty ) PCT/CA2022/051269 2022-08-22 Application ALA002 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF Global (Patent Cooperation Treaty ) PCT/CA2023/051019 2023-07-28 Application APA01 PROCESSES FOR THE PREPARATION OF THE ENANTIOMERS OF 3,4- METHYLENEDIOXYMETHAMPHETAMINE (MDMA) AND N-METHYL-1,3-BENZODIOXO United States 18/289586 2023-11-06 Granted ALA002 and LaNeo™ COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 United States 18/117723 2023-03-06 Granted ALA002 COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 United States 18/747519 2024-06-19 Application ALA002 COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 United States 19/040188 2025-01-29 Application ALA002 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES United States 18/380423 2023-10-16 Granted APA01
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29 Title Jurisdiction of Filing Patent/ Application Number Filed Date (YYYY/MM/DD) Status Program FOR PREPARATION, COMPOSITIONS AND USES THEREOF (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF United States 18/739924 2024-06-11 Application APA01 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF United States 19/040042 2025-01-29 Application APA01 3,4-METHYLENEDIOXYMETHAMPHETAMINE (MDMA) DERIVATIVES AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF United States 63/615963 2023-12-29 Application LaNeo™ COMPOSITIONS COMPRISING NON-RACEMIC MIXTURES OF (R)- AND (S)-3,4- METHYLENEDIOXYMETHAMPHETAMINE OR (R) AND (S) N-METHYL-1 South Africa 2024/02095 2024-03-13 Granted ALA002 (R)-2-[(2H-1,3-BENZODIOXOL-5- YL)METHYL]PYRROLIDINE AND PROCESSES FOR PREPARATION, COMPOSITIONS AND USES THEREOF South Africa 2024/08870 2024-11-21 Granted APA01 Intangible Properties The Company has significant intangible IP assets, consisting principally of costs capitalized in respect of the development o f MDXX molecules, which consist of novel MDXX class compounds and synthesis routes to manufacture these molecules, and our process development, which pertains to manufacturing pathways allowing for the manufacture and testing of clinical -grade MDMA at scale (“Process Development”). During the fiscal year ended August 31, 2023, the Company initiated amortization of the Process Development asset, as it was available for its intended use, straight-line over an estimated 15 year life. Commercially, the Process Development asset constitutes our MDMA manufacturing IP, which in turn is the IP underlying the Cortexa Licensing Agreement. During the year e nded August 31, 2023, the Company completed a quantitative impairment test over all of the intangible assets and concluded that there was no impairment . During the fiscal year ended August 31, 2024, specifically in July and August 2024, the Company was granted patents covering APA- 01 and ALA-002, respectively, two novel MDXX molecules. The previously capitalized amounts included within intangible assets fo r MDXX molecules as well as the Preclinical Testing, were related to developing these molecules and securing the related patent s. As a result of the granting of the patents, the Company commenced amortization of the related costs, reclassifying the Preclin ical Testing costs to MDXX, which costs are then amortized over the life of the patents being 20 years. During the fiscal year ended Augus t 31, 2025, the Company continued to advance the development of its ALA -002 drug candidate as well as research on its novel molecule APA-01. Cycles PharmAla believes that the Business will not suffer from cyclical or seasonal sales variances. Economic Dependence The Company is not economically dependent on any individual supplier or customer. Changes to Contracts Other than as discussed below, the Company is not expected to be affected in the current financial year by the renegotiation or termination of contracts or sub-contracts. Termination of Red Light Consulting Agreement The Red Light Consulting Agreement was terminated on September 3, 2024. At the time of termination, Red Light owed the Compan y $15,820 corresponding to services accrued in June and July 2024, which amount has been fully reserved.
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30 CFO Change In connection with Mr. Avery’s appointment as CFO on October 1, 2024, the Company terminated its contract with Carmelo Marrel li, the prior CFO. However, the Company continues to use the services of Mr. Marrelli’s related companies, such as Marrelli Suppo rt Services Inc. Marrelli Trust Company Limited, DSA Filing Services Limited and DSA Corporate Services Inc., for bookkeeping, transfer agent and various support services. Employees As at the Fiscal Year-End Date, the Company had three full -time (direct) employees and two contract employees. As at the AIF Date, the Company has four full -time (direct) employees, including Harpreet Kaur, Farnoud Kazemzadeh and Nicholas Kadysh, and two contract employees. In addition, the Company engages contractors, consultants and strategic advisors for services including accounting, administrative, bookkeeping, CFO services, clinical trial design, IP, and marketing. Foreign Operations The Company conducts principally all of its foreign operations through Cortexa and PharmAla Australia. For more information, please see the section entitled “General Development of the Business – Cortexa” above. In the financial year ended August 31, 2023, revenue from outside of Canada represented 2% of the Company’s revenue. In the financial year ended August 31, 2024, revenue from out side of Canada represented 85% of the Company’s revenue. In the financi al year ended August 31, 2025, revenue from outside of Canada represented 95% of the Company’s revenue. On August 11, 2025, the Company incorporated a wholly -owned subsidiary, PharmAla Biotech Australia Pty Ltd. As at the Fiscal Year -End Date, PharmAla Aus tralia had no operations, assets or liabilities. The Company incorporated PharmAla Australia in order to facilitate a planned clinical trial for ALA -002. Developments Subsequent to the Fiscal Year-End Date ALA-002 – United States Out-Licence to Jupiter On May 20, 2026, the Company announced that it had entered into the Jupiter Term Sheet in respect of a proposed exclusive, perpetual licence of United States rights to ALA-002. On July 20, 2026, the Company entered into a definitive licence agreement with Jupiter, announced July 21, 2026. Under the Ju piter Licence Agreement, the Company granted Jupiter an exclusive, perpetual, royalty -bearing licence to develop, manufacture and commercialize ALA-002 in the United States. The Company retains all rights to ALA -002 outside the United States and will continue to advance the molecule internationally. Total consideration payable to the Company under the Jupiter Licence Agreement is up to approximately US$100 million, compris ing: (i) an upfront payment of US$3,333,333, consisting of US$1,500,000 in cash, which has been received by the Company, and US$1,833,333 in common stock of Jupiter, subject to a 120 -day lock-up; (ii) development and regulatory milestone payments of up to US$23,333,333, including US$3,333,333 on first patient dosing in a Phase 3 clinical trial and US$20,000,000 on approval by the United States Food and Drug Administration of a New Drug Application for a licensed product; (iii) commercialization milestone payments of up to US$73,333,333, payable on first achievement of US$333.3 million, US$1.0 billion and US$2.0 billion in cumulative United States net sales; and (iv) a royalty of 3% of United States net sales of licensed products, commencing after the third commercializa tion milestone. The Company has also committed to supply GMP-grade ALA-002 drug product to Jupiter under a separate supply agreement to be negotiated on commercial terms. The separate supply agreement has not been executed, and the effectiveness of the Jupiter Licence Agreement is not contingent on its execution. The milestone payments and royalties are contingent on the a chievement of specified development, regulatory and sales events, which may not be achieved. On August 20, 2026 (the “ Issuance Date”), the Company received 132,867 Jupiter shares, representing 19.99% of the outstanding shares of Jupiter immediately prior to the Issuance Date. The Jupiter shares are subject to a 120 -day lock-up. The remaining share consideration (the “ Reserved Shares”) shall not be issued until Jupiter obtains stockholder approval, which Jupiter is required to use commercially reasonable efforts to obtain within 180 days following the Issuance Date, and if for any reason that approval is not obtained or otherwise Jupi ter cannot issue the Reserved Shares, then the value of the Reserved Shares is due in cash within five business days thereafter.
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31 Restora Neurosciences – Cancellation of Proposed APA-01 Licence On August 13, 2026, the Company exercised its option to cancel the proposed licensing of APA -01 to Restora Neurosciences, which was announced on August 21, 2026, and the Company will evaluate in-house and co-development pathways for APA-01. As a result of the cancellation of the proposed license, the Company retains full ownership of APA-01 and all associated intellectual property and the SPV partners are required to initiate wind -down procedures of Restora. Restora has not conducted any material operations since its formation. Grant of United States Patent No. 12,679,817 On August 21, 2026, the Company announced that the United States Patent and Trademark Office had granted United States Patent No. 12,679,817, covering novel processes for preparing the (R)- and (S)-enantiomers of MDMA and of MBDB. Engagement of Canaccord Genuity LLC On August 21, 2026, the Company announced the engagement of Canaccord Genuity as its exclusive financial advisor pursuant to a letter of engagement dated August 10, 2026, including as exclusive placement agent, lead agent or lead left bookrunner in con nection with one or more private placements or public offerings of the Company’s securities during a 12 -month financing exclusivity period, subject to earlier termination by either party upon 10 days’ prior written notice, and as exclusive financial advisor in connection with one or more possible business combinations. The engagement letter also provides for a nine-month fee tail in respect of certain financings and transactions involving covered parties and grants Canaccord Genuity a right of first refusal to provide certain financial advisory and investment banking services during the term of the engagement and for six months following its termination, subject to the te rms and limitations set out in the engagement letter. Change of Auditor On September 14, 2026, the Board accepted the resignation of Clearhouse LLP as auditor of the Company and appointed Davidson & Company LLP as successor auditor of the Company. The change of auditor was made in order for the Company to engage an auditor capable of conducting an audit in accordance with the standards of the U.S. Public Company Accounting Oversight Board, which engagement Clearhouse LLP was unable to accept. Engagement of Water Tower Research LLC On April 23, 2026, the Company entered into a subscription services agreement with WTR, effective May 15, 2026 and continuing until May 15, 2027, pursuant to which WTR provides the Company with research coverage, including analyst coverage and earnings not es, podcast features and participation in WTR investor symposiums, in consideration for an annual fee of $58,000. WTR does not re ceive any equity-linked compensation under the agreement. Engagement of Oak Hill Financial Inc. On April 21, 2026, the Company engaged Oak Hill to provide business and capital markets advisory services, including raising the Company’s profile with the investment community, for an initial term of two months, which may be extended on a month -to-month basis, in consideration for a monthly fee of $12,000 plus pre -approved out-of-pocket expenses. Oak Hill will not receive any Common Shares or other securities of the Company as compensation, has no present interest, directly or indirectly, in the Company or its securities and is an arm’s length party to the Company. The engagement of Oak Hill was terminated effective September 17, 2026. Annual General and Special Meeting At the annual general and special meeting of Shareholders held on July 9, 2026, all matters put before Shareholders were appr oved, including the election of directors, the re -appointment of Clearhouse LLP as auditor, the re -approval of the Equity Incentive Plan and the authorization of the Board in its sole discretion to file articles of amendment to effect a consolidation of the issued a nd outstanding Common Shares on the basis of a ratio of up to one hundred (100) pre -consolidation Common Shares for one ( 1) post-consolidation Common Share (the “Consolidation”), such Consolidation to be effected within 36 months of the date on which the annual general and special meeting of Shareholders was held. The Board may, in its sole discretion, determine the Consolidation ratio and the effective date of the Consolidation, or elect not to proceed with the Consolidation, in each case without further notice to, or approval of, Shareholders. Where the Consolidation would otherwise result in a fractional Common Share, the number of Common Shares to be received will be rounded down to the nearest whole Common Share.
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32 As at the AIF Date, the Board has not selected a Consolidation ratio and no Consolidation has been effected. Unless otherwise indicated, all share and per-share figures in this Annual Information Form are stated on a pre-Consolidation basis. REGULATORY OVERVIEW The following summary is intended to provide a general overview of the primary Canadian federal Laws and regulations in respe ct of the distribution and sale of products that contain MDMA. The provincial and territorial regulatory frameworks relating to MDM A are complex and rapidly evolving, with provincial and territorial governments in Canada having taken different approaches to regu lating MDMA and MDMA -related activities. The below summary is not intended to be exhaustive and does not address the Laws and regulations of any other jurisdiction. The Company continues to monitor regulatory developments and their impact(s) on the Bu siness, including the Company’s proposed plans for further expansion and growth. The Company is focused on developing, manufacturing and commercializing MDMA and MDXX -class molecules. It is also focused on developing novel formulations which would be subject to FDA, European Medicines Agency and Pharmaceuticals and Medical Devices Agency-approval. Sales of MDMA and other controlled substances in the MDXX class (if those molecules are designated as Controlled Substances under the CSA) are permissible in Canada under the terms of the Company’s Controlled Drugs and Substanc es Dealer’s Lice nse (License 6 -1505) or should the Company partner with an existing Controlled Substances Manufacturer’s License and/or Controlled Drugs and Substances Dealer’s License holder. All potential customers would have to be legally able to purchase and hold controlled substances within their jurisdiction of residence, whether through a license such as a Health Canada controlled substances license, a Ministerial or Regulatory Exemption, or under the auspices of a clinical trial registered with relevant local auth orities. With respect to regulatory processes, the Company is and intends to continue following the same process applicable to other biotechnology companies. In order to develop regulated medicines, the Company’s work must be conducted in strict compliance w ith the regulations of the FDA and other federal, state, local and regulatory agencies in the United States, and in strict compliance with the regulations of the equivalent regulatory agencies in the other jurisdictions in which the Company outsources research an d development activities. These regulatory authorities regulate, among other things, the research, manufacture, promotion and distribution of drugs in specific jurisdictions under applicable law and regulations. However, it must be noted that the Company d oes not require regulatory approval as an approved medicine in order to manufacture API or drug products which are sold to clinical researchers, or which are sold as “unapproved medicines” under the Special Access Program in Canada, the Authorized Prescriber Sche me in Australia, or other exceptional medical programs in other jurisdictions. For novel formulations of MDMA developed by the Company, such formulations could potentially be granted status in the United States under a “505(b)(2)” process, if the Company should prove that its formulations are therapeutically equivalent to MDMA. A “505(b)(2)” process would not necessarily require phased clinical trials, however they would require that MDMA be approved as a therapeutic drug by the FDA prior to filing of the application. For any novel formulations for molecules not currently approved by the FDA or other regulatory authorities, the Company would be required to undertake clinical trials and based on the success of such clinical trials, the Company would engage in licensing, partnership and/or acquisition discussions with life sciences companies that have the resources to complete the development and commercialization of such products. In the United States, the FDA regulates drugs and medical devices under the FDCA and its implementing regulations. Drugs and devices are also subject to other federal, state and local statutes and regulations. The Company plans to investigate its products through the IND framework and seek approval through the new drug application (“ NDA”) pathway. The process required by the FDA before the Company’s product candidates may be marketed in the United States generally involves the following: ● completion of extensive nonclinical laboratory tests, animal studies and formulation studies, all performed in accordance with the FDA’s Good Laboratory Practice and GMP regulations; ● submission to the FDA of an IND, which must become effective before human clinical trials may begin; ● for some products, performance of adequate and well -controlled human clinical trials in accordance with the FDA’s regulations, including Good Clinical Practices (“GCPs”), to establish the safety and efficacy of the product candidate for each proposed indication; ● submission to the FDA of a United States NDA; ● a determination by the FDA within 60 days of its receipt of an NDA to file the NDA for review;
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33 ● satisfactory completion of an FDA pre -approval inspection of the manufacturing facilities at which the API and finished drug product are produced and tested to assess compliance with GMP regulations; and ● FDA review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug. An IND is a request for authorization from the FDA to administer an investigational drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for human studies. The IND also includes results o f animal studies or other human studies, as appropriate, as well as manufacturing information, analytical data and any available clini cal data or literature to support the use of the IND. An IND must become effective before human clinical trials may begin. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to the proposed clinical trials. In such a case, the IND may be placed on clinical hold and the IND sponsor a nd the FDA must resolve any outstanding concerns or questions before clinical trials can begin. Accordingly, submission of an IND may or may not resu lt in the FDA allowing clinical trials to commence. Clinical trials involve the administration of the investigational drug to human subjects under the supervision of qualified i nvestigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety, and the efficacy criteria to be evaluated. A protocol for ea ch clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. Additionally, approval must also be obtained from each clinical t rial site’s institutional review board (“ IRB”) before the trials may be initiated, and the IRB must monitor the study until completed. There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries. The clinical investigation of a drug is generally divided into three phases. Although the phases are usually conducted sequen tially, they may overlap or be combined. The three phases of an investigation are as follows: ● Phase 1. Phase 1 includes the initial introduction of an IND into humans. Phase 1 clinical trials are typically closely monitored and may be conducted in patients with the target disease or condition or in healthy volunteers. These studies are designed to evaluate the safety, dosage tolerance, metabolism and pharmacologic actions of the investigational drug in humans, the side effects associated with increasing doses, and if possible, to gain early evidence on effectiveness. During Phase 1 clinical trials, sufficient information about the investigational drug’s pharmacokinetics and pharmacological effects may be obtained to permit the design of well -controlled and scientifically valid Phase 2 clinical trials. The total number of participants included in Phase 1 clin ical trials varies but is generally in the range of 20 to 80. ● Phase 2. Phase 2 includes controlled clinical trials conducted to preliminarily or further evaluate the effectiveness of the investigational drug for a particular indication(s) in patients with the disease or condition under study, to determine dosage tolerance and optimal dosage, and to identify possible adverse side effects and safety risks associated with the drug. Phase 2 clinical trials are typically well -controlled, closely monitored, and conducted in a limited patient population, usually involving no more than several hundred participants. ● Phase 3. Phase 3 clinical trials are generally controlled clinical trials conducted in an expanded patient population generally at geographically dispersed clinical trial sites. They are performed after preliminary evidence suggesting effectiveness of the drug has been obtained, and are intended to further evaluate dosage, clinical effectiveness and safety, to establish the overall benefit-risk relationship of the investigational drug product, and to provide an adequate basis for product approval. Phase 3 clinical trials usually involve several hundred to several thousand participants. A pivotal study is a clinical study which adequately meets regulatory agency requirements for the evaluation of a drug candid ate’s efficacy and safety such that it can be used to justify the approval of the product. Generally, pivotal studies are also Phas e 3 studies but may be Phase 2 studies if the trial design provides a well-controlled and reliable assessment of clinical benefit, particularly in situations where there is an unmet medical need. The FDA, IRB or clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. Thi s group provides authorization for whether a trial may move forward at designated check points based on access to certain data from the study. The Company may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate.
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34 Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational drug product information is submitted to the FDA in the form of an NDA requesting approval to market the prod uct for one or more indications. The application includes all relevant data available from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from company -sponsored clinical trials intended to test the safety and effectiveness of a use of a product, or from several alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and effe ctiveness of the investigational drug product to the satisfaction of the FDA. Once the NDA submission has been accepted for filing, within 60 days following submission, the FDA’s goal is to review applic ations for new molecular entities within ten months of the filing date or, if the application relates to a serious or life-threatening indication and demonstrates the potential to provide a significant improvement in safety or effectiveness over currently marketed therapies, six months from the filing date. The review process is often significantly extended by FDA requests for additional information or clarification. The FDA may refer the application to an advisory committee for review, evaluation and recommendation as to whether the applicatio n should be approved. The FDA is not bound by the recommendation of an advisory committee, bu t it typically follows such recommendations. After the FDA evaluates the NDA and conducts inspections of manufacturing facilities where the drug product and/or its API wi ll be produced, it may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing o f the drug with specific prescribing information for specific indications. A complete response letter indicates that the review cycle of the application is complete, and the application is not ready for approval. A complete response letter may require addi tional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. Even if such additional information is submit ted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA could also approve the NDA with a risk evaluation and mitigation strategy to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls and specifications, or a commitment to conduct one or more post - market studies or clinical trials. Such post -market testing may include Phase 4 clinical trials and surveillance to further assess and monitor the product’s safety and effectiveness after com mercialization. Regulatory approval of oncology products often requires that patients in clinical trials be followed for long periods to determine the overall survival benefit of the drug. The regulatory process in the other jurisdictions in which the Company operates are substantively similar to the processes de scribed above for the United States. The Company has not received legal advice with respect to its United States regulatory obligations to comply with the FDA’s d rug development and approval processes as a precondition of marketing MDMA within the United States. Once the Company has validated its processes and completed its preclinical research in Canada and has filed the necessary patent applications to protect its inventions, the Company will seek legal advice and conduct due diligence prior to conducting any clinical studies in the United S tates. While the Company is conducting drug discovery, research and development on MDMA, it does not have any direct or indirect involvement w ith the illegal selling, production or distribution of any substances in the jurisdictions in which it operates. T he Company is a drug development company and does not advocate for the recreational legalization of any substances and does not deal with controll ed substances except within approved laboratory or clinical trial settings conducted within approved regulator y frameworks. The Company’s products will not be commercialized prior to applicable regulatory approval, which will only be granted if clinical evidence of safety and efficacy for the intended uses is successfully developed. Furthermore, because the Company will only deal with controlled substances within approved laboratory clinical trial settings within approved regulatory frameworks, in the Company’s view, t here are minimal risks associated with third-party services providers that relate to the treatment of psychedelic substances under applicable laws. The Company also feels that it has minimized other risks associated with third -party service providers through standard contractual obligations. The Company’s drug development strategy focuses on the FDA 505(b)(2) regulatory pathway and the FDA expedited development and review programs for drugs, such as “Fast Track” and “Breakthrough Therapy” designations. FDA 505(b)(2) Regulatory Pathway As an alternative path to FDA approval for modifications to formulations or uses of products previously approved by the FDA, an applicant may submit an NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2) was enacted as part of the Drug Price Competition and Patent Term Restoration Act of 1984 , also known as the Hatch-Waxman Amendments, which permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by, or for, the applicant o r for
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35 which the applicant has not obtained a right of reference. If the 505(b)(2) applicant can establish that reliance on FDA’s previous findings of safety and effectiveness is scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies of the new product. The FDA may also require companies to perform additional studies or measurements, including clinical trials, to support the change from the approved branded reference drug. The FDA may then approve the new product c andidate for all, or some, of the label indications for which the branded reference drug has been approved, as well as for any new indication sought by the 505 (b)(2) applicant. The Company anticipates potentially filing 505(b)(2) NDAs for its novel MDMA formulations, which would rely, in part, on the FDA’s previous findings of safety and efficacy of the active ingredient should such findings be made. FDA Expedited Development The FDA maintains several programs intended to facilitate and expedite development and review of new drugs to address unmet medical needs in the treatment of serious or life -threatening diseases or conditions. These programs include “Fast Track” designatio n and “Breakthrough Therapy” designation, and the purpose of these programs is to either expedite the development or review of impo rtant new drugs to get them to patients more quickly than standard FDA review timelines typically permit. MDMA has already be en granted “Breakthrough Therapy” status by the FDA. A drug is eligible for “Fast Track” designation if it is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address unmet medical needs for such disease or condition. “Fast Track” designation provides inc reased opportunities for sponsor interactions with the FDA during preclinical and clinical development, in addition to the potential for rolling r eview once a marketing application is filed. Rolling review means that the agency may review portions of the marketing application before the sponsor submits the complete application. In addition, a drug may be eligible for “Breakthrough Therapy” designation if it is intende d to treat a serious or life -threatening disease or condition and preliminary clinical evid ence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. “Breakthrough Therapy” designation p rovides all the features of “Fast Track” designation in addition to intensive guidance on an efficient drug development program, and FDA organizational commitment to expedited development, including involvement of senior managers and experienced review staff in a cross-disciplinary review, where appropriate. Any product submitted to the FDA for approval, including a product with “Fast Track” or “Breakthrough Therapy” designation, m ay also be eligible for additional FDA programs intended to expedite the review and approval process, including Priority Review designation and Accelerated Approval. A product is eligible for Priority Review designation, once an NDA or biologics license application is submitted, if the drug that is the subject of the marketing application has the potential to provide a significant improvement in safety or effectiveness in the treatment, diagnosis or prevention of a serious disease or condition. Under priority review , the FDA’s goal date to take action on the marketing application is six months compared to ten months for a standard review. Products are eligible for Accelerated Approval if they can be shown to have an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, which is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. RISK FACTORS The Company is subject to a number of risks. A non -exhaustive list of certain specific and general risks that Management is aware of and believe to be material to, and could affect, the business, results of operations, prospects and financial condition of the Company (the “Non-Exhaustive List of Risk Factors ”) is attached as Schedule “A” to this Annual Information Form. When reviewing forward - looking statements and other information contained in this Annual Information Form, readers should carefully consider the Non - Exhaustive List of Risk Factors, as well as other uncertainties, potential events and industry and company-specific factors that may have a Material Adverse Effect on the Company. The Non-Exhaustive List of Risk Factors are not a definitive list of all risk factors associated with an investment in PharmAla or in connection with the Business. Additional risks and uncertainties not presently known to Management or that Management does not currently anticipate will be material may impair the Business operations and its operating results, and as a result could materially impact the Business, results of operations, prospects and financial condition of the Company. Further, the Company operates in a regulated and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for Management to predict all risk factors or the impact of such factors on the Business. Except as required by Applicable Securities L aws, the Company does not intend, and does not assume any obligation, to update or revise the Non-Exhaustive List of Risk Factors attached as Schedule “A” to this Annual Information Form or other information contained in this Annual Information Form.
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36 DIVIDENDS AND DISTRIBUTIONS To date, the Company has not declared or paid any cash dividends on any of its issued securities. Other than requirements imp osed under applicable corporate Law, there are no other restrictions on the ability of the Company to pay dividends under the notice of articles and other constating documents of the Company. As at the AIF Date, the Company does not have any intention of paying dividends in the foreseeable future. Any determination to pay any future dividends in any of the Company’s issued securities will remain at the discretion of the respective Board and wil l be made based an assessment of various factors, including, the Company’s earnings, financial requirements and other conditions deemed relevant by the respective Board. The Company has neither declared nor paid any dividends on its Common Shares. The Company currently intends to retain any fut ure earnings to fund the development and growth of its business and does not currently anticipate paying dividends on the Common Shares. Any determination to pay dividends in the future will be at the discretion of the Board and will depend on many factors, incl uding, among others, the Company’s financial condition, current and anticipated cash requirements, contractual restrictions a nd financing agreement covenants, solvency tests imposed by applicable corporate Law and other factors that the Board may deem relevant. DESCRIPTION OF CAPITAL STRUCTURE PharmAla’s authorized share capital consists of an unlimited number of Common Shares without par value. As at the Fiscal Year -End Date, there were 106,604,753 Common Shares issued and outstanding. As at the AIF Date PharmAla’s authorized share capital consists of an unlimited number of Common Shares without par value. As at the AIF Date, there were 110,179,782 Common Shares issued an d outstanding. Common Shares Holders of the Common Shares are entitled to vote at all meetings of the holders of the Common Shares, to receive any dividend declared by the Company and, subject to the rights of holders of any shares ranking in priority to or on a parity with the Common Shares, to participate rateably in any distribution of the Company’s property or assets upon liquidation or wind -up. There are no pre -emptive, redemption or conversion rights attached to the Common Shares. All Common Shares, when issued, are and will be issued as fully paid and non-assessable Common Shares without liability for further calls or assessment. The Common Shares do not carry any pre -emptive rights, conversion or exchange rights, or redemption, retraction, repurchase rights, nor do they contain any sinking fund or purchase fund provisions. There are no provisions requiring a holder of Common Share s to contribute additional capital, and there are no restrictions on the issuance of additional Common Shares by PharmAla. The Board is authorized to issue additional Common Shares on such terms and conditions and for such consideration as the Boar d may deem appropriate without further security holder action. Options As at the AIF Date, PharmAla has an aggregate of 11,800,000 unexercised Options issued and outstanding. The following table describes the material terms of the issued and outstanding Options: Date Issued Number of Underlying Common Shares Exercise Price Expiry Date January 5, 2022 750,000 $0.10 January 5, 2027 January 5, 2022 1,500,000 $0.10 January 5, 2027 July 13, 2022 300,000 $0.10 July 13, 2027 November 6, 2023 2,300,000 $0.175 November 6, 2033 May 29, 2025 1,100,000 $0.105 May 29, 2030 October 3, 2025 1,000,000 $0.12 October 3, 2030 April 20, 2026 4,850,000 $0.10 April 20, 2031 RSUs As at the AIF Date, PharmAla has an aggregate of 2,431,250 RSUs issued and outstanding. The following table describes the mat erial terms of the issued and outstanding RSUs:
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37 Date Issued Number of Underlying Common Shares Deemed Price Expiry Date November 3, 2023 2,300,000 $0.12 November 3, 2033 October 1, 2025 131,250 $0.13 n/a PSUs As at the AIF Date, PharmAla has an aggregate of 500,000 PSUs issued and outstanding. The following table describes the material terms of the issued and outstanding PSUs: Date Issued Number of Underlying Common Shares Deemed Price Expiry Date July 27, 2026 500,000 $0.16 n/a Warrants In addition to the Awards issued under the Equity Incentive Plan, the Company issued Warrants. As at the AIF Date, PharmAla h as an aggregate of 6,311,442 unexercised Warrants issued and outstanding. The following table describes the material terms of the issued and outstanding Warrants: Date Issued Number of Underlying Common Shares Exercise Price Expiry Date April 19, 2024 1,973,331 $0.27 April 19, 2027 December 20, 2024 4,338,111 $0.27 December 20, 2027 MARKET FOR SECURITIES Trading Price and Volume On January 11, 2022, the Common Shares were listed on the CSE under the symbol “MDMA” and on May 18, 2023, the Common Shares were listed in the United States on the OTC Pink Market under the symbol “PMBHF”. On September 6, 2023, the Common Shares were uplisted from the OTC Pink Market to the OTCQB under the symbol “PMBHF”. On January 24, 2024, the OTCQB ticker was changed from “PMBHF” to “MDXXF”. The following tables set forth information relating to the trading of the Common Shares on the CSE and OTCQB for the months indicated: CSE Month High ($) Low ($) Trading Volume September 2024 0.1050 0.0700 2,142,257 October 2024 0.2300 0.0750 13,499,217 November 2024 0.3400 0.1600 6,331,791 December 2024 0.3300 0.1950 6,335,791 January 2025 0.3250 0.1950 6,375,162 February 2025 0.2900 0.1550 3,701,642 March 2025 0.2000 0.1500 1,811,590 April 2025 0.1750 0.1350 1,575,469 May 2025 0.1700 0.0900 5,044,585 June 2025 0.1150 0.0850 5,181,553
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38 July 2025 0.1150 0.0900 3,457,670 August 2025 0.1600 0.1000 4,960,373 September 2025 0.1450 0.1000 2,624,977 October 2025 0.1450 0.1000 6,020,406 November 2025 0.1300 0.0900 2,781,357 December 2025 0.1350 0.0850 3,056,268 January 2026 0.1250 0.0950 4,111,269 February 2026 0.1100 0.0900 900,880 March 2026 0.1250 0.0950 1,816,890 April 2026 0.1950 0.0850 8,031,352 May 2026 0.1950 0.1400 3,163,820 June 2026 0.1750 0.1300 2,001,200 July 2026 0.1750 0.1350 1,713,414 August 2026 0.2900 0.1350 5,268,169 September 2026 0.3250 0.22 4,263,921 October 20261 0.2450 0.2100 428,757 Note: (1) From October 1, 2026 to October 8, 2026 OTCQB Month High (US$) Low (US$) Trading Volume September 2024 0.0863 0.0476 62,466 October 2024 0.1920 0.0636 1,045,106 November 2024 0.2256 0.1017 1,040,384 December 2024 0.2400 0.1455 1,194,491 January 2025 0.2255 0.1462 280,449 February 2025 0.1930 0.1162 215,847 March 2025 0.1550 0.1125 243,328 April 2025 0.1395 0.0998 379,915 May 2025 0.1200 0.0678 523,873 June 2025 0.0810 0.0651 327,670 July 2025 0.0811 0.0660 685,680 August 2025 0.1110 0.0800 169,578 September 2025 0.1045 0.0771 261,614 October 2025 0.1016 0.0620 444,304 November 2025 0.0940 0.0650 476,167 December 2025 0.0900 0.0614 160,161
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39 January 2026 0.0893 0.0739 129,919 February 2026 0.0810 0.0687 78,455 March 2026 0.0828 0.0690 36,299 April 2026 0.1425 0.0640 1,878,027 May 2026 0.1511 0.0942 529,085 June 2026 0.1300 0.0889 520,913 July 2026 0.1312 0.0875 365,986 August 2026 0.2000 0.0940 404,636 September 2026 0.2361 0.1569 589,643 October 20261 0.1700 0.1500 377,750 Notes: (1) From October 1, 2026 to October 8, 2026 Prior Sales During the financial year ended August 31, 2025, and up to the AIF Date, PharmAla issued the following securities, which are convertible into Common Shares but are not listed or quoted on a marketplace: Options Date Issued Number Number of Common Shares Issuable Upon Exercise Exercise Price (per Common Share) October 3, 2025 1,000,000 1,000,000 $0.12 May 29, 2025 1,500,000 1,500,000(1) $0.105 April 20, 2026 4,850,000 4,850,000 $0.10 Notes: (1) As at the AIF Date, 400,000 options have been forfeited. RSUs Date Issued Number Number of Common Shares Issuable Upon Exercise Deemed Price (per Common Share) October 1, 2025 250,000 (1) 250,000 (1) $0.13 Notes: (1) As at the AIF Date, 118,750 RSUs have vested and settled into Common Shares. PSUs Date Issued Number Number of Common Shares Issuable Upon Exercise Deemed Price (per Common Share) January 2, 2025 1,000,000(1) 1,000,000(1) $0.25 February 6, 2025 500,000(2) 500,000(2) $0.25 July 27, 2026 1,000,000 1,000,000(3) $0.16 Notes: (1) 150,000 of these PSUs vested and were settled through the issuance of 150,000 Common Shares on April 23, 2026. The remaining 850,000 PSUs expired unvested. (2) These PSUs expired unvested. (3) These PSUs vested 50% on receipt of the cash consideration from the Jupiter license, and such vested PSUs have been settled t hrough the issuance of 500,000 Common Shares, with the remaining 50% vesting on the receipt of the remaining share consideration under the Jupiter License. Warrants
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40 Date Issued Number Number of Common Shares Issuable Upon Exercise Exercise Price (per Common Share) December 20, 2024 4,338,111 4,338,111 $0.27 ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTIONS ON TRANSFER To the knowledge of PharmAla, as at the Fiscal Year -End Date, no securities of PharmAla were subject to escrow or subject to a contractual restriction on transfer. DIRECTORS AND OFFICERS Name, Occupation and Security Holding The following table sets out certain information with respect to the directors and officers of PharmAla. Each director of Pha rmAla is elected to hold office until the next annual meeting of the shareholders of PharmAla or until their successor is duly elected or appointed: Name, province or state and country of residence and position, if any, held in the Company Principal Occupation(s) for the past five years(1) Director or Officer Since Number and Percentage of Common Shares beneficially owned, directly or indirectly, or controlled or directed at present(4) Nicholas Kadysh President, CEO and Director Toronto, Ontario, Canada President, CEO and Director of the Company March 21, 2021 7,652,778(5) 6.95% Shane Morris Former Chief Operating Officer Ottawa, Ontario, Canada CEO of Morris and Associates Consulting; Former Chief Product Officer at Aurora Cannabis Inc. March 21, 2021 493,147(6) 0.45% Farnoud Kazemzadeh Chief Operating Officer Waterloo, Ontario, Canada Co-Founder and Operations Leader at Vital Biosciences, Toronto, ON October 1, 2025 1,553 0.00% Carmelo Marrelli(3) Former CFO and Corporate Secretary Toronto, Ontario, Canada Principal of The Marrelli Group of Companies. March 21, 2021 Nil William Avery CFO Toronto, Ontario, Canada President and CEO of Avery Professional Corporation October 1, 2024 1,000,000(7) 0.91% Jodi Butts Chairperson Ottawa, Ontario, Canada Director of Canada Goose Holdings Inc.; and member of the Board of Governors and Audit Committee of the University of Windsor. March 22, 2021 700,000 0.64% Ali Taghva Former Chief Commercial Officer and Counsel Toronto, Ontario, Canada Consultant at the Company; CEO of Taghva Law Professional Corporation; CEO of 16294120 Canada Inc.; Associate lawyer at Lakin Afolabi Law; CEO of Taghva Consulting; and Grapedrop Co-Founder. March 21, 2025 500,000 0.45% Kevin Roy(2) Director Toronto, Ontario, Canada Self Employed, performing consulting, project engagements and board work. June 24, 2022 150,000 0.14% Perry Tsergas Director Ottawa, Ontario, Canada Co-Founder, President, and CEO of spark*advocacy March 21, 2021 456,000 0.41%
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41 Name, province or state and country of residence and position, if any, held in the Company Principal Occupation(s) for the past five years(1) Director or Officer Since Number and Percentage of Common Shares beneficially owned, directly or indirectly, or controlled or directed at present(4) Fraser Macdonald(2) Director Toronto, Ontario, Canada Corporate Lawyer and Principal at StrategyCorp Inc. March 21, 2021 134,062 0.12% Dr. Abdelmalik Slassi (resigned February 9, 2026) Director Mississauga, Ontario, Canada Founder, President and Chief Scientific Officer of Fluorinov Pharma Inc. March 21, 2021 500,000 0.45% Dr. Harriet de Wit (resigned October 8, 2025) Director Chicago, Illinois, United States Professor in the Department of Psychiatry and Behavioral Neuroscience at the University of Chicago March 21, 2021 250,000 0.23% Lennie Ryer(2) Director Montréal, Quebec, Canada Canadian CPA, financial executive and board director with over 25 years of experience in the life science sector, including CFO and VP Finance roles in pharmaceutical, biotechnology and technology companies. Former Managing Partner of a major public accounting firm. February 9, 2026 36,000 0.03% Notes: (1) Information with respect to the principal occupation, business or employment is not within the knowledge of PharmAla and has been furnished by the respective director and/or officer. (2) Member of the Audit Committee. Mr. Roy chairs the Audit Committee. (3) Effective October 1, 2024, William Avery was appointed the CFO, replacing Mr. Marrelli. (4) Voting securities of the Company beneficially owned, or controlled or directed, directly or indirectly as of the AIF Date. As of the AIF date, there are 110,179,782 Common Shares issued and outstanding. Information regarding voting securities held does not include voting securities issuable upon the exercise of Options (as defined herein), warrants or other convertible securities of the Company. Information in the table above is derived from the Company’s review of insider reports filed with SEDI and from information furnished by the respective individual. (5) Includes 1,075,000 Common Shares directly owned by Mr. Kadysh and 6,577,778 Common Shares held by NKO Consulting Corp., an entity wholly owned by Mr. Kadysh. (6) Includes 305,647 Common Shares directly owned by Mr. Morris and 187,500 Common Shares held by Morris and Associates, an entit y wholly owned by Mr. Morris. (7) Includes 1,000,000 Common Shares directly held by Avery Professional Corporation, an entity wholly owned by Mr. Avery. As at the AIF Date, based on PharmAla’s review of insider reports filed with SEDI and from information furnished by each director and officer of PharmAla, the current directors and officers of PharmAla, as a group, beneficially owned, directly or indirectly, and exercised control or direction over approximately 10,130,393 Common Shares, representing approximately 9.19% of the issued and outstand ing Common Shares as at the AIF Date. A biography of directors and certain officers of PharmAla is contained in the 2026 AGSM Circular, which is incorporated by re ference herein, and available under the Company’s profile on SEDAR+ at www.sedarplus.ca. Cease Trade Orders, Bankruptcies, Penalties or Sanctions Cease Trade Orders No director or executive officer of PharmAla is, as at the AIF Date, or has been within 10 years before the AIF Date, a direc tor, CEO, or CFO of any company (including PharmAla), that: (a) was the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days that was issued while the director or executive officer was acting in the capacity as director, CEO or CFO; or (b) was subject to a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days that was issued after the director or executive officer ceased to be a director, CEO or CFO and which resulted from an event that occurred while that Person was acting in the capacity as director, CEO or CFO.
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42 Bankruptcies No director or executive officer of PharmAla, nor a shareholder holding a sufficient number of securities of PharmAla to affect materially the control of PharmAla: (a) is, as at the AIF Date, or has been within the 10 years before the AIF Date, a director or executive officer of any company (including PharmAla) that, while that Person was acting in that capacity, or within a year of that Person ceasing to act in t hat capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (b) has, within the 10 years before the AIF Date, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder. Penalties or Sanctions No director or executive officer of PharmAla, nor a shareholder of PharmAla holding a sufficient number of securities of Phar mAla to affect materially the control of PharmAla, has been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or h as entered into a settlement agreement with a securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision. Conflicts of Interest PharmAla’s directors and officers may serve as directors or officers, or may be associated with, other reporting companies, o r have significant shareholdings in other public companies. To the extent that such other companies may participate in business or asset acquisitions, dispositions, or ventures in which the Company may participate, the directors and officers of PharmAla may have a conflict of interest in negotiating and concluding terms respecting the transaction. PharmAla’s directors and officers may , from time to time, also be engaged in certain outside business interests that do not materially or adversely interfere with their duties to the Company. In some cases, PharmAla’s directors and officers may have fiduciary obligations associated with such outside business interests, that could interfere with their ability to devote time to the Business and affairs and that could adversely affect the Company’s operati ons. Further, such outside business interests could require significant time and attention o f PharmAla’s directors and officers. In addition, the Company may also become involved in other transactions which conflict with the interests of PharmAla’s directors and officers who, may from time to time deal with persons, firms, institutions or companies with which the Company may be deal ing, or which may be seeking investments similar to those desired by it. The interests of these persons could conflict with those of the Company. In addition, from time to time, these persons may be competing with the Company for available investment oppor tunities. Conflicts of interest, if any, will be subject to the procedures and remedies provided under applicable Laws. In particular, in the event that such a conflict of interest arises at a meeting of PharmAla’s directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In accordance with applicable Laws, the directors of PharmAl a are required to act honestly, in good faith and in the best interests of PharmAla. PROMOTERS Except as disclosed below, no Person has, during the two most recently completed financial years of PharmAla ended August 31, 2025, and 2024 or during the current financial year of PharmAla, been a promoter of PharmAla. Mr. Nicholas Kadysh, President, CEO and a director of the Company, could be considered to be a Promoter of the Company, within the meaning of Applicable Securities Laws, in that he took the initiative in founding and organizing the current business of the Company. As at the AIF Date, Mr. Kadysh continues to be responsible for, among other things, identifying new business opportunities fo r the Company.
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43 As at the AIF Date, Mr. Kadysh beneficially owns, controls, and directs (i) an aggregate of 1,075,000 Common Shares, (ii) 1,5 00,000 Options exercisable at an exercise price of $0.10 expiring on January 5, 2027, (iii) 500,000 Options exercisable at an exerc ise price of $0.105 expiring May 29, 2030, (iv) 1,000,000 Options exercisable at $0.10 expiring on April 20, 2031 and (v) 500,000 unvested PSUs granted on July 27, 2026. In addition, Mr. Kadysh through NKO Consulting Corp., beneficially owns, controls, and directs (i) an aggregate of 6,577,778 Common Shares and (ii) 138,889 Warrants exercisable at an exercise price of $0.27 expiring on April 19, 2027. Effective September 1, 2023, Mr. Kadysh and the Company entered into an executive employment agreement, as amended and restated on July 10, 2024, (the “CEO Agreement”) pursuant to which the parties agreed to the terms and conditions of Mr. Kadysh’s continued employment as the CEO of the Company. Prior to this, Mr. Kadysh was paid $3,000 per month, for CEO services from September 1, 2023, until July 31, 2024. Pursuant to the CEO Agreement, effective July 10, 2024, and commencing August 1, 2024, the Company pays Mr. Kadysh an annual salary of $170,000, less applicable statutory deductions, exclusive of bonuses, benefits, and other compensation (the “Annual Salary”). Further, Mr. Kadysh is granted a total of up to one million Common Shares per year of employment, with such compensation bein g offered in the form of Options, RSUs, PSUs, or any other form of compensation allowable under the Equity Incentive Plan. Mr. Kadysh is also eligible to receive an annual bonus of up to 50% of his Annual Salary, at the discretion of the Board. LEGAL PROCEEDINGS AND REGULATORY ACTIONS Legal Proceedings There are no legal proceedings where the amount involved, exclusive of interest and costs, exceeded ten percent of the current assets of the Company nor are there any material regulatory actions to which the Company is or was a party to, or to which any of its respective property is or was the subject of, during the financial year ended August 31, 2025, and to the knowledge of PharmAla, no such proceedings are contemplated. From time to time, however, the Company may become subject to various claims and legal actions arising in the ordinary course of the Business. Regulatory Actions There were no penalties or sanctions imposed against the Company by a court relating to securities legislation, or by a secur ities regulatory authority, during the financial year ended August 31, 2025, and to the knowledge of PharmAla, no such penalties or sanctions are contemplated. Further, there are no penalties or sanctions imposed by a court or regulatory body against the Company that would likely be considered important to a reasonable investor in making an investment decision. The Company did not enter into any settlement agreement before a court relating to securities legislation, or with a securities regulatory authority, during the financial year ended August 31, 2025. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS Other than as disclosed in this Annual Information Form, PharmAla is not aware of any material interest, direct or indirect, of (i) any Person that beneficially owns, or exercises control or direction over, directly or indirectly, more than ten percent of the voting rights attached to the Common Shares, (ii) any director or officer of the Company, or (iii) any associate or affiliate of any of the foregoing, in any transaction which has been entered into within the three most recently completed financial yea rs, or during the current financial year, that has materially affected or is reasonably expected to materially affect the Company. TRANSFER AGENTS AND REGISTRARS The transfer agent and registrar for the Common Shares is Marrelli Trust Company Limited at its principal offices at 602-1111 Melville Street, Vancouver, British Columbia V6E 3V6. MATERIAL CONTRACTS Except for contracts entered into in the ordinary course of business, there were no contracts entered into by the Company dur ing the financial year ended August 31, 2025, entered into before that financial year but still in effect, or entered into after th at financial year and before the AIF Date, which are material and required to be filed with Canadian securities regulators in accordance with Section 12.2 of National Instrument 51-102 – Continuous Disclosure Obligations, other than the following contracts:
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44 ● Dalton Master Services Agreement (see the Company’s listing statement dated January 6, 2022, which is incorporated by reference in this AIF); ● Rane Master Services Agreement (see the Company’s listing statement dated January 6, 2022, which is incorporated by reference in this AIF); ● Cortexa Licensing Agreement (see “Developments during the Financial Year ended August 31, 2023” and “Cortexa”); ● Cortexa Supply Agreement (see “Developments during the Financial Year ended August 31, 2023” and “Cortexa”); ● Cortexa Distribution Agreement (see “Developments during the Financial Year ended August 31, 2023” and “Cortexa”); ● Cortexa Loan Agreement (see “Developments during the Financial Year ended August 31, 2023” and “Cortexa”); ● SPV Formation, Shareholder and License Agreement dated May 7, 2026 among the Company, Aluvaris and Diteba (see “Developments subsequent to the Financial Year ended August 31, 2025” and “Restora Neurosciences – Cancellation of Proposed APA-01 Licence”); ● Jupiter Licence Agreement dated July 20, 2026 between the Company and Jupiter (see “ALA-002 – United States Out-Licence to Jupiter”). Copies of the above-listed material contracts are available for inspection at the offices of the Company located at 1 Adelaide Street East, Suite 801, Toronto, ON M5C 2V9, at any time during ordinary business hours. Copies of the above -listed material contracts are also available under the Company’s profile on SEDAR+ at www.sedarplus.ca. INTERESTS OF EXPERTS Clearhouse LLP, the former auditors of the Company, who audited the Annual Financial Statements, have advised that they were independent with respect to the Company within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of Ontario. Effective September 14, 2026, Clearhouse LLP resigned as auditor of the Company and Davidson & Company LLP was appointed as successor auditor of the Company. To the knowledge of Management, as of the date hereof, no expert, nor any associate or affiliate of such person has any benef icial interest, direct or indirect, in the property of the Company or of an associate or affiliate of the Company, and, as of the date hereof, each expert, or any associate or affiliate of such person, as a group, beneficially owns, directly or indirectly, less than 1% of the outstanding securities of the Company and no such person is or is expected to be elected, appointed or employe d as a director, officer or employee of the Company or of an associate or affiliate of the Company. AUDIT COMMITTEE Audit Committee Charter PharmAla has adopted the Audit Committee Charter, which sets out, among other things, the composition of the Audit Committee, as well as its responsibilities, duties, principles and procedures. A copy of the Audit Committee Charter is attached as Schedule “A” of the 2026 AGSM Circular. Composition of the Audit Committee The Audit Committee is comprised of the following members: Name Independence (1) Financial Literacy (2) Kevin Roy(3) Independent Financially literate Fraser Macdonald Independent Financially literate Lennie Ryer Independent Financially Literate Notes: (1) A member of an audit committee is independent if the member has no direct or indirect material relationship with the Company, which could, in the view of the Board, reasonably interfere with the exercise of a member’s independent judgment.
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45 (2) An individual is financially literate if he has the ability to read and understand a set of financial statements that present a breadth of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements. (3) Kevin Roy is the Chair of the Audit Committee. National Instrument 52 -110 – Audit Committees (“NI 52-110”) provides that a member of an audit committee is “independent” if the member has no direct or indirect material relationship with the Company, which could, in the view of the Board, reasonably in terfere with the exercise of the member’s independent judgm ent. Each member of the Company’s current Audit Committee is “independent” within the meaning of NI 52-110. NI 52 -110 provides that an individual is “financially literate” if he or she has the ability to read and understand a set of financ ial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the bread th and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements. All of the members of the Audit Committee are “financially literate” as that term is defined. Relevant Education and Experience Each member of the Company’s present Audit Committee has adequate education and experience that is relevant to their performa nce as an Audit Committee member and, in particular, the requisite education and experience that have provided the member with: (a) an understanding of the accounting principles used by the Company to prepare its financial statements and the ability to assess the general application of those principles in connection with estimates, accruals and reserves; (b) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be rai sed by the Company’s financial statements or experience actively supervising individuals engaged in such activities; and (c) an understanding of internal controls and procedures for financial reporting. Audit Committee Member Biographies The following is a summary of the relevant education and experience of the current members of the Audit Committee: ● Kevin Roy – Mr. Roy is an accomplished financial executive with experience in senior roles, providing principled leadership, strategic thinking, and financial discipline to growing organizations. With FirstService Corporation (TSX, NASDAQ: FSV) for more th an 20 years, Mr. Roy served primarily as CFO of the FirstService Company’s Brands division, working with executive management and platform leaders to drive growing businesses and achieve strong financial results. Mr. Roy started his career with FirstServic e Corporation as Director, Corporate Development. Previously he was a member of PricewaterhouseCoopers’ Mergers & Acquisitions advisory team and audit and accounting group. Mr. Roy is currently focused on consulting, project engagements, and board work. Ke vin holds a Commerce degree from the University of Windsor and received his CPA, CA designation in 1997. ● Fraser Macdonald – Mr. Macdonald is a corporate lawyer and public affairs consultant based in Toronto. Mr. Macdonald has provided advice to blue -chip clients across three continents. Specializing in banking and finance law, Mr. Macdonald has worked at top-tier international law firms in Toronto, Australia and London, UK. Mr. Macdonald has a deep understanding of the regulatory landscape for financial institutions and other businesses both within Canada and internationally. Mr. Macdonald is currently a Principal at a leadin g boutique government relations consultancy firm in Toronto. Fraser holds a B.A. (Hons) in History from Queen’s University and a Juris Doctor (with Honours) from Bond University. ● Lennie Ryer – Mr. Ryer, CPA is a seasoned financial executive and board director with extensive experience in corporate finance, governance, and strategic leadership. Throughout his career, Mr. Ryer has held numerous senior roles including Chief Financial Officer and Vice President of Finance for companies in the pharmaceutical, biotechnology, and technology sectors. He has also served as Managing Partner of a major public accounting firm, where he specialized in mergers and acquisitions, taxation, and capital markets . Mr. Ryer’s background includes guiding companies through transitions to public markets and leading significant equity and debt financings. He holds a Bachelor of Commerce in Finance and a Public Accountancy degree from McGill University and is a Chartere d Professional Accountant (CPA). Mr. Ryer was appointed to the Board and Audit Committee effective February 9, 2026.
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46 Audit Committee Oversight Since the commencement of the Company’s financial year ended August 31, 2025, the Audit Committee has not made any recommendations to nominate or compensate an external auditor which were not adopted by the Board. Reliance on Certain Exemptions Other than as disclosed below, at no time since the commencement of the Company’s most recently completed fiscal year has the Company relied on an exemption from the provisions of NI 52-110. The Company has relied upon the exemption provided by section 6.1 of NI 52 -110, which states that the Company, as a venture issuer, is not required to comply with Part 5 (Reporting Obligations). Pre-Approval Policies and Procedures The Audit Committee is authorized by the Board to review the performance of the Company’s external auditors and approve in advance provision of services other than auditing and to consider the independence of the external auditors, including a review of th e range of services provided in the context of all consulting services bought by the Company. The Audit Committee is authorized to appro ve in writing any non-audit services or additional work which the Chairman of the Audit Committee deems is necessary, an d the Chairman of the Audit Committee will notify the other members of the Audit Committee of such non-audit or additional work and the reasons for such non-audit work for the Committee’s consideration, and if thought fit, approval in writing. External Auditor Service Fees The aggregate fees billed by PharmAla’s external auditors during the financial years ended August 31, 2025, and 2024 are as f ollows: Fiscal Year ended August 31, 2025 Fiscal Year ended August 31, 2024 Audit Fees(1) $60,749 $61,900 Audit-related Fees(2) $32,397 $Nil Tax Fees(3) $4,502 $3,150 All Other Fees(4) $Nil $Nil Total $97,648 $65,050 Notes: (1) “Audit fees” include aggregate fees billed by the Company’s external auditor in each of the last two fiscal years for audit fees. (2) “Audit-related fees” include the aggregate fees billed in each of the last two fiscal years for assurance and related services by the Company’s external auditor that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit fees” above. The services provided include employee benefit audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews and audit or attest services not required by legislation or regulation. (3) “Tax fees” include the aggregate fees billed in each of the last two fiscal years for professional services rendered by the Company’s external auditor for tax compliance, tax advice and tax planning. The services provided include tax planning and tax advice include s assistance with tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax authorities. (4) “All other fees” include the aggregate fees billed in each of the last two fiscal years for products and services provided by the Company’s external auditor, other than “Audit fees”, “Audit-related fees” and “Tax fees” above. ADDITIONAL INFORMATION Additional information relating to the Company is available under the Company’s profile on SEDAR+ at www.sedarplus.ca. Additional information concerning the Company, including the remuneration and indebtedness, of the directors and officers of PharmAla, the statement of executive compensation of the Company for the year ended August 31, 2025, the principal holders of PharmAla’s securities, the securities authorized for issuance under PharmAla’s equity compensation plans and the corporate governance practices of the Company as prescribed by National Instrument 58 -101 – Disclosure of Corporate Governance Practices with respect to the corporate governance guidelines adopted in National Policy 58-201 – Corporate Governance Guidelines, is contained in the 2026 AGSM Circular, which is incorporated by reference herein, and is available under the Company’s profile on SEDAR+ at www.sedarplus.ca.
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47 Additional financial information concerning the Company, including the Annual Financial Statements and related management’s discussion and analysis for the financial year ended August 31, 2025, can be found on the Company’s profile on SEDAR+ at www.sedarplus.ca.
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A - 1 SCHEDULE “A” NON-EXHAUSTIVE LIST OF RISK FACTORS Capitalized terms used in this Schedule “A” and defined in the Annual Information Form to which this Schedule “A” is attached have the meanings defined in the Annual Information Form unless otherwise defined herein. An investment in the Common Shares involves a high degree of risk and should be considered highly speculative due to the natu re of the Business and its present stage of development. An investment in the Company’s securities is suitable only for those knowl edgeable and sophisticated investors who are willing to risk loss of their entire investment. Prospective investors should consult wit h their professional advisors to assess an investment in the Company’s securities. In evaluating the Company and its Business, investors should carefully consider, in addition to the other information contained in this Annual Information Form, the following risk factors. These risk factors are not a definitive list of all risk factors associated with an investment in the Comp any or in connection with the Company’s operations. RISKS RELATING TO THE COMPANY’S BUSINESS The Company as a Going Concern. The auditors’ report on the Annual Financial Statements includes a paragraph disclosing a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern. The Annual Financial Statements have been prepared on a going concern basis, which assumes that the Company will realize its assets and discharge its liabilities in the normal course of business. They do not reflect the adjustments to the carrying values of assets and liabilities, the reported revenues and expe nses, and the balance sheet classifications used, that would be necessary if the going concern assumption were not appropriate. Those adjustments could be material. As at the Fiscal Year -End Date, the Company had cash of $40,187, short -term investments of $920,473 and current liabilities of $961,732, and generated revenue of $605,498, a net loss of $2,175,244 and cash used in operations of $1,043,697 during the ye ar then ended. As at May 31, 2026, the Company had cash of $93,599 and short -term investments of $151,465 and current liabilities of $1,140,257 and for the nine months ended May 31, 2026, incurred a net loss and comprehensive loss of $1,247,150 and used cash in operating activities of $673,588. The Company has incurred losses since inception and has not generated positive cash flow fr om operations. The Company’s ability to continue as a going concern depends on its ability to generate positive cash flow from operations and to obtain additional financing on acceptable terms. The Company has no committed source of financing. There can be no assurance that additional financing will be available when required, or at all, or that it will be available on terms acceptable to the Company. Any equity financing may be substantially dilutive to existing shareholders. If the Company is unable to generate sufficient cash flow from operations or to obtain adequate financing, it may be required to curtail or suspend operations, dispose of assets on unfavourable terms, or cease to carry on business, and holders of Common Shares could lose all of their investment. The Company is a development stage company, and if we do not develop commercially successful products, we may be forced to cease operations. We are a development stage company, which may require significant additional investment for research and development, manufacturing, clinical testing, and regulatory submissions prior to commercialization. Prospective investors must evaluate our Business considering the uncertainties and complexities affecting a development stage biotechnology company and there can be no assurance that any such product will eventually be developed. Any product would be unsuccessful if it: ● does not demonstrate acceptable safety and efficacy in preclinical studies and clinical trials or otherwise does not meet applicable regulatory standards for approval; ● does not offer therapeutic or other improvements over existing drugs used to treat the same or similar conditions; ● is not capable of being produced in commercial quantities at an acceptable cost, or at all; or ● is not accepted by patients, the medical community or third-party payors.
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A - 2 A commitment of substantial time and resources is required to conduct research and clinical trials if we are to complete the development of any product. We have not proven our ability to develop and commercialize products. It is not known whether any of th ese products will meet applicable health regulatory standards and obtain required regulatory approvals, or (i) whether such products can be produced in commercial quantities at reasonable costs and be successfully marketed, (ii) whether our products will achieve market acceptance, or (iii) if our investment in any such products will be recovered through sales or royalties. Problems frequently encountered in connection with the development and utilization of new and unproven technologies and the competitive environment in which we operate might limit our ability to develop commercially successful products. Results of early research and development may not be indicative of the results that will be obtained in later stages of resea rch and development. If regulatory authorities do not approve the products or if regulatory compliance is not maintained, we would have limited ability to commercialize our products, and our Business and results of operations would be harmed. We may fail to develop any products, to obtain regulatory approvals, to enter clinical trials, or to commercialize any products. If we are unable to make our product candidates commercially available, we will not generate product revenues, and we may be forced to cease operations. Actual Financial Position and Results of Operations May Differ from Expectations of Management. The Company’s actual financial position and results of operations may differ materially from management’s expectations. The Company’s revenue, net income and cash flow may differ materially from the Company’s projected revenue, net income and cash flow. The process for estimating the Company’s revenue, net income and cash flow requires the use of judgment in determining the appropriate assumptions and estimates. These estimates and assumptions may be revised as additional information becomes available and a s additional analyses are performed. In addition, the assumptions used in planning may not prove to be accurate, and other fact ors may affect the Company’s financial condition or results of operations. We cannot be certain of the future regulatory environment in the jurisdictions in which we conduct or will conduct Business. If there are changes to regulations and new approvals are required, we cannot be certain that we will be able to obtain the requisite regulatory approvals. The failure to obtain such approvals or changes to the regulatory environment may materially adversely affect our Business, financial condition, and results of operations. Biotechnology and pharmaceutical companies operate in a high -risk regulatory environment. The study, manufacture and sale of products are governed by countries’ numerous statutes and regulations. We are required to obtain various regulatory approvals prior to being able to study, commercialize and distribute our product candidates. The regulatory review and approval process required to perform a clinical study in any country includes evaluation of preclinical studies and clinical studies, as well as the eva luation of our manufacturing process. This process is complex, lengthy, expensive, resource intensive and uncertain. Securing regulatory app roval to market our products also requires the submission of extensive preclinical and clinical data, manufacturing information regarding the process and facility, scientific data characterizing our product and other supporting data to the regulatory authorities in order to establish its safety and effectiveness. We, or our collaborators, may fail to continue obtaining the necessary approvals to commence or continue preclinical or clinical testing of our product candidates or to manufacture or market our products in reasonable time frames, if at all. Governmental authorities in any country may enact regulatory reforms or restrictions on the development of new therapies that could adversely affect our ability to develop our products. Many of the products and processes that are being currently developed by us require significant development, testing and the investment of significant funds prior to their commercialization. There can be no assurance that any drugs we attempt to develop will actually be developed to a commercial level. Completing clinical te sting through late-stage trials and obtaining required approvals is expected to take several years and to require the expenditure of substantial resources. T here can be no assurance that clinical trials will be completed successfully within any specified p eriod of time, if at all. Furthermore, clinical trials may be delayed or suspended at any time by us or by the FDA, Health Canada, or foreign regulatory authorities if it is determ ined that the subjects or patients are being exposed to unacceptable risks. We may encounter delays or rejections based on varying regulatory interpretations or changes in regulatory agency policies, during the period in which we develop a product. No assurance can be given that any product candidate will prove to be safe and effective in clinical trials or that we will r eceive the requisite regulatory approval. Moreover, any regulatory approval of a drug which is eventually obtained may be granted w ith specific limitations on the indicated uses for which that drug may be marketed or may be withdrawn if complications occur following in itial marketing or if compliance with regulatory standards is not maintained. We have limited experience in filing and pursuing applications necessary to gain these regulatory approvals. The approval procedures vary among countries and can involve additional product testing and administrative review periods. Th e time required to obtain approval in various countries vary from one another. Approval in one country does not ensure approval by the regulatory authorities of other countries. The failure to obtain such approvals may materially adversely affect our business, financial condition, and results of operations.
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A - 3 Regulatory authorities may not approve our products even if they meet safety and efficacy endpoints in clinical trials. The FDA, Health Canada, and other foreign regulatory agencies can delay, limit, or deny marketing approval for many reasons, including finding a product may not be considered safe and effective; the manufacturing processes or facilities may not meet applic able requirements; or changes in approval policies or regulations. Our product candidates may not be approved even if they achieve their endpoints in clinical trials. Regulatory agencies, including the FDA, or their advisors may disagree with our trial des ign and our interpretations of data from preclinical studies and clinical trials. Regulatory agencies may change requirements for approval even after a clinical trial design has been approved. Regulatory agencies also may approve a product candidate for fewer or more limited indications than requested or may grant approval subject to the performance of post -marketing studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercializa tion of our product candidates. Our products may remain subject to ongoing regulatory review even if they receive marketing approval. If we fail to comply wi th continuing regulations, we could lose these approvals, and the sale of any future products could be suspended. In the event we receive regulatory approval to market a particular product candidate, United States, Canadian or any other fo reign regulatory authority could condition approval on conducting additional costly post-approval studies or could limit the scope of approved uses. In addition, the product may later cause adverse effects that limit or prevent its widespread use, force us to withdraw it from the market or prevent or delay our ability to obtain regulatory approvals in additional countries. In addition , we will continue to be subject to regulatory review and periodic inspections to ensure adherence to applicable regulations. After receiving marketing approv al, the FDA and Health Canada imposes extensive regulatory requirements on the manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, and record keeping related to the product. Failure to comply with the regulatory requirement s could result in: ● civil or criminal penalties or fines; ● injunctions; ● product seizures, detentions or import bans; ● voluntary or mandatory product recalls and publicity requirements; ● suspension or withdrawal of regulatory approvals; and ● refusal to approve pending applications for marketing approval of new drugs or supplements to approved applications. The Company faces risks related to the novelty of the controlled substances industry, and the resulting lack of information regarding comparable companies, unanticipated expenses, difficulties and delays, and the offering of new products and services in an untested market. As a relatively new industry, there are not many established players in the controlled substances industry whose business mod el the Company can emulate. Similarly, there is little information about comparable companies available for potential investors to review in making a decision about whether to invest in the Company. Shareholders and investors should consider, among other factors, the Company’s prospects for success in light of the risks an d uncertainties encountered by similar companies in their early stages. For example, unanticipated expenses and problems or tec hnical difficulties may occur, which may result in material delays in the operation of the Company’s business. The Company may fail to successfully address these risks and uncertainties or successfully implement the Company’s operating strategies. If the Compa ny fails to do so, it could materially harm the Company’s business to the point of having to cease operations and could impair the val ue of the Common Shares to the point where investors may lose their entire investments. The Company has committed and expects to continue committing significant resources and capital to develop and market new products and services. These products and services are relatively untested in the marketplace, and the Company cannot provide assuranc e that it will achieve market acceptance for these products and services. Moreover, these products and services may be subject to signi ficant competition from offerings by new and existing competitors in the business. In addition, new products and services may pose a variety of challenges and require the Company to attract additional qualified employees. The failure to successfully develop and mark et these new products and services could materially harm the Company’s business, prospects, revenue, results of operation and financial condition.
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A - 4 Violations of Laws and Regulations Could Result in Repercussions. In the United States, certain controlled substances, including MDMA and multiple other MDXX compounds, are classified as Schedule I drugs under the CSA and the CSIEA and as such, medical and recreational use currently is illegal under the United States federal laws. In Canada, under the CDSA, MDMA is currently a Schedule I drug and as such, medical and recreational use currently is illegal under the Canadian federal laws. Certain other jurisdictions have similarly regulated certain controlled substances. The Company’s programs involving Schedule I drugs are conducted in strict compliance with the laws and regulations regarding the production, storage and use of Schedule I drugs. As such, all facilities engaged with such substances by or on behalf of the Company do so under current licenses, permits, approvals and exemptions issued by appropriate federal, provincial, state and local governmental agencies. While the Company is conducting research and development of MDMA, the Company does not have any direct or indirect involvement with the illegal selling, production or distribution of any substances in the jurisdictions in which it operates and does not intend to have a ny such involvement. However, a violation of any Canadian or United States federal laws and regulations, such as the CDSA, the CSA or the CSIEA, or of similar legislation in the jurisdictions in which it operates, could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings initiated by either government entities in the jurisdict ions in which the Company operates, or private citizens or criminal charges. Any such violations or the loss of the necessary licenses, permits, approvals or exemptions for Schedule I drugs could have an adverse effect on the Company’s operations. The Company’s regulatory risk is decreased if: (a) It elects to not build its own manufacturing laboratory, and instead works through competent licensed third parties such as Dalton. These parties complete manufacturing operations under their own CDSL and as such can indemnify the Company from any legal risk arising from the physical ownership of these products rather than the beneficial access to them. (b) The Company establishes multiple partnerships with organizations with competency in the manufacture, research, sale, and distribution of controlled substances such as Dalton or the laboratory of Dr. William Fantegrossi. (c) The Company never takes physical possession of any controlled substances. The Company has received legal advice regarding limitations set out in the CSA in the United States and CDSA in Canada and continues to monitor legislative developments. Lack of Supporting Clinical Data. The clinical effectiveness and safety of some of the Company’s developmental products is not yet supported by clinical data a nd the medical community has not yet developed a large body of peer reviewed literature that supports the safety and efficacy of so me of the Company’s products. If future studies call into question the safety or efficacy of the Company’s products, the Business, fina ncial condition, and results of operations could be adversely affected. Research and Development Risk. A principal component of the Business strategy is to expand its product offering. As such, the Company’s organic growth and long-term success is dependent in part on its ability to successfully develop new and current products and it will likely incur sign ificant research and development expenditures to do so. The Company cannot be certain that any investment in research and development will yie ld technically feasible or commercially viable products. Furthermore, its ability to discover and develop products will depend on its ability to: ● retain key scientists as employees or partners; ● identify high quality therapeutic targets and unmet medical needs; ● identify potential drug candidates; ● develop products internally and assist its partners with development; ● successfully complete laboratory testing and clinical trials on humans; ● obtain and maintain necessary intellectual property rights to the Company’s products;
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A - 5 ● obtain and maintain necessary U.S. and other regulatory approvals for its products; ● collaborate with third parties to assist in the development of its products; and ● enter into arrangements with third parties to co-develop, license, and commercialize its products. The Company may not be successful in discovering and developing drug products. Failure to introduce and advance new and curre nt products could materially and adversely affect the Company’s operations and financial condition. Research and development of drugs targeting the central nervous system is particularly difficult, which makes it difficult to predict and understand why such drugs have a positive effect on some patients but not others. Discovery and development of new drugs targeting central nervous system disorders are particularly difficult and time -consuming, as evidenced by the higher failure rate for new drugs for central nervous system disorders compared with most other areas of dr ug discovery. Any setbacks in the Company’s clinical development could have a material adverse effect on its Business and operat ing results. In addition, any later stage clinical trials may present challenges related to conducting adequate and well -controlled clinical trials, including designing an appropriate comparator arm in trials given the potential difficulties related to maintaining t he blinding during the trial or placebo or nocebo effects. Due to the complexity of the human brain and the central nervous system, it can be difficult to predict and understand why a drug may have a positive effect on some patients but not others and why some individuals may react to the drug differently from others. Moreover, if patients being treated in clinical trials have previously been treated with other drugs or therapies, the prior use of such drugs or therapies concurrently or up to two weeks prior to administration may interfere wit h the mechanism of action of, or response to, the Company’s therapies. Further, the size and heterogeneous nature of certain populations that the Company studies may further result in different reactions and impact the effectiveness of the Company’s investigational t herapies. All of these factors may make it difficult to assess the prior use or the overall efficacy of the Company’s therapies. Clinical Development Risks. The Company must demonstrate the safety and efficacy of its novel products through, among other things, extensive clinical te sting. Some of the Company’s drug research and development programs are at an early stage of development. Numerous unforeseen event s during, or as a result of, the testing process could delay or prevent commercialization of any products the Company develops, including the following: ● the results of early clinical studies may be inconclusive, may demonstrate potentially unsafe drug characteristics, or may no t be indicative of results that will be obtained in later human clinical trials; ● the safety and efficacy results attained in the early clinical studies may not be indicative of results that are obtained in later clinical trials; and ● after reviewing early clinical study results, the Company or its partners or collaborators may abandon projects that were previously thought to be promising. Clinical studies are very expensive, can run into unexpected difficulties and the outcomes are uncertain. Clinical studies of the Company’s products may not be completed on schedule or on budget. The Company’s failure to complete any of its clinical studi es on schedule or on budget, or its failure to adequately demonstrate the safety and efficacy of any of the products it develops, c ould delay or prevent regulatory approval of such products, which could adversely affect the Business, financial condition, an d results of operations. Regulatory Approval, Licenses and Permits. The Company may be required to obtain and maintain certain permits, licenses, and approvals in the jurisdictions where its pr oducts or technologies are being researched, developed, or commercialized. There can be no assurance that the Company will be able to obtain or maintain any necessary licenses, permits, or approvals. Any material delay or inability to receive these items is likely to d elay and/or inhibit the Company’s ability to conduct its Business, and would have an adverse effect on its Business, financial condition, and results of operations. In particular, the Company will require approval from the FDA and equivalent organizations in other countries before any of its products can be marketed. There is no assurance that such approvals will be forthcoming. Furthermore, the exact nature of the st udies these regulatory agencies will require is not known and can be changed at any time by the regulatory agencies, increasing the finan cing risk
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A - 6 and potentially increasing the time to market the Company faces, which could adversely affect the Business, financial conditi on or results of operations. Inability to Identify, Discover or License Product Candidates and Reliance on Third Parties. Part of the success of the Business depends on its ability to identify and evaluate new medical indications for pharmaceutica ls and license such pharmaceuticals. The Company’s research programs may fail to yield product candidates and the Company may fail to license identified product candidates for a number of reasons, including but not limited to the following: ● the Company’s research process may be unsuccessful in identifying new uses for the drugs evaluated and suitable product candidates; ● the Company may not be able or willing to assemble sufficient resources to identify or discover additional product candidates; ● the Company may not succeed in partnering with third parties to advance identified product candidates to the experimental research stage; ● the Company’s identified product candidates may not succeed in pre-clinical or clinical testing; ● pharmaceutical companies may develop alternatives that render the Company’s identified product candidates obsolete or less attractive; ● the market for an identified product candidate may change during the Company’s program so that such a product candidate may not be attractive to pharmaceutical companies; ● an identified product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at al l; and ● an identified product candidate may not be accepted as safe and effective by patients, the medical community or third -party payors. If any of these events occurs, the Company may be forced to abandon its efforts to identify, discover or license product cand idates, which would have a material adverse effect on its Business and could potentially cause the Company to cease operations. Res earch programs to identify new product candidates require substantial technical, financial and human resources. The Company may foc us its efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful. If we enter into partnerships or other strategic relationships, we may lose important rights to and control over the development of our products. As a result of the costs and risks associated with commercializing a product candidate, we will seek strategic partnerships i n order to continue to develop and, if approved, market our products. Such strategic partnerships may require us to relinquish cont rol over the timing and manner of clinical trials and commercialization of our product candidates. Strategic partners may experience finan cial difficulties or choose to terminate the arrangement or independently work on a competing product resulting in the delay or discontinuation of development or commercialization of our product candidates. Furthermore, disputes may arise between us and our strategic partners that result in the delay or termination of the research, development, or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management’s attention and consumes resources. Strategic partner s may not properly maintain or defend our intellectual property rights or may use our proprietary information in a manner that could jeopardize or invalidate our proprietary information or expose us to potential litigation. No Assurance of Profits or Revenues. There is no assurance as to whether the Company will be profitable, earn revenues, or pay dividends. The Company has incurred and anticipates that it will continue to incur substantial expenses relating to the development and initial operations of its Bus iness. The payment and amount of any future dividends will depend upon, among other things, the Company’s results of operations, cash fl ow, financial condition, and operating and capital requirements. There is no assurance that future dividends will be paid , and, if dividends are paid, there is no assurance with respect to the amount of any such dividends. Product Liability.
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A - 7 The risk of product liability is inherent in the research, development, marketing and use of pharmaceutical products. Product candidates and products that the Company may license or sell in the future may cause, or may appear to have caused, injury or dang erous drug reactions, and expose the Company to product liability claims. These claims might be made by patients who use the product, healthcare providers, pharmaceutical companies, corporate collaborators or others selling such products. Regardless of the merits or eventual outcome, product liability claims or other claims related to the Company’s product candidates may result in: ● decreased demand for the Company’s services or willingness to partner with the Company due to negative public perception; ● injury to the Company’s reputation; ● initiation of investigations by regulators; ● costs to defend or settle related litigation; ● a diversion of management’s time and resources; ● substantial monetary awards to patients; ● product recalls, withdrawals or labeling, marketing or promotional restrictions; ● loss of revenues from product sales; and ● the inability to license or sell any of the Company’s identified product candidates. The insurance coverage of any insurance obtained by the Company may not be sufficient to reimburse the Company for any expens es or losses it may suffer. Insurance coverage is becoming increasingly expensive, and, in the future, the Company, or any of it s collaborators, may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts or at all to prote ct against losses due to liability. Even if the Company’s agreements with any future collaborators entitle it to indemnification ag ainst product liability losses, such indemnification may not be available or adequate should any claim arise. If a successful product liabi lity claim or series of claims is brought against the Company for uninsured liabilities or in excess of insured liabilities, its assets may not be sufficient to cover such claims and its Business operations could be impaired. Should any of the events described above occur, this could have a material adverse effect on the Business, financial condition and results of operations. Unproven Market for Products and Technologies. The Company believes that the anticipated market for its potential products and technologies will continue to exist and expan d. These assumptions may prove to be incorrect for a variety of reasons, including competition from other products and technologies and the degree of commercial viability of the potential product candidates identified by the Company. Even when product candidates ar e successfully identified, the Company’s ability to generate significant revenue depends on the acceptance of such identif ied product candidates by the Company’s potential partners and pharmaceutical companies. The Company cannot be sure that its products and technologies or any identified product candidates will achieve the expected market acceptance and demand. Any factors preventing or limiting the market acceptance of the Company’s products and technologies or any identified product candidates for licensing could have a material adverse effect on the Business, results of operations, and financial condition. Because the controlled substances industry is in a nascent stage with uncertain boundaries, there is a lack of information ab out comparable companies available for potential investors to review in deciding about whether to invest in the Company and, few, if any, established companies whose business model the Company can follow or upon whose success the Company can build. Accordingly, investors will have to rely on their own estimates in deciding about whether to invest in the Company. There can be no assura nce that the Company’s estimates are accurate or that the market size is sufficiently large for its Business to grow as projected, whi ch may negatively impact its financial results. Unfavourable publicity or consumer perception of controlled substances may have an adverse impact on the Company’s operational results, consumer base and financial results. The Company believes the controlled substances industry is highly dependent upon consumer perception regarding the safety, ef ficacy and quality of controlled substances compounds. The success of the industry in which the Company operates may be significant ly
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A - 8 influenced by the public’s perception of controlled substances inspired medicinal applications. Consumer perception can be significantly influenced by scientific research or findings regarding the consumption of controlled substances inspired products. The re can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research fi ndings or publicity will be favourable to MDMA and the controlled substances markets or any particular product, or con sistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favourable than, or that question, earlier research reports, findings or publicity could ha ve a material adverse effect on the demand for the Company’s services. The Company’s dependence upon consumer perceptions means that adverse scientific research reports , findings, regulatory proceedings, litigation, media attention or other publicity, whet her or not accurate or with merit, could have a material adverse effect on the Company and the demand for the Company’s services. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of MDMA or other contro lled substances compounds in general, or other negative effects or events related to medications and other controlled substances compounds, could have such a material adverse effect . Although the Company believes that various articles, reports and studies support its beliefs regarding the medical benefits, viability, safety, efficacy and dosing of controlled substances inspired medicines, future research and clinical trials may prove s uch statements to be incorrect or could raise concerns. Future research studies and clinical trials may draw opposing conclusions to those stat ed in this Annual Information Form or reach negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing, or other facts related to controlled substances inspired medicinal applications, which could have a material adverse effect on the demand fo r the Company’s products, and therefore on its Business, prospects, revenue, results of operati on and financial condition. Failure to comply with health and data protection laws and regulations could lead to federal, state or provincial government enforcement actions, including civil or criminal penalties, private litigation, and adverse publicity and could negatively af fect the Company’s operating results and Business. The Company and any potential collaborators may be subject to federal, state and provincial data protection laws and regulations in the jurisdictions in which it operates, such as laws and regulations that address privacy and data security. In addition, th e Company may obtain health information from third parties, including research institutions from which the Company obtains clinical trial d ata, which are subject to privacy and security requirements under applicable laws. Depending on the facts and circums tances, the Company could be subject to significant civil, criminal, and administrative penalties if the Company obtains, uses, or discloses individual ly identifiable health information maintained by entities covered by applicable health and data protectio n laws in a manner that is not authorized or permitted by such laws. Compliance with privacy and data protection laws and regulations could require the Company to take on more onerous obligation s in the Company’s contracts, restrict the Company’s ability to collect, use and disclose data, or in some cases, impact the Company’s ability to operate in certain jurisdictions. Failure to comply with these laws and regulations could result in government enforcement actions (which could include civil, criminal and administrative penalties), private litigation, or adverse publicity and could negatively affect the Company’s operating results and Business. Moreover, clinical trial subjects, employees and other individuals about whom the Company or its potential collaborators obtain personal information, as well as the providers who share this information with the Company, which may limit the Company’s ability to collect, use and disclose the information. Claims that the Company has violated individuals’ privacy rights, failed to comply with data protection laws, or breached contractual o bligations, even if the Company is not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm the Business. Requirement for additional funding, which may not be available to the Company on acceptable terms, or at all, and if not available, may require the Company to delay, scale back, or cease our product development programs or operations. We are currently advancing our product candidates through preclinical and clinical development as well as other potential pro duct candidates through discovery. Developing pharmaceutical products, including conducting preclinical studies and clinical trial s, is expensive. In order to obtain such regulatory approval, we will be required to conduct clinical trials for each indication for each of these product candidates. We will continue to require additional funding to complete the development and commerciali zation of our product candidates and to continue to advance the development of our other product candidates and such funding may not be available o n acceptable terms or at all. As the successful development of our product candidates and the achievement of milestones by our strategic partners is uncert ain, we are unable to estimate the actual funds we will require to complete research and development and to commercialize our produ ct candidates. Our future funding requirements will depend on many factors, including but not limited to: ● the number and characteristics of other product candidates that we pursue;
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A - 9 ● the scope, progress, timing, cost and results of research, preclinical development, and clinical trials; ● the costs, timing, requirements and outcome of seeking and obtaining FDA and Health Canada regulatory approvals; ● the costs associated with manufacturing our product candidates and establishing sales, marketing and distribution capabilitie s; ● our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make in connection with the licensing, filing, defense and enforcement of any patents or other intellectual property rights; ● our need and ability to hire additional management, scientific and medical personnel; ● the effect of competing products that may limit market penetration of our product candidates; ● our need to implement additional internal systems and infrastructure, including financial and reporting systems; and ● the economic and other terms, timing of and success of our existing strategic partnerships, and any collaboration, licensing, or other arrangements into which we may enter in the future, including the timing of receipt of any milestone or royalty payments under these agreements. Until the Company can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do , we expect to finance future cash needs primarily through a combination of public and private equity offerings. If sufficient fun ds on acceptable terms are not available when needed, or at all, we could be forced to significantly reduce operating expenses and delay, scale back or eliminate one or more of our development programs or our Business operations. There is no certainty that insiders will make further investments in the Company. We have often raised additional capital to fund repayment of indebtedness and operating activities through private placements of equity and debt securities to insiders of the Company. However, there is no certainty that insiders will continue to make further investments in the Company or that any further investments will be sufficient to fund the Company's existing obligations or ongoing research and development activities. In addition, there are restrictions relating to the amount that insiders may invest in the Company pursuant to stock exchange policies and applicable securities laws, without the Company obtaining the prior approval of shareholders. The re is no certainty that all necessary approvals could be obtained to enable insiders to make further inv estments in the Company or that the Company will be able to obtain such approvals in a timely manner. Raising additional capital may cause dilution to our shareholders, restrict our operations, or require us to relinquish substantial rights. Any additional equity financing may be dilutive to shareholders, and debt financing, if available, may involve restrictive co venants. If additional funds are raised through the issuance of equity securities, the percentage ownership of the shareholders of the Company will be reduced, shareholders may experience additional dilution in net book value per share, or such equity securities may have r ights, preferences or privileges senior to those of the holders of the Common Shares. If adequate funds are not av ailable on acceptable terms, the Company may be unable to develop or enhance its products and services, take advantage of future opportunities or respond to competitive pressures, any of which could have a material adverse effect on its Business, financial condition and operating results, or the Company may be forced to cease operations. Need for Additional Financing. The Company has no history of significant earnings and, due to the nature of its Business, there can be no assurance that the Company will be profitable. There is no guarantee that the Company will be able to achieve its Business objectives. The continued development of the Company will require additional financing. The failure to raise such capital could result in the delay or indefinite p ostponement of current Business objectives or the Company going out of business. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favourable to the Company. Any additional equity financing may be dilutive to shareholders, and debt financing, if available, may involve restrictive co venants. If additional funds are raised through the issuance of equity securities, the percentage ownership of the shareholders of the Company will be reduced, shareholders may experience additional dilution in net book value per share, or such equity securities may have r ights, preferences or privileges senior to those of the holders of the Common Shares. If adequate funds are not av ailable on acceptable terms,
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A - 10 the Company may be unable to develop or enhance its products and services, take advantage of future opportunities or respond to competitive pressures, any of which could have a material adverse effect on its Business, financial condition and operating r esults, or the Company may be forced to cease operations. Conflicts of Interest. The Company may be subject to various potential conflicts of interest because some of its officers and directors may be engag ed in a range of Business activities. In addition, the Company’s executive officers and directors may devote time to their outside Business interests, so long as such activities do not materially or adversely interfere with their duties to the Company. In some case s, the Company’s executive officers and directors may have fiduciary obligations associated with these Business interests that interfere with their ability to devote time to the Business and affairs and that could adversely affect the Company’s operations. These Business interests could require significant time and attention of the Company’s executive officers and directors. In addition, the Company may become involved in other transactions which conflict with the interests of its directors and off icers who may from time to time deal with persons, firms, institutions or companies with which the Company may be dealing, or which may be seeking investments similar to those desired by it. The interests of these persons could conflict with those of the Company. In addition, from time to time, these persons may be competing with the Company for available investment opportunities. Con flicts of interest, if any, will be subject to the procedures and remedies provided under applicable laws. In particular, if such a conflict of inte rest arises at a meeting of the Company’s directors, a director who has such a conflict will abstain from vo ting for or against the approval of such participation or such terms. In accordance with applicable laws, the directors of the Company are required to act honestly, in good faith and in the best interests of the Company. Negative Operating Cash Flow. The Business has incurred losses since its inception. Although the Company expects to become profitable, there is no guarante e that will happen, and the Company may never become profitable. The Company currently has a negative operating cash flow and may continue to have a negative operating cash flow for the foreseeable future. As a result, the Company expects its net losses from operations to improve. The Company’s ability to generate additional revenues and potential to become profitable will depend largely on i ts ability to manufacture and market its products and services. The re can be no assurance that any such events will occur or that the Company will ever become profitable. Even if the Company does achieve profitability, the Company cannot predict the level of such profitability. If the Company sustains losses over an extended period of time, the Company may be unable to continue its Business. We may not receive the full payment of all milestone or royalty payments pursuant to partnerships or strategic relationships. We may enter into license agreements and other forms of agreements with third parties regarding the development and commercialization of our product candidates. These agreements generally require that the third party pays to us certain amoun ts upon the attainment of various milestones and possibly include royalties on the sale of the developed product. There can be no guarantee that we will receive the payments described in those agreements since the development of the products may be cancelled if clinical trials do not yield positive results. Under such circumstances, we would not receive royalties as well. Even if the development of a product yields positive results, all of the risks described herein with respect to the obtaining of regulatory approval and market acceptance of the product are applicable. Finally, if there occurs a disagreement between us and the third party, the payment relating to the attainment of milestones or of royalties may be delayed. The occurrence of any of these circumstances coul d have a material adverse effect on our financial condition and operating results. Reputational Damage in Certain Circumstances. Damage to the Company’s reputation can be the result of the actual or perceived occurrence of any number of events, and could include any negative publicity, whether true or not. The increased usage of social media and other web -based tools used to generat e, publish and discuss user -generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share opinions and views regarding the Company and its activities, whether true or not. Although the Company believes that it operates in a manner that is respectful to all stakeholders and that it takes care in protecting its image and reputation, the Company does not ultimately have direct control over how it is perceived by others. Reputation loss may result in decreased investor confidence, increased challenges in developing and maintaining community relations and an impediment to the Company’s overall ability to advance its projects, thereby having a material adverse impact on financial performance, financial condition, cash flows and growth prospects. If the Company is not able to establish, maintain and enhance the Company’s reputation and brand recognition, the Company’s Business, financial condition and results of operations will be harmed.
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A - 11 The Company believes that establishing, maintaining and enhancing the Company’s reputation and brand recognition is critical to the Company’s relationships with existing and future healthcare professionals, patients and collaborators. The promotion of the Company’s brand may require it to make substantial investments and the Company anticipates that, as its market becomes increasingly competitive, these marketing initiatives may become increasingly difficult and expensive. Brand promotion and marketing acti vities may not be successful or yield increased revenue, and to the extent that these activities yield increased revenue, the increased revenue may not offset the expenses the Company incurs and the Company’s Business, financial condition and results of op erations could be harmed. In addition, any factor that diminishes the Company’s reputation or that of its management, including failing to meet the expect ations of its future network of healthcare professionals, patients and collaborators, could harm its r eputation and brand and make it substantially more difficult in the future for the Company to attract collaborators. If the Company does not successfully establish, mainta in and enhance the Company’s reputation and brand recognition, its Business may not g row and the Company could lose its relationships in the future with potential collaborators, which would harm the Business, financial condition and results of operations. Any failure to maintain an effective system of internal controls may result in material misstatements of the Company’s financial statements or cause the Company to fail to meet its reporting obligations or prevent fraud. The Company is subject to various Canadian reporting and other regulatory requirements. The Company will incur expenses and, to a lesser extent, diversion of its management’s time in its efforts to comply with applicable Canadian securities laws regarding internal controls over financial reporting. Effective internal controls are necessary for the Company to provide reliable financial re ports and prevent fraud. If the Company fails to maintain an effective system of internal controls, the Company might not be able to report its financial results accurately or prevent fraud. In that case, the Company’s shareholders could lose confidence in its financia l reporting, which would harm its Business and could negatively impact the price of the Company’s Common Shares. While the Company believes that the Company has sufficient personnel and review procedures to allow it to maintain an effective system of internal contr ols, the Company cannot provide assurance that the Company will not experience potential material weaknesses in its internal controls. Even if the Company concludes that its internal control over financial reporting provides reasonable assurance regarding the reliabil ity of financial reporting and the preparation of financial statements for external purp oses in accordance with IFRS as issued by the International Accounting Standards Board, because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements. Failure to implement required new or im proved controls, or difficulties encountered in their implementation, could harm the Company’s results of operations or cause it to fail to meet its future reporting obligations. If the Company fails to achieve and maintain the timely adequacy of its inter nal control over financial reporting, the Company may not be able to produce reliable financial reports or help prevent fraud. In addition, any testing by the Company conducted in connec tion with applicable Canadian securities laws, or the subsequent testing by an independent registered public accounting firm when required, may reveal deficiencies in its internal controls over financial reporting that are deemed to be material weaknesses or that may r equire prospective or retrospective changes to its consolidated financial statements or identify other areas for further attention or improvement. The Company’s failure to achieve and maintain effective internal control over financial reporting could prevent the Company f rom complying with its reporting obligati ons on a timely basis, which could result in the loss of investor confidence in the reliability of its consolidated financial statements, harm the Business and negatively impact the trading price of its Common Shares. Difficulties with Forecasts. The Company must rely largely on its own market research to forecast sales as detailed forecasts are not generally obtainable from other sources at this early stage of the controlled substances -derived pharmaceuticals industry. A failure in the demand for its products and services to materialize as a result of competition, technological change or other factors could have a material adverse effec t on the Business, results of operations and financial condition of the Company. Retention and Acquisition of Management and Skilled Personnel. The success of the Company is currently largely dependent on the performance of its directors and officers. The loss of the s ervices of any of these persons could have a materially adverse effect on the Business and prospects. There is no assurance the Com pany can maintain the services of its directors, officers or other qualified personnel required to operate its Business. In addition, an inability to hire, or the increased costs of new personnel, including members of executive management, could have a material adverse effect on the Business and operating results. At present and for the near future, the Company will depend upon a relatively small number of employees to develop, market, sell and support its products. The expansion of marketing and sales of its products will require the Company to find, hire and retain additional capable employees who can understand, explain, market and sell its products. There is intense competition for capable personnel in all of these areas and the Company may not be successful in attracting, training, integrating, motivating, or retaining new personnel, vendors, or subcontractors for these required functions. New employees often require significant training and, in many cases, take significant time before they achieve full productivity. As a result, the Company may incur significant costs to attract and retain employees, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards,
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A - 12 and may lose new employees to its competitors or other companies before it realizes the benefit of its investment in recruiti ng and training them. Key Person Insurance. The Company does not maintain key person insurance on any of its directors or officers, and as result the Company would bear the full loss and expense of hiring and replacing any director or officer in the event the loss of any such persons by their resignation, retirement, incapacity, or death, as well as any loss of Business opportunity or other costs suffered by the Company from such loss of an y director or officer. Our products are not currently and may not in the future be eligible for reimbursement from government or private third-party payors, or may be eligible for reimbursement at lower prices than we currently anticipate, which could materially adversely affect our Business, financial condition, and results of operations. Our ability to successfully market therapeutic products depends in part on the extent to which reimbursement for the cost of such products and related treatments will be available from government health administration authorities, private health insurers and other healthcare organizations. Significant uncertainty exists as to whether newly approved pharmaceutical products will qualify fo r reimbursement from these organizations. Furthermore, challenges to the price of medical products continue to grow in frequency due to increased focus on cost containment and pharmacoeconomic issues. Health authorities will continue to increase their scrutiny and pharmacoeconomic diligence on new products in all disease areas. These rapid changes in the healthcare reimbursem ent marketplace will potentially have a significant impact on the future marketability of new drugs in development and could materially adversely affect our Business, financial condition, and results of operations. In light of these market changes in drug development, pricing of drug therapies has come under significant pressure with gove rnment authorities and private health insurers around the world. The top current leading reimbursed markets; U.S., Japan, Germany, United Kingdom, France, Spain, Italy, and Canada have implemented healthcare reforms that focus specifically on value and reimbursem ent. Reforms such as reference -based pricing, pharmacoeconomics, and numbers needed to treat are a few of the many instrumen ts that healthcare organizations utilize to ensure maximum value for reimbursed therapeutics. Healthcare reform is underway in these top global markets and there is additional uncertainty about the viability of current pricing methodologies for reimburseme nt. There can be no assurance that adequate third -party coverage will be available to establish price levels which would allow us to realize an acceptable return on our investment in product development. If we cannot realize an acceptable return on our inv estment in product development, we may need to delay or cease our product development. The effects of the outbreak of infectious disease could materially negatively impact the Company’s operations Emerging infectious diseases or the threat of outbreaks of viruses or other contagions or epidemic diseases could have a material adverse effect on the Company. The outbreak of the novel strain of coronavirus, specifically identified as “COVID -19”, has res ulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self -imposed quarantine periods and social distancing, have caused material disruption to busines ses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operating subsidiaries in future periods. However, depending on the length and severity of the pandemic, COVID- 19 could impact the Company’s operations, could cause delays relating to approval from the FDA and equivalent organizations in other countries, could postpone research activities, could impair the Company’s ability to raise funds depending on COVID -19’s effect on capital markets, and could affect logistics and the Company’s ability to move mate rials in a timely manner to clinical trial sites or production of GMP materials (which availability of GMP materials may also impact clinical trial timelines). The Company is not currently aware of any changes in laws, regulations or guidelines, including tax and accounting requiremen ts, arising from COVID-19 which would be reasonably anticipated to materially affect the Business. Legal Proceedings. From time to time, the Company may be a party to legal and regulatory proceedings, including matters involving governmental agencies, entities with whom the Company does business and other proceedings arising in the ordinary course of business. The Company will evaluate its exposure to these legal and regulatory proceedings and establish reserves for the estimated liabilities in accor dance with generally accepted accounting principles. Assessing and predicting the outcome of these matters involves substanti al uncertainties.
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A - 13 Unexpected outcomes in these legal proceedings, or changes in management’s evaluations or predictions and accompanying changes in established reserves, could have an adverse impact on the Company’s financial results. Regulatory Compliance Risks. Achievement of the Business objectives is subject to compliance with regulatory requirements enacted by governmental authorities. The Company may incur costs and obligations related to regulatory compliance. Failure to comply with applicable laws, regulati ons and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial autho rities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. The Company may be required to compensate those suffering loss or damage by reason of its operations and may have civil or criminal fines or penalties imposed for violations of applicable laws or regu lations. In addition, changes in regulations or other unanticipated events could require extensive changes to the Company’s operations, increased compliance c osts or give rise to material liabilities, which could have a material adverse effect on the Business, results of operations and financial condition of the Company. In both domestic and foreign markets, the development, formulation, manufacturing, packaging, labeling, handling, distribution, import, export, licensing, sale and storage of pharmaceuticals are affected by a body of laws, governmental regulations, adminis trative determinations, including those by the FDA, court decisions and similar constraints. Such laws, regulations and other constra ints can exist at the federal, provincial or local levels in Canada and at all levels of government in foreign jurisdictions. There can be no assurance that the Company and the Company’s partners are in compliance with all of these laws, regulations and other constraints. The Company and its partners may be required to incur significant costs to comply with such laws and regul ations in the future, and such laws and regulations may have an adverse effect on the Business. The failure of the Company or its partners to comply with current or future regulatory requirements could lead to the imposition of significant penalties or cla ims and may have a material adverse effect on the Business. In addition, the adoption of new laws, regulations or other constraints or changes in the interpretations of such r equirements might result in significant compliance costs or lead the Company and its partners to discontinue product development and could have an adverse effect on the Business. Unstable market conditions may have serious adverse consequences on our Business. The economic downturn and market instability made the business climate more volatile and more costly. Our Business strategy m ay be adversely affected by unpredictable and unstable market conditions. If the current equity and credit markets deteriorate it may make any necessary equity or debt financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favourable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans. There is a risk that one or more of our current or future strategic partners may encounter difficulties during challenging economic times, which would directly affe ct our ability to attain our operating goals on schedule and on budget. Trade Policy Risks in Connection with U.S. Tariffs. In February 2025, the U.S. government announced a 25% tariff on most Canadian exports (excluding energy products, which face a 10% tariff). In response, Canada imposed reciprocal tariffs on $155 billion of U.S. goods. The U.S. also introduced a 25% tar iff on Mexican imports and a 10% tariff on Chinese goods, with potential expansions to other countries under consideration. It remains unclear the extent to which additional duties, tariffs, and trade restrictions may be imposed by the United States. There is also uncertainty about potential retaliatory tariffs by other countries and the possibility of escalating trade wars. Whether changes to the current ly announced tariffs will occur, how long they may be in effect, and the extent to which these tariffs, retaliatory measures, and trade wars will impact the market remain uncertain. Trade restrictions, including tariffs, quotas, embargoes, safeguards, customs and/or other similar measures could increase the cost or reduce the supply of various products available to the Company, reduce the attractiveness of the Company’s products to other countries, or otherwise force the Company to modify its current Business practices, any of which could harm our Business, financial condition and results of operations. While no material impact is currently expected, the imposition of new or increased tariffs, or retaliatory measures by other countries, could increase costs, disrupt supply chains, delay timelines, or otherwise adversely affect the Company’s operations. General Economic Uncertainty Adversely Affecting the Company’s Access to Capital. Generally, worldwide economic conditions remain uncertain. Access to capital markets is critical to our ability to operate. Traditionally, biotechnology companies have funded their research and development expenditures through raising capital in the equity markets. Declines and uncertainties in these markets in the past have severely restricted raising new capital and have affected companies’ ability
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A - 14 to continue to expand or fund existing research and development efforts. We require significant capital for research and deve lopment for our product candidates and clinical trials. The general economic and capital market conditions, both in the U.S. and worldwide, have been volatile and at times have adversely affected our access to capital and increased the cost of capital. For example, the ongoing military conflict between Russia and Ukraine, the possibility of a wider European or global conflict, global sanctions imposed in response thereto and the possibility of a global energy crisis resulting therefrom, has created extreme volatility in the global capit al markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets. Any such volatility and disruptions may adversely affect our Business or the third parties on whom we rely. If global capital mar kets deteriorate, including as a result of political unrest or war, it may make any ne cessary financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. If economic conditions become worse, our future cost of equity or debt capital and access to the capital markets could be adversely affected. If we are unable to access the capital markets on favorable terms, our ability to execute our Business plan as scheduled would be compromised. Moreover, we rely and intend to rely on third par ties, including clinical research organizations, contract manuf acturing organizations and other important vendors and consultants. Global economic conditions may result in a disruption or delay in the performance of our third -party contractors and suppliers. If such third parties are unable to adequately satisfy their contractual commitments to us in a timely manner, our Business could be adversely affected. RISKS RELATING TO THE COMPANY’S INTELLECTUAL PROPERTY Intellectual Property and Licenses. The Company’s success is heavily dependent on the Company’s intangible properties and technologies, and will depend in part o n its ability to protect and maintain its intellectual property rights. No assurance can be given that the Company’s patents will n ot be challenged, invalidated, infringed or circumvented, nor that the patents will provide competitive advantages to the Company. Moreover, the Company could potentially incur substantial legal costs in defending legal actions which allege patent infringement or by instituting patent infringement suits against others. The Company’s commercial success also depends on the Company not infringing patents or proprietary rights of others. There can be no assurance that the Company will be able to maintain such l icenses that it may require to conduct its Business or that such licences have been obtained at a reasonable cost. Furthermore, there can be no assurance th at the Company will be able to remain in compliance with any such licenses. Consequently, there may be a risk that such licenses may be withdrawn with no compensation or penalties to the Company. We may not accurately predict the protection afforded by our patents and proprietary technology and if our predictions are wrong, this may materially adversely affect our Business, financial condition, and results of operations. Our patent positions are highly uncertain, and any future patents we receive for our potential products will be subject to this uncertainty, which may adversely affect our Business, financial condition, and results of operations. There can be no assurance that pending patent applications will be allowed and that we will develop additional proprietary products that are patentable, that issued patents will provide any competitive advantage or will not be challenged by any third parties, or that patents of others will not have an adverse effect on the ability to do business. Furthermore, there can be no assurance that others will not independently develop similar products, duplicate any of the products, or design around the products patented by us. In addition, we may be required to obtain licenses under patents or other proprietary rights of third parties. No assurance can be given that any licenses required under such patents or proprietary r ights will be available on terms acceptable to us. If such licenses a re not obtained, we could encounter delays in introducing one or more of our products to the market, while we attempt to design around such patents, or could find that the development, manufacturing, or sale of products requiring such licenses could be foreclosed. In addition, we could incur substantial costs in defending suits brought against us on such patents or in suits in which we attempt to enforce our own patents against other parties. Such disputes could involve arbitration, litigation or proceeding s declared by the USPTO or International Trade Commission or other foreign patent authorities. Intellectual property litigation can be extremely expensive, and this expense, as well as other consequences should we not prevail, could seriously harm our Business. With respect to any infringement claim asserted by a third party, we can give no assurances that we will be successful in the litigation or that such litigation would not have a material adverse effect on our Business, financial condition, and results of operation. Until such time, if ever, that patent applications are filed and/or approved, our ability to maintain the confidentiality of the described technology may be crucial to our ultimate possible commercial success. While procedures have been adopted to protect the confidentiality of our technology through signed invention and service agreements, no assurance can be given that such arrang ements will be effective, that third parties will not gain access to trade secrets or disclose the technology, or that we can m eaningfully protect our rights to our trade secrets. Even if valid and enforceable patents cover our products and technologies, such patents will provide protection only for a limited amount of time.
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A - 15 Even if patents are issued regarding our product candidates or methods of using them, those patents can be challenged by our competitors who can argue that our patents are invalid and/or unenforceable. Third parties may challenge our rights to, or the scop e or validity of, our patents. Patents also may not protect our products if competitors devise ways of making these or similar product candidates without legally infringing our patents. The FDCA and the FDA regulations and policies provide incentives to manufacturers to challenge patent validity or create modified, non -infringing versions of a drug or device in order to facilitate the approval of generic substitutes. These same types of incentives encourage manufacturers to submit new drug applications that rely on literature and clinical data not prepared for or by the drug sponsor. We also rely on trade secrets to protect our technology, especially where we do not believe that patent protection is appropr iate or obtainable. However, trade secrets are difficult to protect. The employees, consultants, contractors, outside scientific co llaborators and other advisors of our company and our strategic partners may unintentionally or willfully disclose our confidential informati on to competitors. Enforcing a claim that a third party illegally obtained and is using our trade secrets is expens ive and time consuming and the outcome is unpredictable. Failure to protect or maintain trade secret protection could adversely affect our competitive B usiness position. Our research and development collaborators may have rights to publish data and other information in which we have rights. In addition, we sometimes engage individuals or entities to conduct research that may be relevant to our Business. The ability of thes e individuals or entities to publish or otherwise publicly disclose data and other information generated during the course of their researc h is subject to certain contractual limitations. These contractual provisions may be insufficient or inadequate to pr otect our trade secrets and may impair our patent rights. If we do not apply for patent protection prior to such publication or if we cannot otherwise mainta in the confidentiality of our technology and other confidential information, then our ability to re ceive patent protection or protect our proprietary information may be jeopardized. Changes to Patent Law. Important legal issues remain to be resolved as to the extent and scope of available patent protection for pharmaceutical and biotechnology companies in Canada and other important markets outside Canada, such as Europe or the United States. As such, litigation or administrative proceedings may be necessary to determine the validity, scope and ownership of certain of the Company’s and others’ proprietary rights. Any such litigation or proceeding may result in a significant commitment of resources in the futu re and could force the Company to do one or more of the following: cease using any of its future products that incorporate a challenged intellectual property, which would adversely affect its revenue; obtain a license or other rights from the holder of the intellectual property right alleged to have been infringed or otherwise violated, which license may not be available on reasonable terms, if at all; and redesign it s future products to avoid infringing or violating the intellectual property rights of third parties, which may be time-consuming or impossible to do. In addition, changes in patent laws in Canada and other countries may result in allowing others to use its discoveries or develop and commercialize the Company’s products. The Company cannot provi de assurance that the patents it obtains will afford it significant commercial protection. Enforcement of Intellectual Property in Other Jurisdictions. The laws of foreign countries may not protect intellectual property rights to the same extent as the laws of Canada. Many com panies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdicti ons. This risk is exacerbated for the Company because it expects that identified product candidates may be licensed or used in a number of f oreign countries. The legal systems of some countries do not favor the enforcement of patents and other intellectual property protection. This could make it difficult to stop the infringement or other misappropriation of the Company’s intellectual property rights. For example, several foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, some c ountries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents and trade secrets may provide limited or no benefit. Most jurisdictions in which the Company intends to apply for patents have patent protection laws similar to those of Canada, but some of them do not. For example, the Company may do business in the future in countries that may not provide the same or similar protection as that provided in Canada. Additionally, due to uncertainty in patent protection law, the Company has not filed applications in many countries where significant markets exist. Proceedings to enforce patent rights in foreign jurisdictions could result in substantial costs and divert the Company’s effo rts and attention from other aspects of its Business. Accordingly, efforts to protect intellectual property rights in such countrie s may be
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A - 16 inadequate. In addition, changes in the law and legal decisions by courts in Canada, the U.S., and foreign countries may affe ct the Company’s ability to obtain adequate protection for its technology and the enforcement of its intellectual property. We may be subject to claims for intellectual property infringement from former employers of our key employees, contractors, consultants, or strategic advisors, which could result in loss of intellectual property, our key employees or both. Some of our employees, contractors, consultants, or strategic advisors were previously employed at universities or other biot echnology or pharmaceutical companies, including competitors or potential competitors. We could be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. I n many cases, litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money claims, we may lose valuable intellectual propert y rights or personnel. A loss of key research personnel or their work product could hamper or prevent the ability to commercialize certain product candidates, which could severely harm our Business, financial condition, and results of operations. Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information. Disclosure of this information may materially adversely affect our Business, financial condition, an d results of operations. We rely on trade secrets, which we seek to protect, in part, through confidentiality and non -disclosure agreements with our employees, collaborators, suppliers, and other parties. There can be no assurance that these agreements will not be breached, that w e would have adequate remedies for any such breach or that our trade secrets will not otherwise become known to or independently developed by our competitors. We might be involved from time to time in litigation to determine the enforceability, scope, and validity of our proprietary rights. Any such litigation could result in substantial cost and divert management’s attention from our operations. RISKS RELATING TO THE COMPANY’S SECURITIES Market Price of Common Shares and Volatility of Common Share Price. The Common Shares currently trade on the CSE and OTCQB. Securities of companies with a small market capitalization have experienced substantial volatility in the past, often based on factors unrelated to the companies’ financial performance or p rospects. These factors include macroeconomic developments in North America and globally, as well as market perceptions of the attractiv eness of particular industries. Factors unrelated to the Company’s performance that may affect the price of the Common Shares inclu de the following: the extent of analytical coverage available to investors concerning the Business may be limited if investment bank s with research capabilities do not follow the Company; lessening in trading volume and general market interest in the Commo n Shares may affect an investor’s ability to trade significant numbers of Common Shares; the size of the Company’s public float may limit the ability of some institutions to invest in Common Shares; and a substantial decline in the price of the Common Shar es that persists for a significant period of time could cause the Common Shares to be delisted, further reducing market liquidity. As a result of an y of these factors, the market price of the Common Shares at any given point in time may not accurately refl ect the Company’s long-term value. Securities class action litigation often has been brought against companies following periods of volatility in the market pri ce of their securities. The Company may in the future be the target of similar litigation. Secur ities litigation could result in substantial costs and damages and divert management’s attention and resources. In recent years, the securities markets in Canada have experienced a high level of price and volume volatility, and the marke t prices of securities of many companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that continual fluctuations in price of the Common Shares will not occur. It may be anticipated that any quoted market for the Common Shares will be subject to market trends generally, notwithstanding any potential success of the Company in creating revenues, cash flows or earnings. If an active public market for the Common Shares does not develop, the liquidity of a shareholder’s investment may be limi ted and the share price may decline below the initial purchase price. Among other things, volatility in our Common Share price could mean that investors will not be able to sell their Common Shar es at or above prices at which they were acquired. The volatility also could impair our ability in the future to offer Common Share s as a source of additional capital. In addition, in the past, stockholders have often instituted securities class action litigation after periods of volatility in the market price of a company’s securities. If a stockholder files a securities class action suit against us, we would incur substantial legal fees, and our management’s attention and resources would be diverted from operating our Business in order to respond to the litigation.
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A - 17 The market prices for securities of pharmaceutical companies have historically been volatile. A number of factors could influence the volatility in the trading price of the Common Shares, including changes in the econom y or in the financial markets, industry-related developments, the results of product development and commercialization, changes in government regulations, and developments concerning proprietary rights, litigation and cash flow. The Company’s quarterly losses may vary because of the timing of costs for manufacturing, preclinical studies and clinical trials. Also, the reporting of adverse safety events involving the Company’s products and public rumors about such events could cause the Company’s share price to decline or experience periods of volatility. Each of these factors could lead to increased volatility in the market price of the Common Shares. In addition, changes in the market prices of the securities of the Company’s competitors may also lead to fluctuations in the trading price of the Common Shares. Dividends. We have not to date paid any dividends on our Common Shares. We currently intend to invest our future earnings, if any, to fu nd the development and growth of our Business. The payment of dividends will be at the discretion of our Board and will depend on our results of operations, capital requirements, financial condition, future prospects, contractual arrangements, restrictions imposed by applicable law, any limitations on payments of dividends present in any debt agreements we may enter into, and other factors our Board may deem relevant. If we do not pay dividends, your ability to achieve a return on your investment in the Company will depend on any f uture appreciation in the market price of our Common Shares. There is no guarantee that our Common Shares will appreciate in value or even maintain the price at which our holders have purchased their Common Shares. The Company is subject to risks related to additional regulatory burden and controls over financial reporting. The Company is subject to the continuous and timely disclosure requirements of Canadian securities laws and the rules, regulations and policies of the CSE, OTCQB, the OSC and other Canadian securities regulators. These rules, regulations and policies relat e to, among other things, corporate governance, corporate controls, internal audit, disclosure controls and procedures and financial repo rting and accounting systems. The Company has made, and will continue to make, changes in these and other areas, including its internal controls over financial reporting. However, there is no assurance that these and other measures that the Company may take will be suff icient to satisfy our obligations as a public company on a timely basis. In addition, compliance with reporting and other requirements applicable to public companies create additional costs for us and require the time and attention of the Company’s management. The Compan y cannot predict the amount of the additional costs that the Company may incur, the timing of such costs or the impact that management’s attention to these matters will have on its Business. In addition, its inability to maintain effective internal controls over financial reporting could increase the risk of an error in its consolidated financial statements. The Company’s management, including the Company’s CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s in ternal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS. Internal control over fin ancial reporting cannot provide absolute assur ance of achieving financial reporting objectives due to its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is therefore subject to error, imprope r override or improper applicati on of the internal controls. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis, and although it is possible to incorporate safeguards into the financial reporting p rocess to reduce t his risk, they cannot be guaranteed to entirely eliminate it. If the Company fails to maintain effective internal control ove r financial reporting, then there is an increased risk of an error in its consolidated financial statements that could result in us being required to restate previously issued consolidated financial statements at a later date. Securities or Industry Analysts. The trading market for the Common Shares will depend in part on the research and reports that securities or industry analysts publish about the Company or its Business. The Company does not currently have and may never obtain research coverage by securitie s and industry analysts. If no securities or industry analysts commence covering the Company, the trading price for the Common Shar es may be negatively impacted. If the Company obtains securities or industry analyst coverage and if one or more of the analysts who cover the Company downgrade the Common Shares or publish inaccurate or unfavorable research about its Business, the trading price of th e Common Shares may decline. If one or more of these analysts cease coverage of the Company or fail to publish reports on us regularly, demand for the Common Shares could decrease, which could cause the trading price and volume of the Common Shares to decline. Future sales or issuances of equity securities and the conversion of outstanding securities to Common Shares could decrease the value of the Common Shares, dilute investors’ voting power, and reduce the Company’s earnings per share.
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A - 18 Sales of substantial amounts of the Common Shares, or the availability of such securities for sale, could adversely affect th e prevailing market prices for the Common Shares. A decline in the market prices of the Common Shares could impair the Company's ability to raise additional capital through the sale of securities should it desire to do so. Subject to compliance with applicable securities laws and the terms of any arrangements described under "Escrowed Securities and Securities Subject to Contractual Restrictions on Transfer", the officers, directors, principal shareholders and their affili ates may sell some or all of the Common Shares held by such party in the future. No prediction can be made as to the effect, if any, such f uture sales of Common Shares will have on the market price of the Common Shares prevailing from time to time. However, the future sale of a substantial number of Common Shares by the Company’s officers, directors, and any principal shareholders and their affiliates , or the perception that such sales could occur, could adversely affect the prevailing market prices for the C ompany’s securities and dilute investors’ earnings per share. A decline in the market prices of the Company’s securities could impair the Company’s ability to raise additional capital through the sale of securities should the Company desire to do so. Accordingly, if the Company’s principal shareholders sell substantial amounts of securities in the public market, the market price of such securities could fall. Additional Common Shares issuable upon the exercise of stock options or the conversion of Common Shares may also be available for sale in the public market, which may also cause the market price of the Common Shares to fall. The Board has the authority to authorize certain offers and sales of additional securities without the vote of, or prior noti ce to, shareholders. Based on the need for additional capital to fund expected expenditures and growth, it is likely that the Company will issue additional securities to provide such capital. Such additional issuances may involve the issuance of a significant number of Common Shares at prices less than the current market price for the Common Shares. Changes in tax laws may affect the Company and holders of Common Shares. There can be no assurance that the Canadian and U.S. federal income tax treatment of the Company or an investment in the Comp any will not be modified, prospectively or retroactively, by legislative, judicial or administrative action, in a manner adverse to the Company or holders of Common Shares. Income tax consequences in relation to the Common Shares will vary according to circumstances of each investor. Prospective investors should seek independent advice from their own tax and legal advisers prior to in vesting in Common Shares of the Company. A return on the Company’s securities is not guaranteed. There is no guarantee that the Company’s securities will earn any positive return in the short term or long term. Holding the Company’s securities is speculative and involves a high degree of risk and should be undertaken only by holders whose financial re sources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment. Holding the Company’s securities is appropriate only for holders who have the capacity to absorb a loss of some or all of their inv estment. Future issuances of securities may result in dilution. The Company may issue additional Common Shares or securities convertible into or exercisable for Common Shares to raise capit al, satisfy existing obligations, fund its operations, pursue strategic transactions or for other corporate purposes. The exercis e, conversion, settlement or vesting of the Company’s outstanding Options, Warrants, RSUs and PSUs may also result in the issuance of additi onal Common Shares. Any such issuances may dilute the ownership interests and voting power of existing shareholders an d may adversely affect the market price of the Common Shares. Although the Consolidation would not, by itself, alter a shareholder’s proporti onate interest in the Company, the Board may subsequently issue additional Common Shares or securities convertible into or exercisable for Common Shares, which issuances may result in dilution. There can be no assurance that future issuances will be completed at p rices or on terms favourable to existing shareholders. Discretion as to the Use of Available Funds. The Company's management will have broad discretion in how it uses the funds available to it. Management may use the available funds in ways that purchasers may not consider desirable. The results and the effectiveness of the application of the funds are uncertain. If the funds are not applied effectively, the results of the Company's operations may suffer. Management currently intends to alloca te the available funds as described under "Use of Available Funds" in future prospectuses or prospectus supplement s, however, management may elect to allocate the funds differently from that described under "Use of Available Funds" if it believes it would be in the Company's best interest to do so. Shareholders may not agree with the manner in which management chooses to allocate and spend the available funds.