What changed in this filing

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Item 1. Financial Statements

2024-08-09 compared with 2024-05-10 · 280 added, 134 removed, 337 unchanged (55% of the section changed)

2 unchanged sentences

Condensed Interim Consolidated Balance Sheets

June 30, 2024

September 30, 2023

26 unchanged sentences

Accumulated deficit

( 55,958,750 )

( 52,418,968 )

Total shareholders' equity

4 unchanged sentences

Three Months Ended

Six Months Ended

March 31, 2024

March 31, 2023

March 31, 2024

March 31, 2023

Nine Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Research and development

1 unchanged sentence

Loss from operations

( 2,220,474 )

( 2,410,581 )

( 4,077,903 )

( 4,788,886 )

Other income (loss):

1 unchanged sentence

Interest income

Miscellaneous other income

Misc other income

Foreign exchange loss

Loss before income taxes

( 1,860,531 )

( 2,333,549 )

( 3,538,982 )

( 4,668,366 )

Income tax expense

( 1,861,331 )

( 2,334,349 )

( 3,539,782 )

( 4,669,166 )

Exchange differences on translation

Net comprehensive loss

$ ( 1,872,514 )

$ ( 2,325,706 )

$ ( 3,551,537 )

$ ( 4,685,590 )

Weighted average number of common shares

3 unchanged sentences

Condensed Interim Consolidated Statements of Cash Flows

Six Months Ended

March 31, 2024

March 31, 2023

Nine Months Ended

June 30, 2024

June 30, 2023

Cash flows from operating activities:

$ ( 3,539,782 )

$ ( 4,669,166 )

Adjustments for:

1 unchanged sentence

Share-based compensation

Gain on loan forgiveness

Gain on payable forgiveness

Changes in working capital items:

3 unchanged sentences

Net cash used in operating activities

( 3,066,687 )

( 3,363,240 )

Cash flows from financing activities:

6 unchanged sentences

Net change in cash and cash equivalents

( 2,561,766 )

Cash and cash equivalents, beginning of period

7 unchanged sentences

Accumulated Deficit

Shareholders' Equity

Three Months Ended March 31, 2024

Balance - December 31, 2023

$ ( 215,220 )

$ ( 54,097,419 )

Total Shareholders' Equity

Three Months Ended June 30, 2024

Balance - March 31, 2024

Issuance of common shares

2 unchanged sentences

Net loss and comprehensive loss

( 1,861,331 )

( 1,872,514 )

Balance - June 30, 2024

Three Months Ended June 30, 2023

Balance - March 31, 2023

$ ( 226,403 )

$ ( 55,958,750 )

Three Months Ended March 31, 2023

Balance - December 31, 2022

$ ( 238,669 )

$ ( 46,379,370 )

Issuance of common shares upon exercise of warrants

2 unchanged sentences

Net loss and comprehensive loss

( 2,334,349 )

( 2,325,706 )

Balance - March 31, 2023

$ ( 230,026 )

$ ( 48,713,719 )

Six Months Ended March 31, 2024

Balance - June 30, 2023

Nine Months Ended June 30, 2024

Balance - September 30, 2023

$ ( 214,648 )

$ ( 52,418,968 )

Issuance of common shares

2 unchanged sentences

Net loss and comprehensive loss

( 3,539,782 )

( 3,551,537 )

Balance - March 31, 2024

$ ( 226,403 )

$ ( 55,958,750 )

Six Months Ended March 31, 2023

Balance - June 30, 2024

Nine Months Ended June 30, 2023

Balance - September 30, 2022

$ ( 213,602 )

$ ( 44,044,553 )

Issuance of common shares and warrants in equity offering

3 unchanged sentences

Net loss and comprehensive loss

( 4,669,166 )

( 4,685,590 )

Balance - March 31, 2023

$ ( 230,026 )

$ ( 48,713,719 )

Balance - June 30, 2023

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

16 unchanged sentences

All adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the results of operations for the periods presented have been included in the interim periods.

Operating results for the three and six months ended March 31, 2024 are not necessarily indicative of the results that may be expected for other interim periods or the fiscal year ending September 30, 2024.

Operating results for the three and nine months ended June 30, 2024 are not necessarily indicative of the results that may be expected for other interim periods or the fiscal year ending September 30, 2024.

Use of estimates

27 unchanged sentences

Intangible assets, net consisted of the following:

March 31, 2024

June 30, 2024

September 30, 2023

2 unchanged sentences

Total intangible assets, net

Amortization expense amounted to $ 0.03 million for each of the three months ended March 31, 2024 and 2023 and $ 0.05 million for each of the six months ended March 31, 2024 and 2023.

Amortization expense amounted to $ 0.03 million for each of the three months ended June 30, 2024 and 2023 and $ 0.08 million for each of the nine months ended June 30, 2024 and 2023.

Total estimated future amortization of intangible assets for each fiscal year is as follows:

9 unchanged sentences

Three Months Ended

Six Months Ended

March 31, 2024

March 31, 2023

March 31, 2024

March 31, 2023

Nine Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Right-of-use lease cost, included in general and administrative on the Statements of Operations

Lease terms and discount rates were as follows:

June 30, 2024

September 30,2023

1 unchanged sentence

Estimated incremental borrowing rate:

The future minimum lease payments under right-of-use leases at March 31, 2024 were as follows:

The future minimum lease payments under right-of-use leases at June 30, 2024 were as follows:

September 30, 2024

6 unchanged sentences

Cash flow information was as follows:

Six Months Ended

March 31, 2024

March 31, 2023

Nine Months Ended

June 30, 2024

June 30, 2023

Cash paid for amounts included in the measurement of right-of-use lease liabilities, included in accounts payable and accrued liabilities on the Statements of Cash Flow.

1 unchanged sentence

The Company has commitments for contracted research organizations who perform clinical trials for the Company’s ongoing clinical studies and other service providers.

Approximate aggregate future contractual payments at March 31, 2024 are as follows:

Approximate aggregate future contractual payments at June 30, 2024 are as follows:

September 30, 2024

9 unchanged sentences

The Company also has a commitment to pay royalties based on any net sales of products containing the Constructs in the countries where the Company directly commercializes the products containing the Constructs and a percentage of any sublicensing revenue received by the Company and its affiliates in the countries where it does not directly commercialize the products containing the Constructs.

No milestone, royalty or sublicensing payments were made to the third party during the three and six months ended March 31, 2024 and 2023.

No milestone, royalty or sublicensing payments were made to the third party during the three and nine months ended June 30, 2024 and 2023.

In 2016, through its Ontario subsidiary, the Company entered into a license agreement with a third party to obtain exclusive rights to certain know-how, patents and data relating to a pharmaceutical product.

4 unchanged sentences

The Company also has a commitment to pay the third party a royalty based on net sales of the product in countries where the Company, or an affiliate, directly commercializes the product and a percentage of sublicensing revenue received by the Company and its affiliates in the countries where it does not directly commercialize the product.

A milestone payment of $ 0.06 million and $ 0.12 million were to the third party during the three and six months ended March 31, 2023 and no milestone payments were made during the three and six months ended March 31, 2024.

A milestone payment of $ 0.04 million and $ 0.16 million were to the third party during the three and nine months ended June 30, 2023 and no milestone payments were made during the three and nine months ended June 30, 2024.

In March 2021, through its Ontario subsidiary, the Company entered into a license agreement with the inventor of the same pharmaceutical product to acquire global rights for all fields of use beyond those named under the 2016 license agreement.

1 unchanged sentence

In addition, if the Company fails to file an investigational new drug application or foreign equivalent (IND) for the product within a certain period of time following the date of the agreement, the Company is required to remit to the inventor a fixed license fee quarterly as long as the requirement to file an IND remains unfulfilled.

For the three and six months ended March 31, 2024, the Company recorded an expense of $ 25,000 and $ 50,000 as a result of meeting milestones outlined in the 2021 license agreement.

There were no milestones achieved in the three and six months ended March 31, 2023 and no expenses were incurred.

For the three and nine months ended June 30, 2024, the Company recorded an expense of $ 25,000 and $ 75,000 as a result of meeting milestones outlined in the 2021 license agreement.

There were no milestones achieved in the three and nine months ended June 30, 2023 and no expenses were incurred.

In June 2024, the Company’s drug candidate, EB05, was selected by the Biomedical Advanced Research and Development Authority (BARDA), part of the Administration for Strategic Preparedness and Response within the U.S.

Department of Health and Human Services, for evaluation in a U.S.

government-funded clinical study.

The Phase 2 platform trial will be a randomized, double-blinded, placebo-controlled, multi-center U.S.

clinical trial to investigate novel threat-agnostic host-directed therapeutics, including EB05, in hospitalized adult patients with ARDS due to a variety of causes.

For the EB05 cohort of the study, patients will be randomized one-to-one to either EB05 plus Standard of Care (SOC) or to a placebo plus SOC control arm.

The Company plans to provide drug product for the study as well as technical support.

The Company is responsible for providing drug product and placebo for the Phase 2 platform trial.

Capital Shares

9 unchanged sentences

The Company has no obligation to sell any of the common shares and may at any time suspend sales or terminate the equity distribution agreement in accordance with its terms.

During the six months ended March 31, 2024, the Company sold a total of 140,495 common shares pursuant to the agreement for gross proceeds of approximately $ 0.5 million after deducting commissions and direct costs.

During the nine months ended June 30, 2024, the Company sold a total of 171,916 common shares pursuant to the agreement for net proceeds of approximately $ 0.6 million after deducting commissions and direct costs.

Black-Scholes option valuation model

9 unchanged sentences

Changes in the subjective input assumptions can materially affect the fair value estimates, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s warrants and share options.

A summary of the Company’s warrants activity is as follows:

A summary of the Company’s warrant activity is as follows:

Number of Warrant Shares (#)

Weighted Average Exercise Price

Six Months Ended March 31, 2024

Nine Months Ended June 30, 2024

Balance - September 30, 2023

Balance - March 31, 2024

Six Months Ended March 31, 2023

Balance - June 30, 2024

Nine Months Ended June 30, 2023

Balance - September 30, 2022

Balance - March 31, 2023

The weighted average contractual life remaining on the outstanding warrants at March 31, 2024 is 35 months.

The following table summarizes information about the warrants outstanding at March 31, 2024:

Balance - June 30, 2023

The weighted average contractual life remaining on the outstanding warrants at June 30, 2024 is 32 months.

The following table summarizes information about the warrants outstanding at June 30, 2024:

Number of Warrants (#)

3 unchanged sentences

September 2027

The fair value of warrants granted during the six months ended March 31, 2023 was estimated using the Black-Scholes option valuation model using the following assumptions:

Six Months Ended March 31, 2023

The fair value of warrants granted during the nine months ended June 30, 2023 was estimated using the Black-Scholes option valuation model using the following assumptions:

Nine Months Ended

June 30, 2023

Class A Warrants

1 unchanged sentence

Risk free interest rate

Expected life

Expected life (years)

Expected share price volatility

4 unchanged sentences

The total number of shares available for issuance under the terms of the 2019 Plan is 642,737 .

The remaining number of shares available to grant at March 31, 2024 is 69,728 .

The remaining number of shares available to grant at June 30, 2024 is 156,679 .

The Company’s 2019 Plan allows options to be granted to directors, officers, employees and certain external consultants and advisers.

4 unchanged sentences

Weighted Average Grant Date Fair Value

Six Months Ended March 31, 2024

Nine Months Ended June 30, 2024

Balance - September 30, 2023

Balance - March 31, 2024

Six Months Ended March 31, 2023

Balance - June 30, 2024

Nine Months Ended June 30, 2023

Balance - September 30, 2022

Balance - March 31, 2023

During the three and six months ended March 31, 2024, the independent members of the Board of Directors granted 500 employee options and no director options.

During the three and six months ended March 31, 2024 and 2023, there were no employee or director options granted.

Balance - June 30, 2023

During the three and nine months ended June 30, 2024, the independent members of the Board of Directors granted 500 employee options and no director options.

During the three and nine months ended June 30, 2024 and 2023, there were no employee or director options granted.

The options have a term of 10 years and an exercise price equal to the Nasdaq closing price on the grant date.

The weighted average contractual life remaining on the outstanding options at March 31, 2024 is 79 months.

The following table summarizes information about the options under the 2019 Plan outstanding and exercisable at March 31, 2024:

The weighted average contractual life remaining on the outstanding options at June 30, 2024 is 83 months.

The following table summarizes information about the options under the 2019 Plan outstanding and exercisable at June 30, 2024:

Number of Options (#)

Exercisable at

March 31, 2024 (#)

June 30, 2024 (#)

Range of Exercise Prices

7 unchanged sentences

Apr 2024 - Sep 2031

$ 20.58 - 25.97

Apr 2024 - Feb 2032

$ 4.10 - 10.01

Apr 2024 - Oct 2033

The options exercisable at March 31, 2024 had a weighted average exercise price of $ 29.27 , $ 7 .00 intrinsic value and a weighted average remaining life of 72 months.

There were 85,804 options at March 31, 2024 that had not vested with a weighted average exercise price of $ 10.70 , no intrinsic value and a weighted average remaining life of 107 months.

The fair value of options granted during the six months ended March 31, 2024 and 2023 was estimated using the Black-Scholes option valuation model using the following assumptions:

Six Months Ended

March 31, 2024

Six Months Ended

March 31, 2023

The options exercisable at June 30, 2024 had a weighted average exercise price of $ 28.05 , $ 22.00 intrinsic value and a weighted average remaining life of 78 months.

There were 66,778 options at June 30, 2024 that had not vested with a weighted average exercise price of $ 10.15 , $ 68.00 intrinsic value and a weighted average remaining life of 104 months.

The fair value of options granted during the nine months ended June 30, 2024 and 2023 was estimated using the Black-Scholes option valuation model using the following assumptions:

Nine Months Ended

June 30, 2024

Nine Months Ended

June 30, 2023

Risk free interest rate

3.62 % - 4.18

Expected life

Expected life (years)

Expected share price volatility

1 unchanged sentence

Expected dividend yield

The Company recorded $ 0.1 million and $ 0.3 million of share-based compensation expenses for the three months ended March 31, 2024 and 2023, respectively and $ 0.3 million and $ 0.6 million for the six months ended March 31, 2024 and 2023.

As of March 31, 2024, the Company had approximately $ 0.2 million of unrecognized share-based compensation expense, which is expected to be recognized over a period of 30 months.

The Company recorded $ 0.1 million and $ 0.1 million of share-based compensation expenses for the three months ended June 30, 2024 and 2023, respectively and $ 0.4 million and $ 0.7 million for the nine months ended June30, 2024 and 2023.

As of June 30, 2024, the Company had approximately $ 0.1 million of unrecognized share-based compensation expense, which is expected to be recognized over a period of 27 months.

Restricted share units (RSU)

4 unchanged sentences

There were no RSUs granted in the comparative period.

The following is a summary of changes in the status of RSUs from October 1, 2023 through March 31, 2024:

The following is a summary of changes in the status of RSUs from October 1, 2023 through June 30, 2024:

Number of RSU (#)

Weighted Average Grant Date Fair Value

Six Months Ended March 31, 2024

Nine Months Ended June 30, 2024

Balance - September 30, 2023

Balance - March 31, 2024

The following table summarizes information about the RSUs under the 2019 Plan outstanding and exercisable at March 31, 2024:

Balance - June 30, 2024

The following table summarizes information about the RSUs under the 2019 Plan outstanding and exercisable at June 30, 2024:

Number of RSU (#)

Fully-vested RSUs

January 2034 - March 2034

August 2033 - June 2034

All RSUs that were granted vested immediately upon the grant date.

18 unchanged sentences

The Agreement will expire on the later of December 31, 2042 or the date of the last repayment, unless earlier terminated, subject to certain provisions that extend three ( 3 ) years beyond the term or early termination of the Agreement.

Under the 2023 SIF Agreement the Company recorded grant income of $ 0.3 million and $ 0.4 million for the three and six months ended March 31, 2024.

No grant income was recorded under the 2023 SIF Agreement for the three and six months ended March 31, 2023.

Under the 2023 SIF Agreement the Company recorded grant income of $ 0.2 million and $ 0.6 million for the three and nine months ended June 30, 2024.

No grant income was recorded under the 2023 SIF Agreement for the three and nine months ended June 30, 2023.

Financial Instruments

14 unchanged sentences

The Company is also exposed to credit risk at period end from the carrying value of its cash and cash equivalents and accounts and other receivable.

The Company manages this risk by maintaining bank accounts with a Canadian Chartered Bank and a U.S.

bank believed to be credit worthy and money market mutual funds of U.S.

The Company manages this risk by maintaining bank accounts with Canadian Chartered Banks and a U.S.

banks believed to be credit worthy and money market mutual funds of U.S.

government securities.

9 unchanged sentences

The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks.

At March 31, 2024, the Company and its Canadian subsidiary had assets denominated in Canadian dollars of approximately C$ 1.9 million and the U.S.

At June 30, 2024, the Company and its Canadian subsidiary had assets denominated in Canadian dollars of approximately C$ 1.0 million and the U.S.

dollar exchange rate at this date was equal to 1.3680 Canadian dollars.

Based on the exposure at March 31, 2024, a 10% annual change in the Canadian/U.S.

Based on the exposure at June 30, 2024, a 10% annual change in the Canadian/U.S.

exchange rate would impact the Company’s loss and other comprehensive loss by approximately $ 0.1 million.

5 unchanged sentences

Related Party Transactions

During the three and six months ended March 31, 2024 and 2023, the Company paid cash of $ 20,000 and $ 40,000 , respectively, for a ROU lease from a company controlled by the Company’s CEO.

During the three and nine months ended June 30, 2024 and 2023, the Company paid cash of $ 20,000 and $ 60,000 , respectively, for a ROU lease from a company controlled by the Company’s CEO.

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by both parties.

On December 31, 2022, the Company executed a two -year lease extension through December 31, 2024 in accordance with the terms of the original lease agreement.

Rent of approximately $ 7,000 was payable at March 31, 2024.

There was no rent payable at March 31, 2023.

Rent of approximately $ 7,000 was payable at June 30, 2024.

There was no rent payable at June 30, 2023.

In October 2023, we entered into $ 10.0 million revolving credit agreement with Pardeep Nijhawan Medicine Professional Corporation, an entity controlled by Dr.

4 unchanged sentences

The Company has not drawn any funds from the Credit Agreement.

During the three and six months ended March 31, 2024 the Company incurred a standby charge of $ 13,000 and $ 25,000 .

There was no standby charge in the three and six months ended March 31, 2023.

Subsequent Events

During the three and nine months ended June 30, 2024 the Company incurred a standby charge of $ 13,000 and $ 38,000 .

There was no standby charge in the three and nine months ended June 30, 2023.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.

The following management ’ s discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed interim consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q as of June 30, 2024 and our audited consolidated financial statements for the year ended September 30, 2023 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on December 15, 2023.

This Quarterly Report on Form 10-Q contains forward-looking statements.

When used in this report, the words “ expects, ” “ anticipates, ” “ suggests, ” “ believes, ” “ intends, ” “ estimates, ” “ plans, ” “ projects, ” “ continue, ” “ ongoing, ” “ potential, ” “ expect, ” “ predict, ” “ believe, ” “ intend, ” “ may, ” “ will, ” “ should, ” “ could, ” “ would ” and similar expressions are intended to identify forward-looking statements.

You should not place undue reliance on these forward-looking statements.

Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in our Annual Report on Form 10-K for the year ended September 30, 2023 and other reports we file with the Securities and Exchange Commission.

Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made.

We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed interim consolidated financial statements for the three months ended June 30, 2024 and 2023, and for the nine months ended June 30, 2024 and 2023 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which we have prepared in accordance with U.S.

generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods.

On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below.

We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties, and other factors, which may be beyond our control, and which may cause our actual results, performance, or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

All statements other than statements of historical fact are statements that could be forward-looking statements.

You can identify these forward-looking statements through our use of words such as “ may, ” “ can, ” “ anticipate, ” “ assume, ” “ should, ” “ indicate, ” “ would, ” “ believe, ” “ contemplate, ” “ expect, ” “ seek, ” “ estimate, ” “ continue, ” “ plan, ” “ point to, ” “ project, ” “ predict, ” “ could, ” “ intend, ” “ target, ” “ potential ” and other similar words and expressions of the future.

There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us.

These factors include, but are not limited to:

our ability to obtain funding for our operations;

our estimates regarding our expenses, revenues, anticipated capital requirements and our needs for additional financing;

the timing of the commencement, progress and receipt of data from any of our preclinical and clinical trials;

the expected results of any preclinical or clinical trial and the impact on the likelihood or timing of any regulatory approval;

the therapeutic benefits, effectiveness and safety of our product candidates;

the timing or likelihood of regulatory filings and approvals;

changes in our strategy or development plans;

the volatility of our common share price;

the rate and degree of market acceptance and clinical utility of any future products;

the effect of competition;

our ability to protect our intellectual property as well as comply with the terms of license agreements with third parties;

our ability to identify, develop and commercialize additional products or product candidates;

reliance on key personnel;

general changes in economic or business conditions;

other risks and uncertainties, including those listed under the caption “ Risk Factors ” in our Annual Report on Form 10-K for the year ended September 30, 2023

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events.

The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

You should refer to the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the SEC, on December 15, 2023, for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements.

We operate in an evolving environment and new risk factors and uncertainties may emerge from time to time.

It is not possible for management to predict all risk factors and uncertainties.

As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate.

Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

You should review the factors and risks and other information we describe in the reports we will file from time to time with the SEC.

We are a biopharmaceutical company developing innovative ways to treat inflammatory and immune-related diseases.

Our approach is to acquire, develop and commercialize drug candidates based on mechanisms of action that have demonstrated proof-of-concept in human subjects.

We prioritize our efforts on disease indications where there is compelling scientific rationale, no approved therapies or where there are unmet medical needs, and where there are large addressable market opportunities, among other factors.

We have multiple late-stage product candidates in our development pipeline in the fields of respiratory diseases and medical dermatology.

Our most advanced drug candidate is EB05 (paridiprubart).

EB05 represents a new class of therapies called Host-Directed Therapeutics (HDTs) that are designed to modulate the body’s own immune response when confronted with infectious diseases or even chemical agents.

Importantly, these therapies are designed to work across multiple infectious diseases and threats, and could be stockpiled preemptively ahead of outbreaks.

Because they are threat agnostic, HDTs like paridiprubart have the potential to become standard of care in Intensive Care Units (ICUs) and critical countermeasures for both pandemic preparedness and biodefense.

We are currently evaluating EB05 as a potential treatment for Acute Respiratory Distress Syndrome (ARDS), a life-threatening form of respiratory failure.

Recruitment in a Phase 3 study is ongoing.

EB05 has also been included in a U.S.

government funded platform study of HDTs.

In addition to EB05, we are developing product candidates for a number of chronic inflammatory and dermatological conditions.

We intend to file an investigational new drug application (IND) with the U.S.

Food and Drug Administration (FDA) for a future Phase 2 study of paridiprubart as a potential treatment for patients with progressive pulmonary fibrosis, a serious chronic disease that causes lung inflammation and scarring.

For our EB06 monoclonal candidate, we have received regulatory approval by Health Canada to conduct a future Phase 2 study in patients with moderate to severe nonsegmental vitiligo, a common autoimmune disorder that causes skin to lose its color in patches.

We plan to seek regulatory approval for this vitiligo study in the U.S.

In addition, we are developing an sPLA2 inhibitor, EB01 (daniluromer), as a topical treatment for chronic Allergic Contact Dermatitis (ACD), a common occupational skin condition.

We intend to seek strategic arrangements to further develop and/or monetize this late-stage clinical asset, following favorable Phase 2b results of 1.0% EB01 cream.

Recent Developments

Government-Funded Platform Study in General ARDS

In June 2024, our drug candidate, EB05, was selected by the Biomedical Advanced Research and Development Authority (BARDA), part of the Administration for Strategic Preparedness and Response within the U.S.

Department of Health and Human Services, for evaluation in a U.S.

government-funded clinical study.

The Phase 2 platform trial will be a randomized, double-blinded, placebo-controlled, multi-center U.S.

clinical trial to investigate novel threat-agnostic host-directed therapeutics, including EB05, in hospitalized adult patients with ARDS due to a variety of causes.

For the EB05 cohort of the study, patients will be randomized one-to-one to either EB05 plus Standard of Care (SOC) or to a placebo plus SOC control arm.

Edesa plans to provide drug product for the study as well as technical support.

Given this opportunity, we are currently evaluating our broader development strategy for the development of EB05 to align our activities with sources of government funding and the greater market opportunity for general ARDS, including amending our Canadian government supported Phase 3 ARDS study, which is exclusively recruiting patients hospitalized with Covid-19.

Potential options include, but are not limited to, expanding the enrollment criteria of the Phase 3 study, refocusing the project on manufacturing scale-up, extending the project timeline and/or pausing recruitment while awaiting results of the BARDA study.

Should we decide to make changes to our ongoing Phase 3 trial and manufacturing plans, we may be required to renegotiate the terms of our 2023 SIF Agreement.

Significant Accounting Policies and Estimates

See Note 2 to our financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2023 for a discussion of our significant accounting policies and estimates.

There have been no material changes to such significant accounting policies or estimates.

Results of Operations

Comparison of the Three Months Ended June 30, 2024 and 2023

Total operating expenses decreased by $0.2 million to $1.9 million for the three months ended June 30, 2024 compared to $2.1 million for the same period last year:

Research and development (R&D) expenses decreased by $0.1 million to $0.9 million for the three months ended June 30, 2024 compared to $1.0 million for the same period last year primarily due to decreased external research expenses related to our ongoing EB05 phase 3 clinical study and the completed EB01 phase 2 study, partially offset by an increase in expenses related to manufacturing of our investigational drug, paridiprubart.

Our R&D expenses consist primarily of employee-related expenses, including salaries, benefits, taxes, travel, and share-based compensation expense for personnel in R&D functions;

expenses related to process development and production of product candidates paid to contract manufacturing organizations, including the cost of acquiring, developing, and manufacturing research material;

costs associated with clinical activities, including expenses for contract research organizations;

and clinical trials and activities related to regulatory filings for our product candidates, including regulatory consultants.

General and administrative (G&A) expenses were unchanged at $1.0 million for the three months ended June 30, 2024 and June 30, 2023.

Our G&A expenses consist primarily of salaries and related costs for our employees in administrative, executive and finance functions.

G&A expenses also include professional fees for legal, accounting, audit, tax and consulting services, insurance, office, and travel expenses.

Total other income increased by $185,000 to $264,000 for the three months ended June 30, 2024 compared to $79,000 for the same period last year and was composed of the following:

Grant income increased by $0.2 million to $0.2 million for the three months ended June 30, 2024.

There was no grant income in the comparative period.

The increase is related to the grant income associated with the activities under the 2023 SIF Agreement.

Interest income decreased by $50,000 to $33,000 for the three months ended June 30, 2024 compared to $83,000 for the same period last year primarily due to lower cash balances.

Foreign exchange loss was $5,000 for the three months ended June 30, 2024 compared to a loss of $3,000 for the three months ended June 30, 2023.

For the three months ended June 30, 2024, our net loss was $1.7 million, or $0.52 per common share, compared to a net loss of $2.0 million, or $0.68 per common share for the three months ended June 30, 2023.

Comparison of the Nine Months Ended June 30, 2024 and 2023

Total operating expenses decreased by $0.9 million to $6.0 million for the nine months ended June 30, 2024 compared to $6.9 million for the same period last year:

R&D expenses decreased by $1.0 million to $2.8 million for the nine months ended June 30, 2024 compared to $3.8 million for the same period last year primarily due to decreased external research expenses related to our completed EB01 phase 2 study and a decrease in non-cash share-based compensation and labor costs, partially offset by an increase in expenses for our ongoing EB05 phase 3 clinical study and for manufacturing of our investigational drug, paridiprubart.

Our R&D expenses consist primarily of employee-related expenses, including salaries, benefits, taxes, travel, and share-based compensation expense for personnel in R&D functions; expenses related to process development and production of product candidates paid to contract manufacturing organizations, including the cost of acquiring, developing, and manufacturing research material; costs associated with clinical activities, including expenses for contract research organizations; and clinical trials and activities related to regulatory filings for our product candidates, including regulatory consultants.

G&A expenses increased by $0.2 million to $3.2 million for the nine months ended June 30, 2024 compared to $3.0 million for the same period last year primarily due to increased fees for professional services, partially offset by a decrease in non-cash share-based compensation.

Our G&A expenses consist primarily of salaries and related costs for our employees in administrative, executive and finance functions.

G&A expenses also include professional fees for legal, accounting, audit, tax and consulting services, insurance, office, and travel expenses.

Total other income increased by $0.6 million to $0.8 million for the nine months ended June 30, 2024 compared to $0.2 million for the same period last year and was composed of the following:

Grant income increased by $0.6 million to $0.6 million for the nine months ended June 30, 2024.

There was no grant income in the comparative period.

The increase is related to the grant income associated with the activities under the 2023 SIF Agreement.

Interest income decreased by $81,000 to $137,000 for the nine months ended June 30, 2024 compared to $218,000 for the same period last year primarily due to a decrease in cash balances.

Miscellaneous other income was $15,000 for the nine months ended June 30, 2024 related to loan forgiveness on the CEBA loan that was repaid in the quarter.

Foreign exchange loss was $9,700 for the nine months ended June 30, 2024 compared to a loss of $18,100 for the nine months ended June 30, 2023.

For the nine months ended June 30, 2024, our net loss was $5.2 million, or $1.64 per common share, compared to a net loss of $6.7 million, or $2.37 per common share for the nine months ended June 30, 2023.

Capital Expenditures

Our capital expenditures primarily consist of computer and office equipment.

There were no significant capital expenditures for the three and nine months ended June 30, 2024 and 2023.

Liquidity and Capital Resources

As a clinical-stage company we have not generated significant revenue, and we expect to incur operating losses as we continue our efforts to acquire, develop, seek regulatory approval for and commercialize product candidates and execute on our strategic initiatives.

Our operations have historically been funded through issuances of common shares, exercises of common share purchase warrants, convertible preferred shares, convertible loans, government grants and tax incentives.

Our primary use of cash is to fund our operating expenses, which consist of R&D and G&A expenditures.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in accounts payable and accrued expenses.

Net cash used in operating activities was $3.9 million and $5.2 million for the nine months ended June 30, 2024 and 2023, respectively.

We incurred net losses of $5.2 million and $6.7 million for the nine months ended June 30, 2024 and 2023.

In October 2023, we entered into the 2023 SIF Agreement with the Canadian Government’s SIF.

Under the 2023 SIF Agreement, the Government of Canada committed up to C$23 million in partially repayable funding.

Of the C$23 million committed by SIF, up to C$5.8 million is not repayable by us.

The remaining C$17.2 million is conditionally repayable starting in 2029 only if and when we earn gross revenue.

In February 2021, we entered into the 2021 SIF Agreement, pursuant to which we were eligible to receive cash reimbursements up to C$14.1 million in the aggregate for certain R&D expenses related to our EB05 clinical development program.

All potential funding available under the 2021 SIF Agreement has been received.

For the three and nine months ended June 30, 2024 we recorded grant income of $0.2 million and $0.6 million respectively, related to the 2023 SIF Agreement.

There was no grant income recognized in the comparative periods.

In October 2023, we entered into $10.0 million revolving credit agreement with Pardeep Nijhawan Medicine Professional Corporation, an entity controlled by Dr.

Pardeep Nijhawan, MD, our Chief Executive Officer and Secretary and member of our board of directors (Credit Agreement), providing an unsecured revolving credit facility, with a credit limit of $3.5 million (Credit Limit) which was available immediately.

The line of credit bears interest at the Canadian Imperial Bank of Commerce US Base-Interest Rate plus 3% per annum and has a maturity date of March 31, 2026, unless terminated earlier by either party with 90 days’ notice.

Advances under the line of credit are tied to a borrowing base (Borrowing Base) consisting of eligible grant receivables from SIF, future potential license fee receivables and any other accounts receivable.

At no time shall the aggregate principal amount of all advances outstanding exceed the lesser of (i) the Credit Limit and (ii) an amount equal to 85% of the Borrowing Base.

We have not drawn any funds from the Credit Agreement.

In August 2022, we filed a $150.0 million shelf registration statement.

In March 2023, we entered into an equity distribution agreement with Canaccord, as sales agent, pursuant to which we may offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $20 million in gross proceeds, subject to certain offering limitations that currently allow us to offer and sell common shares having an aggregate gross sales price of up to $8.4 million (Canaccord ATM).

There was approximately $6.3 million of available capacity on the Canaccord ATM as of June 30, 2024.

We have no obligation to sell any of the common shares and may at any time suspend sales or terminate the equity distribution agreement in accordance with its terms.

For the three months ended June 30, 2024, we sold a total of 31,421 common shares pursuant to the agreement for net proceeds of $0.1 million after deducting commissions and costs of $40,000.

For the nine months ended June 30, 2024, we sold a total of 171,916 common shares pursuant to the agreement for net proceeds of $0.6 million after deducting commissions and costs of $140,000.

In November 2022, we completed a private placement of units consisting of 384,475 common shares, 12-month warrants to purchase up to an aggregate of 192,248 common shares and 3-year warrants to purchase up to an aggregate of 192,248 common shares.

The gross proceeds from this offering were approximately $3.0 million, before offering expenses.

At June 30, 2024, we had an accumulated deficit of $57.6 million and working capital of $0.7 million, including $2.0 million in cash and cash equivalents.

Subsequent to the quarter, we collected the receivable from 2023 SIF Agreement for $0.3 million from Canadian government.

We plan to finance company operations over the course of the next twelve months with cash and cash equivalents on hand, including net proceeds from the Canaccord ATM, advances under the Credit Agreement and reimbursements of eligible R&D expenses under the 2023 SIF Agreement with the Canadian government.

Management has flexibility to adjust this timeline by making changes to planned expenditures related to, among other factors, the size and timing of clinical trial expenditures and manufacturing campaigns, staffing levels, and the acquisition or in-licensing of new product candidates.

To help fund our operations and meet our obligations in the future, we plan to seek additional financing through the sale of equity, government grants, debt financings or other capital sources, including potential future licensing, collaboration or similar arrangements with third parties or other strategic transactions.

If we raise additional funds by issuing equity securities, our shareholders will experience dilution.

Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our existing shareholders.

If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.

Adequate funding may not be available to us on acceptable terms, or at all.

If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development of our product candidates.

We expect to continue to incur substantial additional operating losses for at least the next several years as we continue to develop our product candidates and seek marketing approval and, subject to obtaining such approval, the eventual commercialization of our product candidates.

If we obtain marketing approval for our product candidates, we will incur significant sales, marketing and outsourced manufacturing expenses.

In addition, we expect to incur additional expenses to add operational, financial and information systems and personnel, including personnel to support our planned product commercialization efforts.

We also expect to incur significant costs to comply with corporate governance, internal controls and similar requirements applicable to us as a public company.

To continue to grow our business over the longer term, we plan to commit substantial resources to research and development, clinical trials of our product candidates, and other operations and potential product acquisitions and in licensing.

We have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in license and develop additional products and product candidates to augment our internal development pipeline.

Strategic transaction opportunities that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both.

In addition, we may pursue development, acquisition or in licensing of approved or development products in new or existing therapeutic areas or continue the expansion of our existing operations.

Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations, or for general corporate purposes.

Strategic transactions may require us to raise additional capital through one or more public or private debt or equity financings or could be structured as a collaboration or partnering arrangement.

We have no arrangements, agreements, or understandings in place at the present time to enter into any acquisition, in licensing or similar strategic business transaction.

Net cash used in operating activities

Net cash used in operating activities was $3.9 million for the nine months ended June 30, 2024 compared to $5.2 million for the nine months ended June 30, 2023, primarily due to a decrease in R&D expenses of $1.0 million and an investment in working capital of $0.1 million, partially offset by a reduction in non-cash stock based compensation of $0.3 million.

Net cash used in investing activities

There was no cash used in investing activities for the nine months ended June 30, 2024 and 2023, respectively.

Net cash provided by financing activities

Net cash provided by financing activities was $0.6 million for the nine months ended June 30, 2024 as compared to $4.4 million for the nine months ended June 30, 2023.

In the current period, we received proceeds of $0.7 million from the Canaccord ATM, partially offset by issuance costs of $76,000 and the repayment of debt of $29,500.

In the comparative period, we received proceeds of $3.0 million from a private placement in November 2022, offset by issuance costs of $0.1 million for net proceeds of $2.9 million;

we received $0.8 million in proceeds from the exercise of warrants and $0.7 million in net proceeds from the Canaccord ATM.

Research and Development

Our primary business is the development of innovative therapeutics for inflammatory and immune-related diseases with clear unmet medical needs.

We focus our resources on R&D activities, including the conduct of clinical studies and product development, and expense such costs as they are incurred.

R&D expenses, which have historically varied based on the level of activity in our clinical programs, are significantly influenced by study initiation expenses and patient recruitment rates, and as a result are expected to continue to fluctuate, sometimes substantially.

Our R&D expenses were $0.9 million and $2.8million for the three and nine months ended June 30, 2024 compared to $1.0 million and $3.8 million for the three and nine months ended June 30, 2023.

The decrease was due primarily to lower external research expenses related to our ongoing clinical studies.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company and are not required to provide disclosure under this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements