2. Summary of Significant Accounting Policies

a)  Basis of Consolidation

The condensed consolidated financial statements include the accounts of the Company and Milestone Pharmaceuticals USA, Inc. All intercompany transactions and balances have been eliminated.

b)  Basis of Presentation and Use of Accounting Estimates and Significant Accounting Policies

These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or “U.S. GAAP,” pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information, and on a basis consistent with those accounting principles followed by the Company and disclosed in Note 2, “Summary of Significant Accounting Policies,” of its most recent annual consolidated financial statements. Certain information, in particular the accompanying notes normally included in the annual financial statements prepared in accordance with U.S. GAAP, has been omitted or condensed. Accordingly, these unaudited interim condensed consolidated financial statements do not include all the information required for full annual financial statements, and therefore, should be read in conjunction with the annual consolidated financial statements and the notes thereto for the year ended December 31, 2025.

In the opinion of the Company's management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its condensed consolidated balance sheet as of March 31, 2026, and its condensed consolidated statements of loss and shareholders’ equity for the three-months ended March 31, 2026 and 2025, and its condensed consolidated statements of cash flows for the three-months ended March 31, 2026 and 2025.

The condensed consolidated balance sheet as of December 31, 2025, was derived from the audited annual consolidated financial statements, but does not contain all the footnote disclosures required by U.S. GAAP. Commencing in the three months ended March 31, 2026, amounts previously presented as “Accounts payable and accrued liabilities” on the Condensed Consolidated Balance Sheets are presented separately as “Accounts payable” and “Accrued liabilities.” Comparative amounts have been reclassified to conform with the current period presentation.

These unaudited interim condensed consolidated financial statements are presented in US dollars, which is the Company’s functional currency.

The preparation of unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and judgments that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the period. The Company bases its estimates and assumptions on current facts, historical experience

and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. Significant estimates and judgments include, but are not limited to,

Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these condensed consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates, and any such differences may be material to the Company’s condensed consolidated financial statements.

c) Significant Risks and Uncertainties

The Company is subject to challenges and risks specific to its business and its ability to execute on its strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry, including, without limitation, risks and uncertainties associated with: commercializing CARDAMYST; procuring inventory given the Company’s reliance on a concentrated supplier base, delays or problems in the supply of its study drug or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing its intellectual property rights; and complying with applicable regulatory requirements.

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Further, the Company may be impacted by general economic, political, and market conditions, including deteriorating market conditions due to investor concerns regarding inflation, armed conflicts, and overall fluctuations in the financial markets in the U.S. and abroad.

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d) Recent Accounting Pronouncements

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In November 2024, the Financial Accounting Standards Board, or “FASB,” issued Accounting Standards Update, or “ASU” 2024-03 “Income Statement: Reporting Comprehensive Income— Expense Disaggregation Disclosures,” which requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement, as well as disclosures about selling expenses. This ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods

after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating this guidance to determine the impact it may have on its financial statement disclosures.

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In November 2024, the FASB issued ASU 2024-04, “Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments,” which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as induced conversions or as debt extinguishments. This ASU is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years. The amendments may be applied on either a prospective or retrospective basis. The Company adopted this standard and determined that it did not have a material impact with respect to the condensed consolidated financial statements.

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In July 2025, the FASB issued ASU 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets,” which provides a practical expedient for estimating expected credit losses on current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. This ASU is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years. The amendments are applied prospectively. The Company adopted this standard and determined that it did not have a material impact with respect to the condensed consolidated financial statements.

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e) Sources of Liquidity and Funding Requirements

The Company has incurred operating losses and experienced negative operating cash flows since its inception and expects to incur additional costs in connection with commercialization. To date the Company has, and intends to continue, financing commercialization and working capital needs from existing cash, proceeds from the commercialization of CARDAMYST, royalty revenue, the exercise of outstanding common stock options and warrants to purchase common stock, and existing and future licensing and commercial partnership agreements. As of March 31, 2026, the Company had cash, cash equivalents and short-term investments of $184.2 million and an accumulated deficit of $456.7 million. The Company believes that its cash, cash equivalents and short-term investments as of March 31, 2026, will be sufficient to allow the Company to fund its planned operations for at least the next 12 months from the date of these unaudited interim condensed consolidated financial statements.

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The Company has historically financed its operations primarily through the sale of equity securities, convertible notes, short-term investments, and from cash received pursuant to its license agreement. Although the Company is now generating product revenues, management expects operating losses and negative cash flows from operations to continue for the foreseeable future. There can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company, if at all. Failure to generate sufficient cash flows from operations, raise additional capital and reduce discretionary spending should additional capital not become available could have a material adverse effect on the Company’s ability to achieve its business objectives.

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f) Revenue Recognition

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Product Revenue, net

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The Company recognizes revenue in accordance with FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Revenue is recognized at a point in time when the customer obtains control of promised goods or services in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s).

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The Company’s product revenues for the three months ended March 31, 2026 relate to sales of CARDAMYST. The Company recognizes revenue on product sales when control of the promised goods is transferred to its customers in an amount that reflects the consideration expected to be received in exchange for transferring those goods. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. When determining whether the customer has obtained control of the goods, the Company considers any future performance obligations.

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Revenue is recorded net of variable consideration, which includes prompt pay discounts, distribution fees, returns, chargebacks, rebates, co-payment assistance, and patient assistance programs. The variable consideration is estimated based on contractual terms as well as management assumptions. The amount of variable consideration is calculated by using the expected value method, which is the sum of probability-weighted amounts in a range of possible outcomes, or the most likely amount method, which is the single most likely amount in a range of possible outcomes. Estimates are reviewed quarterly and adjusted as necessary.

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Accruals are established for gross to net deductions and actual amounts incurred are offset against applicable accruals. The Company reflects these accruals as either a reduction in the related account receivable from the customer or as an accrued liability, depending on the means by which the deduction is settled. Sales deductions are based on management’s estimates that involve a substantial degree of judgment.

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Prompt Pay: Customers receive a prompt pay discount for payments made within a contractually agreed number of days before the due date. The discounts are accounted for as a reduction of the transaction price and recorded as a contra-receivable.

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Distribution fees: The Company compensates its customers for distribution of its products and the use of data. The Company has determined that such services received to date are not distinct from its sale of products and may not reasonably represent fair value for these services. Therefore, estimates of these payments are recorded as a reduction of revenue based on contractual terms.

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Returns: The Company records allowances for product returns as a reduction of revenue at the time product sales are recorded. Product returns are estimated based on forecasted sales and historical and industry data. Returns are permitted in accordance with the return of goods policy defined within each customer agreement. A returns reserve is recorded as an accrued liability.

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Chargebacks: The Company estimates obligations resulting from contractual commitments with the government and other entities to sell products to qualified healthcare providers at prices lower than the list prices charged to the customer who directly purchases from the Company. The customer charges the Company for the difference between what it pays to the Company for the product and the selling price to the qualified healthcare providers, with the difference recorded as a contra receivable.

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Co-payment assistance and patient assistance programs: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. Based upon the terms of the program and co-payment assistance utilization reports received, the Company estimates the co-payment assistance amounts, which are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue and establishment of a current liability.

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Rebates: The Company’s rebates include amounts paid to managed care organizations, Medicaid, Medicare, and other rebate programs. Reserves for rebates are recorded in the same period the related product revenue is recognized,

resulting in a reduction of product revenues and a current liability that is included in accrued liabilities on the consolidated balance sheet. The Company’s estimate for rebates is based on statutory or contractual discount rates, expected utilization or an estimated number of patients on treatment, as applicable.

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License Revenue

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The Company recorded no license revenue for either of the three months ended March 31, 2026 and 2025.

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In prior periods, the Company recognized license revenue upon achievement of milestones under its License and Collaboration Agreement, dated May 15, 2021 (the “Ji Xing License Agreement”), with Corxel Pharmaceuticals (formerly known as Ji Xing Pharmaceuticals Limited, “Ji Xing”). On March 23, 2026, Corxel announced that it had entered into an Asset Purchase Agreement with Everest Medicines (“Everest”), pursuant to which Everest acquired the rights to develop, manufacture and commercialize CARDAMYST™ (etripamil) nasal spray in Greater China, including mainland China, Hong Kong, Macau and Taiwan.

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No milestones were achieved under the Ji Xing License Agreement during either of the three months ended March 31, 2026 and 2025. For additional information regarding the license agreement, see Note 3, “Revenue,” to the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

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g) Cost of Product Sales

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Cost of product sales includes the costs of producing inventory related to CARDAMYST, including manufacturing, freight, overhead, and any inventory valuation adjustments, and is recognized in the period in which the related product revenue is earned.

Prior to FDA approval of CARDAMYST on December 12, 2025, all manufacturing costs were expensed as research and development costs. As a result, inventory on hand at the time of approval had a zero-cost basis.

For the three months ended March 31, 2026, the Company recognized a de minimis amount of cost of product sales, consisting primarily of post-approval manufacturing activities, including final packaging costs. Accordingly, cost of product sales for the period may not be indicative of the full cost of units sold, and gross margin may not be representative of future periods. The Company recorded no cost of product sales for the three months ended March 31, 2025.

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h) Royalty Financing Obligation

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The royalty financing obligation is required to be repaid based on royalties from net sales of CARDAMYST in the United States under the Royalty Purchase Agreement with RTW – see Note 11, “Royalty Financing Obligation,” for further details on the Royalty Purchase Agreement. Interest expense is accrued using the effective interest rate method over the estimated period of royalty payments. This requires the Company to estimate the total amount of future royalty payments to be generated from product sales in the United States over the estimated repayment term of the obligation. The Company imputes interest on the carrying value of the royalty financing obligation and records interest expense using an imputed effective interest rate. The Company reassesses the expected royalty payments each reporting period and accounts for any changes through adjustments to the effective interest rate on a prospective basis. The assumptions used in determining the estimated repayment term of the debt require that the Company make estimates which could impact the carrying value of the obligation. A significant increase or decrease in forecasted net sales could materially impact the liability balance, interest expense, and the time period for repayment.

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i) Concentration Risks

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and investment securities classified as held-to-maturity. The Company maintains deposits at major financial institutions and such amounts may exceed those amounts insured by the Federal Deposit Insurance Corporation, or the “FDIC.” The Company has not experienced any losses on its deposits since inception, and the Company believes that minimal credit risk exists with respect to these financial institutions. Additionally, the Company has adopted an investment policy that includes guidelines relative to credit quality, diversification of maturities and liquidity.

Concentration of Supplier Risk

The Company relies on a single source manufacturer for starting materials and active pharmaceutical ingredient, or “API,” packaging components, and packaged pharmaceutical product ready for commercial sale.

j) Inventory

Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out, or “FIFO,” basis. Inventory costs include raw materials, work-in-process, finished goods, and applicable manufacturing overhead. Raw materials include starting materials used to manufacture the API. Work-in-process includes API, intermediate compounding steps, and bulk drug product. Finished goods include packaging components and the packaged pharmaceutical product ready for commercial sale.

Prior to the FDA’s approval of CARDAMYST on December 12, 2025, costs associated with manufacturing pre-approval commercial batches and clinical materials were expensed as research and development expenses in accordance with the Company’s accounting policy and SAB Topic 5A, as the product had not yet received regulatory approval and therefore did not meet the criteria for capitalization. Following FDA approval, the Company began capitalizing inventory related to CARDAMYST manufactured after the approval date. Inventory produced prior to approval and previously expensed as research and development remains recorded at a zero-cost basis and is excluded from the inventory balance.

Because the Company’s inventory is subject to expiration, the Company evaluates its carrying value each reporting period and records allowances for any estimated excess, obsolete, short-dated, or otherwise unmarketable inventory. In accordance with regulatory requirements and current Good Manufacturing Practices, or “cGMP,” the Company’s inventory is also subject to strict quality control and monitoring throughout the manufacturing process. If certain batches or units do not meet quality specifications, the Company would write down the related inventory to its estimated net realizable value and record the expense as a cost of production in the Consolidated Statement of Loss. Inventory valuation adjustments require judgment and consideration of various factors, including forecasted demand, remaining shelf life, and quality assessments, among others.

k) Income Taxes

The provision for income taxes is computed using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amount of deferred income tax assets until when it is more likely than not that these assets will be realized. Tax benefits related to tax positions not deemed to meet the “more likely than not” threshold are not permitted to be recognized in the consolidated financial statements.

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For interim reporting, the Company estimates its annual effective tax rate, adjusted for discrete items, and applies that rate to its year-to-date pre-tax income (loss) to determine its income tax provision.

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