Claritas Pharmaceuticals, Inc. — Management Reports 2021

Apr 30, 2021

CLARITAS PHARMACEUTICALS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As of April 28, 2021

For the year ended December 31, 2020

This management discussion and analysis (“ MD&A ”) of Claritas Pharmaceuticals, Inc. (the “ Company ” or “ Claritas ”) is for the year ended December 31, 2020 and is performed by management using information available as of April 28, 2021. Claritas has prepared this MD&A with reference to National Instrument 51-102 “Continuous Disclosure Obligations” of the Canadian Securities Administrators. This MD&A should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2020 and the related notes thereto (“ Annual Financial Statements ”). The Company’s Annual Financial Statements are prepared in accordance with International Financial Reporting Standards (“ IFRS ”).

All amounts are expressed in United States dollars unless otherwise indicated.

This MD&A contains certain “forward-looking statements” and certain “forward-looking information” as defined under applicable Canadian securities laws that may not be based on historical fact, including, without limitation, statements containing the words “believe”, “may”, “plan”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect” and similar expressions. Forward-looking statements are necessarily based on estimates and assumptions made by us in light of Claritas’ experience and perception of historical trends, current conditions and expected future developments, as well as the factors Claritas believes are appropriate. Forward-looking statements in this MD&A include but are not limited to statements relating to:

• the initiation, timing, cost, progress and success of Claritas’ research and development programs, pre-clinical studies and clinical trials;

• Claritas’ ability to advance product candidates into, and successfully complete, clinical trials;

• Claritas’ ability to recruit sufficient numbers of patients for Claritas’ future clinical trials;

• • Claritas’ ability to achieve profitability;

• Claritas’ ability to obtain sufficient funding for Claritas’ operations, including funding for research and commercial activities;

• Claritas’ ability to establish and maintain relationships with collaborators with acceptable development, regulatory and commercialization expertise and the benefits to be derived from such collaborative efforts;

• whether Claritas’ third party collaborators will maintain their intellectual property rights in the technology Claritas’ licenses;

• the implementation of Claritas’ business model and strategic plans;

• Claritas’ ability to develop and commercialize product candidates;

• Claritas’ anticipated regulatory submissions and commercial activities;

• Claritas’ estimates of the size and characteristics of the potential markets for its product candidates;

• Claritas’ commercialization, marketing and manufacturing capabilities and strategy;

• Claritas’ ability to protect its intellectual property and operate its business without infringing upon the intellectual property rights of others;

39161-2001 27553992.1

• 2 -

• Claritas’ expectations regarding federal, provincial and foreign regulatory requirements;

• • whether the Company will receive, and the timing and costs of obtaining, regulatory approvals in the U.S., Canada, the European Union and other jurisdictions;

• the therapeutic benefits, effectiveness and safety of Claritas’ product candidates;

• the rate and degree of market acceptance and clinical utility of Claritas’ future products, if any;

• the timing of, and Claritas’ ability and its collaborators’ ability, if any, to obtain and maintain regulatory approvals for its product candidates;

• Claritas’ expectations regarding market risk, including interest rate changes and foreign currency fluctuations;

• Claritas’ ability to engage and retain the employees required to grow its business;

• the compensation that is expected to be paid to employees of the Company;

• Claritas’ future financial performance and projected expenditures;

• developments relating to Claritas’ competitors and its industry, including the success of competing therapies that are or may become available; and

• estimates of Claritas’ expenses, future revenue, capital requirements and its needs for additional financing.

• Claritas’ ability to continue as a going concern.

Such statements reflect Claritas’ current views with respect to future events and are subject to risks and uncertainties and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Claritas, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Claritas’ actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forwardlooking statements. In making the forward looking statements included in this MD&A, the Company has made various material assumptions, including, but not limited to: (i) enrollment in, completion of and obtaining positive results from clinical trials; (ii) obtaining regulatory approvals; (iii) general business and economic conditions; (iv) the Company’s ability to develop and commercialize, or otherwise monetize, its product candidates and in-license and develop new products; (v) the assumption that Claritas’ current good relationships with its collaborators, licensors and other third parties will be maintained; (vi) the availability of financing on reasonable terms; (vii) the Company’s ability to attract and retain skilled staff; (viii) the products and technology offered by the Company’s competitors; and (ix) the Company’s ability to protect patents and proprietary rights.

In evaluating forward-looking statements, current and prospective shareholders should specifically consider various factors, including the risks outlined under the heading “Financial Instruments and Risks”. Should one or more of these risks or uncertainties, or a risk that is not currently known to us materializes, or should assumptions underlying those forward-looking statements prove incorrect, actual results may vary materially from those described herein. These forward-looking statements are made as of the date of this MD&A, and Claritas does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance and are inherently uncertain. Accordingly, investors are cautioned not to put undue reliance on forward-looking statements.

39161-2001 27553992.1

• 3 -

OVERVIEW OF THE COMPANY

Claritas is a clinical-stage specialty pharmaceutical company developing a portfolio of pharmaceutical products. Claritas currently has no product candidate that has received regulatory approval.

Lead Program to Develop and Commercialize R-107 for Prevention and Treatment of Vaccine-Resistant COVID-19 Infection, and Certain Other Viral infections

On July 16, 2020, Claritas entered into a License Agreement (the “License Agreement”) with Salzman Group, under which Salzman Group granted to Claritas an exclusive, worldwide license to develop and commercialize Salzman Group’s proprietary drug, R-107, for the prevention and treatment of coronavirus, COVID-19 infection, and certain other viral infections. Claritas’ rationale for entering into this license was based on the following facts: (1) R-107 is a liquid prodrug of nitric oxide; (2) nitric oxide gas has shown clinical evidence of antiviral activity against strains of coronavirus; and (3) nitric oxide gas was being evaluated by both industry and academic groups as a potential treatment for coronavirus and COVID-19 infection. Initial data from some of these studies have been recently announced. These data are exceptionally positive. For example:

• Recently announced in vitro data demonstrate that nitric oxide can inhibit viral reproduction of SARS-CoV-2, the human coronavirus that causes COVID-19.These milestone in-vitro studies were conducted by testing multiple nitric oxide-releasing compounds against wild type SARS-CoV-2 virus. Therapeutic doses (<200 µM) were applied to infected cells and demonstrated a dose-dependent effect on viral replication. The result was a greater than 99.9% reduction in virus observed after 24 hours versus virus observed on untreated cells.

• Recently announced data from a clinical study conducted by Massachusetts General hospital in pregnant patients with severe and critical COVID-19 infection demonstrated viral clearance by 22 days after COVID-19 diagnosis in 5 of 6 patients who received inhaled nitric oxide gas but no other antiviral medication.

R-107 is a liquid prodrug of nitric oxide that can be administered by injection, unlike nitric oxide gas, which requires a special type of delivery device, and complex administration by trained respiratory therapists. When administered by injection, R-107 is slowly hydrolyzed, releasing its active moiety, R-100, which in turn steadily and slowly releases nitric oxide into the lung tissue. Put simply, following injection, R-107 is metabolized, and releases R-100, which in turn releases nitric oxide into the tissues of the lung. R-100 is the pharmaceutically active payload of R-107.

R-107 in Treatment of Coronavirus and COVID-19 Infection

R-107 is a proprietary and novel molecule that acts as a nitric oxide donor. Nitric oxide normally exists in a gaseous state, and is approved as such by the FDA for administration to patients via inhalation therapy requiring a special type of delivery device, and complex administration by

39161-2001 27553992.1

• 4 -

trained respiratory therapists. R-107, in contrast, is a liquid that is readily administered by a single intramuscular injection. In addition to its clear advantages in simplicity of administration, R-107 does not lose its potency after prolonged periods of administration. In contrast, other nitric oxide donors in liquid form, such as nitroglycerin, rapidly induce tolerance and lose biological activity after more than a single dose. Accordingly, R-107 is poised to be the first liquid nitric oxide donor that is easy and inexpensive to administer and provides sustained and biologically effective delivery.

Gaseous nitric oxide is already approved by the FDA as an inhalation therapy for treating newborns with acute pulmonary hypertension and respiratory failure, and has shown clinical evidence of antiviral activity against strains of coronavirus. For example, inhaled nitric oxide has demonstrated an inhibitory effect on the replication of the SARS virus (“SARS-CoV”). The SARS virus is a coronavirus. Inhalable nitric oxide will also be evaluated in a Phase 2 clinical study sponsored by Massachusetts General Hospital in severe acute respiratory syndrome in COVID-19.

Respiratory viruses, such as SARS-CoV and COVID-19, can cause acute respiratory distress syndrome (“ARDS”), in which fluid leaks into the lungs, making breathing difficult or impossible. The prognosis with COVID-19 can be poor if the patient develops respiratory disease. R-107 will be developed for COVID-19 associated lung disease, and, because there are no existing therapies or vaccines to effectively treat or prevent COVID-19, it is anticipated that the FDA will allow an expedited clinical development pathway for R-107 in this indication.

Salzman Group has spoken with the U.S. Biomedical Advanced Research and Development authority (“BARDA”) regarding a new BARDA contract to support the development of R-107 for coronavirus and COVID-19 infection. If awarded, the new contract would support a clinical trial in intubated and mechanically ventilated patients with COVID-19 associated pulmonary failure. The goals of this treatment would be to reduce fluid congestion in the lungs, improve oxygenation, decrease length of mechanical ventilation and ICU care, and reduce mortality.

Planned Phase 1 Clinical Study to Evaluate Safety and Pharmacokinetics of R-107

Given the data demonstrating the antiviral activity of nitric oxide against coronaviruses, as well as the even greater body of data demonstrating the potential activity of nitric oxide in treatment of viral-associated lung disease, Claritas and Salzman Group are working together to advance R-107 into Phase 1 clinical testing. Salzman Group intends to submit Investigational New Drug Application (IND) to the Australian Therapeutic Goods Administration (TGA) and the U.S Food and Drug Authority (FDA) in support of a first-in-human Phase 1 clinical trial. This Phase 1 safety and pharmacokinetic study of intramuscular R-107 using a single dose escalation design in 32 healthy middle-aged volunteers will be conducted at CMAX, a clinical contract research organization located at Royal Adelaide Hospital in Australia. The study is expected it to be completed by year-end 2021.

Product Development Program in Treatment of Acute and Chronic Pain

39161-2001 27553992.1

• 5 -

Claritas is also developing a novel, proprietary cannabidiol (“CBD”) analogue for the treatment of acute and chronic pain. A provisional U.S. patent application for this compound is pending, and Claritas had obtained an exclusive, worldwide license for this compound from Beetlebung Pharma, Ltd. (“ BPL ”).

However, this program has not advanced beyond the preclinical research stage, and in order to conserve cash and eliminate expenses, Claritas has placed this program on temporary hold.

Program Evaluating CBD in Prevention and Treatment of Graft Versus Host Disease

During the first quarter of 2020, the Company determined that it did not have sufficient resources to continue research and development activities in its program evaluating cannabidiol (“CBD”) in the prevention of GVHD. In May 2019, the Company engaged Echelon Wealth Partners (“Echelon”) to assist with the review of potential out-licensing and divestment opportunities for the commercial rights to the its program evaluating CBD in the prevention and treatment of GVHD. In conjunction with Echelon, Claritas engaged in an extensive effort to out-license or sell this program. Claritas reached out to several dozen companies in the pharmaceutical and cannabis industries, and engaged in negotiations with several potential corporate partners, but did not receive an acceptable offer for either a license or sale of the program.

Claritas’ wholly owned subsidiary, Kalytera Therapeutics Israel, Ltd. (“Kalytera Israel”) acquired the GVHD program through the acquisition of Talent Biotechs Ltd. (“Talent”) in 2017”), under the terms of a share purchase agreement (the “SPA”) between Claritas, Kalytera Israel, Talent and the former shareholders of Talent (the “Former Shareholders”). Under the terms of the SPA, Kalytera Israel is obligated to make certain milestone payments (the “Milestone Payments”) to the Former Shareholders.

Kalytera Israel failed to pay certain Milestone Payments when they became due under the SPA, and issued a promissory note (the “Note”) in favor of the Former Shareholders evidencing such debt. Kalytera Israel is obligated to pay approximately $4 million to the Former Shareholders under the terms of the Note.

Kalytera Israel is in default under the terms of the SPA and the Note, and has received a formal notice of default from the representative of the Former Shareholders. The obligations of Kalytera Israel under the Note are guaranteed by Talent, and both Kalytera Israel and Talent are parties to a Security Agreement, under which they have secured their obligations under the Note by pledging certain assets to the Former Shareholders as security for the Note (the “Pledged Assets’). The Pledged Assets are the assets of the Company’s program evaluating CBD in the prevention and treatment of GVHD. The Pledged Assets are both tangible and intangible assets, consisting primarily of tangible assets, such as patient blood samples, and intangible assets, such as contract rights, clinical and preclinical data, know how, and intellectual property rights that are held under a license agreement between MOR Research Applications, Ltd. and Talent. The Pledged Assets also include all shares of the Company’s two subsidiaries, Kalytera Israel and Talent.

The Company and the representative of the Former Shareholders are in discussions regarding a contemplated agreement under which Kalytera Israel will transfer ownership of all Pledged Assets,

39161-2001 27553992.1

• 6 -

other than the shares of Kalytera Israel, to the Former Shareholders in consideration for the release and discharge by the Former Shareholders of all obligations the Company and its subsidiaries may have to such Former Shareholders, including all obligations under the Note and SPA (the “Agreement”). If the Company does not complete an out-license or sale of its GVHD program prior to the Company’s next annual meeting of shareholders on June 17, 2021, the Company and the representative of the Former Shareholders will enter into the Agreement subject to approval by the Company’s shareholders and the TSXV as applicable. The Company has scheduled an annual meeting of shareholders at which it will seek such approval. Such annual meeting of shareholders will occur on June 17, 2021.

Assuming that Claritas and the former shareholders of Talent (the “Former Shareholders”) agree that the Company will return the GVHD program to the Former Shareholders, and such agreement is approved by Claritas’ shareholders and the TSXV, the Company will owe no further amounts to the Former Shareholders.

COVID-19

Public health epidemics or outbreaks could adversely impact our business. In late 2019, a novel strain of COVID-19, also known as coronavirus, was reported in Wuhan, China. While initially the outbreak was largely concentrated in China, it has now spread to several other countries, including in Israel, and infections have been reported globally. The extent to which the coronavirus impacts the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to contain the coronavirus or treat its impact. In particular, the continued spread of the coronavirus globally, could adversely impact the Company’s operations and workforce, including other Company’s research and clinical trials and its ability to raise capital, which in turn could have an adverse impact on Company’s business, financial condition and results of operation.

Corporate Developments during the Fiscal Year Ended December 31, 2020

On January 22, 2020 the Company announced that the United States Patent and Trademark Office (the “USPTO”) has issued a Notice of Allowance for US Patent Application 15/905/050 covering the use of cannabidiol (“CBD”) in the prevention and treatment of graft versus host disease (“GVHD”).

On February 18, 2020 the Company announced that it had entered into a new agreement with the Salzman Group of Israel (the “Agreement”), under which Claritas would pay the Salzman Group USD$300,000 through issuance of 7,983,000 Common Shares of the Company (“Common Shares”) for certain services previously provided by Salzman Group to the Company.

On June 15, 2020 the Company announced proof-of-concept data demonstrating that R-107 reduces tissue damage and increases survival in a lethal rodent model of chlorine inhalational lung injury (“CILI”) that mimics the pulmonary damage of chlorine exposure in humans.

39161-2001 27553992.1

• 7 -

On July 15, 2020 the Company announced that it has received conditional approval from the TSX Venture Exchange (“TSXV”) and partial revocation orders from the British Columbia and Ontario Securities Commissions to commence its offering to raise up to approximately $485,000 in a nonbrokered private placement transaction.

On July 16, 2020 the Company announced that it had entered into a License Agreement with Salzman Group, Inc. (“Salzman Group”), under which Salzman Group has granted to Claritas an exclusive, worldwide license to develop and commercialize Salzman Group’s proprietary drug, R- 107, for the treatment of coronavirus and COVID-19 infection.

On August 7, 2020 the Company announced that it had closed in escrow its non-brokered private placement (the “Private Placement”) of units comprised of 20,628,700 Common shares and 10,314,350 Common share purchase warrants in the capital of the Company.

On August 31, 2020 the Company announced that Kost Forer Gabbay & Kasierer/Ernst & Young Global (“E&Y”) had, at the request of the Company, resigned as auditors of the Company, effective August 20, 2020. The Company further announced that the Board of Directors had appointed BDO/BDO Israel (“BDO”) as auditors of the Company effective August 20, 2020.

Corporate Developments Subsequent to December 31, 2020

On February 26, 2021, the Company announced that, pending TSXV approval, it would change its name to Claritas Pharmaceuticals, Inc.

On March 1, 2021, the Company announced that it will focus its resources primarily on development of its nitric oxide-releasing compound, R-107, for the treatment of vaccine-resistant COVID-19, and other viral infections.

On March 3, 2021 the Company announced that it had entered into a Strategic Collaboration Agreement (the Collaboration Agreement”) with the Salzman Group, Ltd. (“Salzman Group”), and is in the process of entering into similar agreements with other third party service providers.

On March 4, 2021, the Company announced that it has initiated a second development program with R-107, the Company’s proprietary nitric oxide-releasing compound. The Company is currently developing R-107 as a therapy for vaccine-resistant COVID-19, influenza and other viral infections. The additional program that the Company is announcing today will develop R-107 as a nasal spray designed to be used prophylactically to prevent viral infections.

On March 5, 2021, the Company announced the addition of Professor Salvatore Cuzzocrea, Ph.D. as an independent member of the Company’s board of directors.

On March 8, 2021, the Company announced the formation of a Scientific Advisory Board that will work closely with Claritas’ management team to develop nitric oxide-based therapeutics to treat diseases and disorders with significant unmet medical needs.

39161-2001 27553992.1

• 8 -

On March 12, 2021, the Company announced that it completed GLP toxicology studies of R-107 in rodents. Claritas is developing R-107 as a therapy for vaccine-resistant COVID-19, influenza, and other viral diseases.

On March 17, 2021, the Company announced that it had completed toxicology studies of R-107 in canines.

On March 18, 2021, the Company announced that Robert Farrell, J.D., the Company’s President and CEO had been appointed Chairman of the Company’s board of directors (the “Board of Directors”), effective immediately. The Company also announced the resignations of independent board members Mr. Robin (“Rob”) Hutchison and Ronald Erickson, J.D., effective immediately. The resignations of Mr. Hutchison and Mr. Erickson followed the recent appointment of Professor Salvatore Cuzzocrea, Ph.D. to the Company’s Board of Directors.

On March 26, 2021, the Company announced the addition of Perenlei Enkhbaatar, MD, PhD, FAHA as an independent member of the Company’s board of directors.

During March 2021 and April 2021, the Company issued 16,237,438 Common Shares in exchange for March 2019 debentures conversion of the remaining principal and accrued interest.

During March 2021, the Company issued 9,083,705 Common Shares in exchange for exercise of April/May 2019 warrants.

On April 1, 2021, the Company announced that it has completed GLP genotoxicity studies of R- 107.

On April 2, 2021, the Company announced that it had changed its name to Claritas Pharmaceuticals, Inc.

On April 8, 2021, the Company announced that, based on significantly positive results in a controlled large animal model of sepsis, the Company will now expand its R-107 development program to include the treatment of COVID-19 related sepsis, the leading cause of death in COVID-19 patients.

On April 14, 2021, the Company announced that it has entered into a binding Letter of Intent with Salzman Group, Inc. (a Delaware corporation), Salzman Group, Ltd. (an Israeli corporation), and Salzman Group Pty. Ltd. (an Australian corporation), (collectively, the “Salzman Group” ), under which Salzman Group will grant to Claritas an exclusive, worldwide license to develop and commercialize R-107 for the treatment of pulmonary arterial hypertension. The Company expects that definitive agreements will be executed by May 15, 2021. Closing of the transaction is subject to receipt of all regulatory approvals, including approval of the TSX Venture Exchange.

OVERALL PERFORMANCE

Dollar amounts in this section are specified in thousands unless otherwise specified.

39161-2001 27553992.1

• 9 -

Since its inception in July 2014, Claritas has accumulated a deficit of approximately $55 million as at December 31, 2020. The Company did not generate any revenue from product sales during the year ended December 31, 2020. Claritas expects its operating losses to continue in the next fiscal year as it invests in its product development programs.

The Company has funded its operations with proceeds from equity and convertible debt financings and expects to seek additional funding through equity financings and partnership collaborations to finance its product development, and corporate growth. However, if Claritas’ product development activities do not show positive progress, or if capital market conditions in general or with respect to the life sciences sector or development stage companies such as Claritas are unfavorable, its ability to obtain additional funding will be adversely affected.

SELECTED AUDITED FINANCIAL INFORMATION

Dollar amounts in this section are specified in thousands unless otherwise specified.

The following table sets forth selected financial information for the fiscal year ended December 31, 2020 (“ Fiscal 2020 ”) and the comparable fiscal year ended December 31, 2019 (“ Fiscal 2019 ”) and fiscal year ended December 31, 2018 (“ Fiscal 2018 ”). The selected financial information set out below has been derived from the Annual Financial Statements and accompanying notes, in each case prepared in accordance with IFRS. The selected financial information set out below may not be indicative of the Company’s future performance. The following discussion should be read in conjunction with the Annual Financial Statements.

	Fiscal 2020	Fiscal 2019	Fiscal 2018
Net loss (income) for the period	$(4,210)	$21,212	$(6,935)
Basic loss (income) and per share (in U.S. dollars)	$(0.008)	$0.05	$(0.04)
Total assets	$10,445	$25,255	$59,610
Total non-current financial liabilities	$1,810	$22,930	$42,026
Cash dividends declared per
Common Share	-	-	-

Revenues

Claritas did not generate any revenue from product sales in Fiscal 2020. The time required for Claritas to have the ability to generate revenue and to become profitable depends upon the Company’s ability to complete the development, obtain regulatory approval for, and successfully commercialize product candidates that Claritas develops or acquires in the future, and a variety of other factors, including as set out under the heading “ Financial Instruments and Risks – Additional risk factors – Lack of Revenue ”.

39161-2001 27553992.1

• 10 -

Discussion of Operations

Claritas recorded a net income of $4,210 ($0.008 income per Common Share) in Fiscal 2020, and net loss of $21,212 ($0.05 loss per Common Share) in Fiscal 2019. The net income in Fiscal 2020 was primarily due to $12,170 gain from changes in fair value of contingent consideration, income taxes of $ 4,884, research and development income of $2,055 and financial income of $2,873 which was offset by $15,630 loss from impairment of intangible assets and $1,871 general and administrative expenses.

The following table provides an overview of the financial results in Fiscal 2020 as compared to those in Fiscal 2019:

	Fiscal 2020	Fiscal 2019
Research and development expenses (income)	$(2,055)	$5,790
General and administrative expenses	1,871	3,661
Gain from changes in fair value of contingent consideration	(12,170)	(17,344)
Lossfrom impairmentof intangibleassets	15,630	33,769
Total operating expenses	3,276	25,876
Finance expenses	271	704
Finance income	(2,873)	(746)
Income taxes	(4,884)	(4,622)
Net loss(income)	$(4,210)	$21,212

Research and Development Expenses

Claritas incurred total research and development income of $2,055 in Fiscal 2020 as compared to loss of $5,790 in Fiscal 2019. The decrease in research and development expenses of $7,845 was primarily due to putting on hold all research activities for the prevention and treatment of GVHD; research and development activities for treatment of pain, and other research and development projects, due to decrease in share-based compensation expenses and due to research and development tax refunds for the years 2018 and 2019 which were received in 2020.

The following table summarizes the Company’s research and development expenditures in Fiscal 2020 compared to Fiscal 2019:

	Fiscal 2020	Fiscal 2019	Fiscal 2019
Salary and share based payment	$ 45	$	374
Subcontract research costs	149		5,310
Laboratory supplies	-		102
Travel andaccommodation	-		4
Total research and development expenses	194		5,790
Research and development tax refund	(2,249)		-
Total	$(2,055)		$5,790

39161-2001 27553992.1

• 11 -

General Administration Expenses

Generally, general administration expenditures in Fiscal 2020 were $1,871 compared to $3,661 in 2019. The change in general and administration expenses in the amount of $1,790 is mainly due to decrease in professional fees in the amount of $963, decrease in share-based payment expense of $539 and decrease in other expenses of $215 which resulted from putting Company’s GVHD program on hold in the first quarter of 2020.

The following table summarizes the Company’s general administration expenditures in Fiscal 2020 and Fiscal 2019:

		Fiscal 2020	Fiscal 2019	Fiscal 2019
Professional fees	$	1,076	$	2,039
Salaries and benefits		375		414
Share-based payments		255		794
Board member fees		144		178
Otherexpenses		21		236
Total		$1,871	$3,661

Gain from changes in fair value of contingent consideration

Changes in fair value of contingent consideration in the amount of $12,170 if Fiscal 2020 were recognized for the change in contingent liabilities in respect of the Talent acquisition which was mainly putting Company’s development programs during the first quarter of 2020 on hold

Loss from impairment of intangible assets

The Company recorded an expense during the Fiscal 2020 of $15,630 to account for the change in the fair value of In-process research and development and Goodwill.

Finance expenses

Finance expenses were $271 in Fiscal 2020 compared to $704 in Fiscal 2019. The decrease is mainly due to decrease in currency exchange rate and impairment loss on bridge funding which occurred in 2019.

Finance income

Finance income were $2,873 in Fiscal 2020 compared to $746 in Fiscal 2019. The increase is mainly due finance income related to fair value revaluation of derivatives instruments.

39161-2001 27553992.1

• 12 -

QUARTERLY FINANCIAL INFORMATION

The following table summarizes selected unaudited consolidated financial data for each of the last eight fiscal quarters, prepared in accordance with IFRS (expressed in thousands):

	Quarter Ended 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20
	Unaudited Unaudited Unaudited Unaudited (“Q4 2020”) (“Q3 2020”) (“Q2 2020”) (“Q1 **2020”) **
Research and development expenses General and administrative expenses Gain (loss) from changes in fair value of contingent consideration Loss from impairment of intangible assets Finance expense Finance income Income taxes (benefit) Net loss (income) for the period Basic and diluted loss (earning) per common share	(91) (2,235) 74 197 348 822 368 333 57 56 55 (12,338) 220 3,259 12,090 61 26 152 42 51 38 (1,032) 357 (2,236) 56 (609) (4,320) (11) 654 413 8,666 (13,943) 0.001 0.001 0.02 (0.03)

	Quarter Ended 31-Dec-19 30-Sep-19 30-Jun-19 31-Mar-19
	Unaudited Unaudited Unaudited Unaudited (“Q4 2019”) (“Q3 2019”) (“Q2 2019”) (“Q1 2019”)
Research and development expenses General administration expenses Gain (loss) from changes in fair value of contingent consideration Loss from impairment of intangible assets	55 1,037 1,867 2,831 481 1,140 1,272 768 (3,073) 1,157 (18,221) 2,793 10,482 (2,291) 26,161 (583)

39161-2001 27553992.1

• 13 -

Finance expense	391	40	197	76
Finance income	155	(633)	(646)	378
Income taxes (benefit)	(7)	526	(5,272)	131
Net loss for the period	8,484	976	5,358	6,394
Basic and diluted loss per Common Share	0.017	0.002	0.01	0.021

Variations in the Company’s net losses and expenses for the periods above resulted primarily from the following factors:

• In general, research and development expenditures trended upwards as Claritas continued to advance its lead product development program in prevention and treatment of GVHD.

• The general and administrative expenses remained similar in recent quarters. However, expenditures fluctuated more significantly in certain quarters due to the costs associated with legal expenses, the April/May 2019 financing and expenses related to obtaining 2018-2019 research and development tax refunds.

• Changes in fair value of contingent consideration and loss from impairment of intangible assets results from valuation analysis performed each period

• In Q1 of 2020 The Company putt on hold all research activities for the prevention and treatment of GVHD; research and development activities for treatment of pain, and other research and development projects.

LIQUIDITY AND CAPITAL RESOURCES

Dollar amounts (other than per share amounts) in this section are specified in thousands unless otherwise specified.

The Company has not yet generated revenues and has incurred losses from operations since its inception. As of December 31, 2020, the Company has a working capital deficiency of $6,153 and an accumulated deficit of $55,007. Continuation as a going concern is dependent upon obtaining additional capital. The Company will require a substantial amount of additional funds to complete the development of its products, to build a sales and marketing organization, and to fund additional losses, which the Company expects to incur over the next few years. The management of the Company intends to seek additional funding through private placements and public offerings, which will be utilized to fund product development and continue operations. The Company recognizes that, if it is unable to raise additional capital, it may find it necessary to substantially reduce or cease operations.

At December 31, 2020, the Company’s cash and cash equivalents decreased to $5 from $32 at December 31, 2019. Negative working capital at December 31, 2020 increased to $6,153 as compared to $5,609 at December 31, 2019. The increase in working capital is mainly due to increase in short-term contingent payments related to the Talent acquisition in February 2017.

==> picture [471 x 39] intentionally omitted <==

39161-2001 27553992.1

• 14 -

Transaction with the Salzman Group

On May 19, 2020, Claritas announced that it had signed a Letter of Intent dated May 12, 2020 (the “LOI”) to acquire Salzman Group, Inc. (“Salzman Group”), a privately held company located in West Tisbury, MA (the “Acquisition”). Salzman Group is the owner of R-107, a proprietary drug with issued and pending composition of matter and method of use patents in approximately 40 countries, including the U.S., Australia, Brazil, China, Europe, India, Japan, Russia and South Korea.

Claritas has decided not to proceed with the acquisition of Salzman Group. Instead, the Company will proceed to develop R-107 for the treatment of coronavirus and COVID-19 infection under the Company’s exclusive world-wide license for the development and commercialization of R-107.

Highlights of the License Agreement

• R-107 is a liquid prodrug of nitric oxide. Based on the fact that nitric oxide is an approved treatment for acute respiratory failure in newborns, and the clinical evidence of nitric oxide’s antiviral activity against strains of coronavirus, Salzman Group will develop R-107 for treatment of coronavirus and COVID-19 associated lung infection.

• Following completion of a Phase 1 clinical safety and pharmacokinetic study, Claritas intends to apply for funding from the U.S. Department of Health and Human Services for the costs of Phase 2 and Phase 3 clinical studies of R-107 in coronavirus and COVID-19 infection.

• If the application for a new BARDA contract for development of R-107 for treatment of coronavirus and COVID-19 infection is successful, Salzman Group may receive an additional USD $20 million under this BARDA contract.

• Claritas expects the Phase 1 clinical safety and pharmacokinetic study to be completed in the first half of 2021.

• Under the terms of the License Agreement, Claritas will pay a $1.2 million cash license fee to Salzman Group, and also issue to the former shareholders of Salzman Group 130 million Claritas common shares. As of December 31, 2020, Claritas had made partial payments of the $1.2 million cash license fee to the former shareholders of Salzman Group in the total amount of approximately $764,000.

Issuance of Cease Trading Order by British Columbia Securities Commission

On June 22, 2020, the British Columbia Securities Commission (the “BCSC”) issued a Failureto-File Cease Trade Order against the Company (the “FFCTO”) due to the Company’s failure to file by the prescribed filing deadlines its annual financial statements for the year ending December 31, 2019, and the accompanying Management’s Discussion and Analysis and certifications, (the “Filings”). On November 4, 2020 the Company applied to the British Columbia Securities Commission (the “BCSC”) and the Ontario Securities Commission (the “OSC”) for a full revocation of the Failure-to-File Cease Trade Order against the Company (the "FFCTO") issued in June 22, 2020 by the BCSC and the OSC. After the FFCTO has been lifted, the Company will issue the license fee of 130 million Claritas common shares to Salzman Group.

The Company will not be able to continue to operate beyond year-end 2021 unless it is able to raise at least $2.2 million to fund its R&D and G&A expenses for a period of twelve months,

39161-2001 27553992.1

• 15 -

because there is not currently sufficient working capital to continue to further fund the Company’s operations without raising additional capital in the near term. Management also plans to raise additional capital through equity or debt financing in the near term to finance at least six months of working capital, which amount will also be sufficient to pay off the 2017 Debenture.

The Company’s future cash requirements may vary materially from those expected now due to a number of factors, including costs associated with product development and strategic opportunities. As a result, it may be necessary to raise further additional funds sooner than currently expected. These funds may come from sources such as the issuance of shares from treasury, or alternative sources of financing. However, there can be no assurance that the Company will successfully raise such funds.

Sources and Uses of Cash

Sources and Uses of Cash	Fiscal 2020	Fiscal 2019
Cash used in operating activities	$(309)	($6,483)
Cash provided by investing activities	2	(188)
Cashprovided byfinancingactivities	280	6,476
Net decrease in cash and cash equivalents	($27)	($195)

Cash used in operating activities was comprised of net income (loss), add-back of non-cash expenses, and net change in non-cash working capital items.

Cash used in operating activities decreased to $309 in Fiscal 2020 compared to $6,483 in Fiscal 2019. This decrease was primarily due to increase in net income of $25,422, a decrease in gain from changes in fair value of contingent consideration of $5,174 and increase in other payables and accrued expenses of $1,231 which was offset by a decrease in impairment in intangible assets of $18,139, increase in change in fair value of convertible instruments of $2,127, decrease in shares issued for services of $2,095, decrease in account payables of $841, decrease in share-based payment of $709, increase in other non-current assets of $764 and increase in change in deferred tax liability, net of $262.

Cash provided by investing activities increased by $190 from $(188) in Fiscal 2019. This increase was primarily due to bridge funding provided, net which occurred in 2019.

Cash provided by financing activities decreased by $6,196 from $6,476 in Fiscal 2019. This decrease was mainly due to decrease in net proceeds from issuance of shares and warrants of $5,972 and decrease in net proceeds from issuance of Convertible debentures and warrants in March 2019 of $492 which was offset by a decrease in partial payment of promissory note related to Talent Biotechs Ltd. of $200 and a receipt of a long-term loan of $68.

39161-2001 27553992.1

• 16 -

OUTSTANDING SHARE CAPITAL

As of April 28, 2021, there were 583,397,110 Common Shares issued and outstanding, and other securities convertible into Common Shares as summarized in the following table:

	Number Outstanding as
	of April 28, 2021
Common Shares issued and outstanding	583,397,110
Options(1)	30,208,356
2017 Convertible debentures principal amount(2)	C$453,000
August 2018 Investors Warrants(3)	22,462,950
February 2019 Talent Warrants(4)	4,719,176
April/May 2019 Investors Warrants(5)	167,195,000
April/May 2019 Broker Warrants(6)	2,426,250
September 2019 Investors Warrants(6)	10,946,423
September 2019 Broker Warrants(6)	675,788
October 21, 2019 Investors Warrants(6)	1,974,445
October 25, 2019 Investors Warrants(6)	2,811,111
October 25, 2019 Compensation Warrants(6)	224,889
July 2020 Investors Warrants(6)	10,314,350
July 2020 Broker Warrants(6)	1,333,336

Notes:

(1) Out of the 30,208,356 options outstanding, 24,569,139 are vested and exercisable at a weighted average price of C$0.15 per Common Share. The remaining 5,639,217 options are not vested and have a weighted average price of C$0.07 per Common Share.

(2) The convertible debentures issued in the Company’s December 2017 private placement are convertible by the holder into Common Shares at a conversion price of CDN$0.13 per Common Share.

(3) Each warrant issued to investors in the August Offering entitles the holder to acquire one Common Share at a price of C$0.155 per Common Share.

(4) Each warrant issued to the Talent Sellers in February 2019 bears the same terms as the August Warrants and entitles the holder to acquire one Common Share at a price of C$0.155 per Common Share.

(5) Each warrant issued to investors in the April Offering entitles the holder to acquire one Common Share at a price of C$0.065 per Common Share.

(6) Each warrant issued entitles the holder to acquire one Common Share at a price of C$0.05 per Common Share.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no undisclosed off-balance sheet arrangements that have or are reasonably likely to have, a current or future effect on its results of operations, financial condition, revenues or expenses, liquidity, capital expenditures or capital resources that is material to investors.

39161-2001 27553992.1

• 17 -

RELATED PARTY TRANSACTIONS

[a] Transactions with related parties

Related parties include members of the Board and officers of the Company, and enterprises controlled by these individuals. The following table summarizes compensation to key management personnel and transactions with related parties which were incurred in the normal course of business (expressed in thousands):

Board Member Fees(1) Officer Salaries & Benefits(2) Share based payments(3) TOTAL	Fiscal 2020 Fiscal 2019 144 178 458 646 216 925
	818 1,749

Notes:

(1) Board member fees for the year ended December 31, 2020 are in respect of Ron Erickson $96, Jeffrey Paley $9.5, and Rob Hutchison $38.

(2) Officer Salaries & Benefits for the year ended December 31, 2020 are in respect of Robert Farrell $300, Victoria Rudman $75, Sari Prutchi-Sagiv $59 and Dr. Moshe Yeshurun $24.

(3) Share-based compensation for the year ended December 31, 2020 are in respect of the Company's directors, Ron Erickson $41, Rob Hutchison $13 and officers of the Company Robert Farrell $272, Victoria Rudman $7, Company’s former directors and employees - Jeffrey Paley $(78) Dr. Moshe Yeshurun $(11), Sari Prutchi-Sagiv $(28)

Sari Prutchi-Sagiv resigned from it’s role in the Company in July 2020.

PROPOSED TRANSACTIONS

There are at present no transactions outstanding that have been proposed but not approved by either the Company or regulatory authorities.

CHANGES IN OR ADOPTION OF ACCOUNTING POLICIES

None

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of the financial statements to which this MD&A applies requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and also in future periods when the revision affects both current and future periods.

39161-2001 27553992.1

• 18 -

Below is a list of the critical accounting estimates and judgments applied in this MD&A which may have a significant effect on the figures recognized in the financial statements.

Derivatives

Warrants issued that are exercisable in cash or on a cashless basis, that contain non-standard antidilution protection provisions, or that are denominated in a foreign currency resulting in a variable number of shares being issued are considered a liability and therefore measured at fair value.

The Company uses the Black-Scholes option pricing model to estimate fair value at each reporting date. The key assumptions used in the model are the expected future volatility in the price of the Company's shares and the expected life of the warrants.

Fair value measurement of financial instruments and intangible assets

When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow (DCF) model.

The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect the reported fair value of financial instruments.

Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of the business combination. When the contingent consideration meets the definition of a financial liability, it is subsequently remeasured to fair value at each reporting date. The determination of the fair value is based on discounted cash flows. The key assumptions take into consideration the probability of meeting each performance target and the discount factor.

FINANCIAL INSTRUMENTS AND RISKS

Dollar amounts in this section are specified in thousands unless otherwise specified.

The Company’s financial instruments at December 31, 2020 and December 31, 2019 consist of the following:

	December	31,	December
	2020		31, 2019
Financial Liabilities
Derivative liability		40	2,712

39161-2001 27553992.1

• 19 -

Conversion option	*)	55
Earn-Out and contingent liability related to the acquisition of Talent	4,223	16,393
Convertible Debenture	925	736

*) Less than $1.

The Company has designated its cash and cash equivalents as fair value through profit or loss, which is measured at fair value. Amounts receivable are classified as loans and receivables, which are measured at amortized cost. Accounts payable and accrued liabilities are classified as other financial liabilities, which are measured at amortized cost.

Fair value

IFRS 13 establishes a fair value hierarchy for financial instruments measured at fair value that reflects the significance of inputs used in making fair value measurements as follows: Level 1 - quoted prices in active markets for identical assets or liabilities;

Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liabilities, either directly (i.e. as prices) or indirectly (i.e. from derived prices); and Level 3 - inputs for the asset or liability that are not based upon observable market data.

The fair value of cash and cash equivalents is based on Level 1 inputs.

[a] Credit risk

Credit risk is the risk of a financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations. Credit risk arises for the Company from its cash on deposits and amounts receivable. The Company has adopted practices to mitigate against the deterioration of principal, to enhance the Company’s ability to meet its liquidity needs, and to optimize yields within those parameters.

[b] Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they come due. The Company’s exposure to liquidity risk is dependent on its purchasing commitments and obligations and its ability to raise funds to meet commitments and sustain operations. The Company manages liquidity risk by continuously monitoring its actual and forecasted working capital requirements, and actively managing its financing activities. As of December 31, 2020, the - Company had working capital of ($6,153) (December 31, 2019 ($5,609).

[c] Market risk

Liquidity [i] Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in the market interest rates. During the year ended December 31, 2020 and 2019, fluctuations in the market interest rates had no significant impact on its interest income.

39161-2001 27553992.1

• 20 -

[ii] Currency risk

The Company is exposed to the financial risk related to the fluctuation of foreign exchanges rates. The Company has a portion of its operating expenses in Canadian dollars and in Israeli new shekels (NIS). The Company has not entered into foreign exchange derivative contracts. A significant change in the currency exchange rate between the Canadian dollar or the NIS relative to the U.S. dollar could have an effect on the Company’s results of operations, financial position or cash flows.

As at December 31, 2020 and December 31, 2019, the Company had the following assets and liabilities denominated in Canadian dollars (in thousands):

	December	31,	December
	2020		31, 2019
	USD		USD
Cash		-	-
Other payables and accrued expenses		-	-
Convertible debentures	(925)		(736)
Total	(925)		(736)

Based on the above net exposure as at December 31, 2020, assuming that all other variables remain constant, a 5% appreciation or deterioration of the Canadian dollar against the US dollar would result in a change of $46 in the Company’s net loss and comprehensive loss in US dollars.

As at December 31, 2020 and December 31, 2019, the Company had the following assets and liabilities denominated in NIS (in thousands):

	December	31,	December
	2020		31, 2019
	USD		USD
Cash		3	4
Other receivables and prepaid expenses		5	7
Otherpayables and accrued expenses	(483)		(189)
Total	(475)		(178)

Based on the above net exposure as at December 31, 2020, assuming that all other variables remain constant, a 5% appreciation or deterioration of the NIS against the US dollar would result in $24 change in the Company’s net loss and comprehensive loss in US dollars.

[d] Additional risk factors

Should one or more of these risks or uncertainties, including the risks listed below, or a risk that is not currently known to us materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described above.

Volatility of Market Price

Securities markets have a high level of price and volume volatility, and the market price of securities of many companies has experienced substantial volatility in the past. This volatility may affect the ability of holders of Common Shares to sell their securities at an advantageous price.

39161-2001 27553992.1

• 21 -

Market price fluctuations in the Common Shares may be due to the Company’s operating results failing to meet expectations of securities analysts or investors in any period, downward revision in securities analysts’ estimates, adverse changes in general market conditions or economic trends, acquisitions, dispositions or other material public announcements by the Company or its competitors, along with a variety of additional factors. These broad market fluctuations may adversely affect the market price of the Common Shares.

Financial markets historically at times experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the Common Shares may decline even if the Company’s operating results, underlying asset values or prospects have not changed. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increase levels of volatility and market turmoil continue, the Company’s operations could be adversely impacted and the trading price of the Common Shares may be materially adversely affected.

Positive Return in an Investment in the Common Shares of the Company is Not Guaranteed

There is no guarantee that an investment in the Company will earn any positive return in the short term or long term. A purchase of the shares involves a high degree of risk and should be undertaken only by purchasers whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment. An investment in the Common Shares is appropriate only for purchasers who have the capacity to absorb a loss of some or all of their investment.

Dilution

The Company may issue additional securities in the future, which may dilute a shareholder’s holdings in the Company. The Company’s articles permit the issuance of an unlimited number of Common Shares. The Company’s shareholders do not have pre-emptive rights in connection with any future issuances of securities by the Company. The directors of the Company have discretion to determine the price and the terms of further issuances. Moreover, additional Common Shares will be issued by the Company on the exercise of stock options under the Company’s stock option plan and upon the exercise of outstanding warrants.

Negative Cash Flow from Operations

During the year ended December 31, 2020 and December 31, 2019, the Company had positive and negative cash flows from operating activities, respectively. To the extent that the Company has negative cash flow in any future period, proceedings from equity, debt or alternative financing sources may be used to fund such negative cash flow from operating activities.

Development Costs and Timing

39161-2001 27553992.1

• 22 -

Claritas may be unable to initiate or complete development of its product candidates on Claritas’ currently expected timeline, or at all. The timing for the completion of the studies for Claritas’ product candidates will require funding beyond the Company’s existing cash and cash equivalents. In addition, if regulatory authorities require additional time or studies to assess the safety or efficacy of a product candidate, Claritas may not have or be able to obtain adequate funding to complete the necessary steps for approval for its product candidates. Additional delays may result if the FDA or other regulatory authority recommends non-approval or restrictions on approval. Studies required to demonstrate the safety and efficacy of Claritas’ product candidates are time consuming, expensive and together take several years or more to complete. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. Claritas has not obtained regulatory approval for any product candidate and it is possible that none of its existing product candidates or any product candidates it may seek to develop in the future will ever obtain regulatory approval. Delays in regulatory approvals or rejections of applications for regulatory approval in Canada, the United States, Europe, Japan or other markets may result from a number of factors, many of which are outside of Claritas’ control.

The lengthy and unpredictable approval process, as well as the unpredictability of future clinical trial results, may result in Claritas’ failure to obtain regulatory approval to market any of its product candidates, which would significantly harm Claritas’ business, results of operations and prospects.

Change in Laws, Regulations, and Related Issues

The Company's operations are subject to a variety laws, regulations and guidelines including relating to the manufacture, management, transportation, storage, and disposal of controlled substances as well as laws and regulations relating to health and safety, the conduct of operations and the protection of the environment. Approval policies, laws, regulations and guidelines may change during the course of a product candidate’s clinical development and may vary among jurisdictions. Any delays in obtaining, or failure to obtain regulatory approvals, including at the pre-clinical, clinical or marketing stage, would significantly delay the development of markets and products and could have a material adverse effect on the business, results of operations and financial condition of the Company.

Dependence on Key Personnel

The Company strongly depends on the business and technical expertise of its key management and service providers and it is unlikely that this dependence will decrease in the near term. Loss of the Company’s key personnel or service providers could slow the Company’s ability to innovate, although the effect on ongoing operations would be manageable as experienced key operations personnel and other service providers could be put in place. As the Company’s operations expand, additional general management resources will be required.

If the Company expands its operations, the ability of the Company to recruit, train, integrate and manage a large number of new employees is uncertain and failure to do so would have a negative impact on the Company’s business plans.

39161-2001 27553992.1

• 23 -

Intellectual Property

Our success depends on our ability to protect our proprietary rights and operate without infringing the proprietary rights of others; we may incur significant expenses or be prevented from developing and/or commercializing products as a result of an intellectual property infringement claim.

Our success will depend in part on our ability and that of our corporate collaborators to obtain and enforce patents and maintain trade secrets, both in the United States and in other countries.

The patent positions of biotechnology and biopharmaceutical companies, including us, is highly uncertain and involves complex legal and technical questions for which legal principles are not firmly established. The degree of future protection for our proprietary rights, therefore, is highly uncertain. In this regard there can be no assurance that patents will issue from any of the pending patent applications. In addition, there may be issued patents and pending applications owned by others directed to technologies relevant to our or our corporate collaborators’ research, development and commercialization efforts. There can be no assurance that our or our corporate collaborators’ technology can be developed and commercialized without a license to such patents or that such patent applications will not be granted priority over patent applications filed by us or one of our corporate collaborators.

Our commercial success depends significantly on our ability to operate without infringing the patents and proprietary rights of third parties, and there can be no assurance that our and our corporate collaborators’ technologies and products do not or will not infringe the patents or proprietary rights of others.

There can be no assurance that third parties will not independently develop similar or alternative technologies to ours, duplicate any of our technologies or the technologies of our corporate collaborators or our licensors, or design around the patented technologies developed by us, our corporate collaborators or our licensors. The occurrence of any of these events would have a material adverse effect on our business, financial condition and results of operations.

Litigation may also be necessary to enforce patents issued or licensed to us or our corporate collaborators or to determine the scope and validity of a third party’s proprietary rights. We could incur substantial costs if litigation is required to defend ourselves in patent suits brought by third parties, if we participate in patent suits brought against or initiated by our corporate collaborators or if we initiate such suits, and there can be no assurance that funds or resources would be available in the event of any such litigation. An adverse outcome in litigation or an interference to determine priority or other proceeding in a court or patent office could subject us to significant liabilities, require disputed rights to be licensed from other parties or require us or our corporate collaborators to cease using certain technology or products, any of which may have a material adverse effect on our business, financial condition and results of operations.

Lack of Revenue

39161-2001 27553992.1

• 24 -

The ability to generate revenue depends upon the ability to obtain regulatory approval for, and successfully commercialize, product candidates that Claritas develops or acquires in the future.

There is no assurance that Claritas can generate revenues even if regulatory approvals are achieved for its product candidates. The ability to generate revenue depends on a number of factors, including:

• successful completion of development activities, including the additional preclinical studies and planned clinical trials for the product candidates;

• completion and submission of applications for regulatory approval in select jurisdictions, including New Drug Applications to the FDA in the United States, Marketing Authorization Applications to the European Medicines Agency, and New Drug Submissions to Health Canada;

• obtaining regulatory approval from the FDA, European Medicines Agency and Health Canada for indications for which there is a commercial market;

• completion and submission of applications to, and obtaining regulatory approval from, other foreign regulatory authorities;

• raising substantial additional capital to fund operations;

• manufacturing or acquiring CBD and approved products and in commercial quantities and on commercially reasonable terms;

• developing a commercial organization, or finding suitable partners, to market, sell and distribute approved products in the markets in which Claritas have obtained commercialization rights;

• achieving acceptance among patients, clinicians and advocacy groups for any developed products;

• obtaining coverage and adequate reimbursement from third parties, including government payors; and

• selling approved products at a commercially viable price in countries subject to price controls.

ADDITIONAL INFORMATION

Additional information about the Company, including the Annual Financial Statements, is available on SEDAR at www.sedar.com.

39161-2001 27553992.1